<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1999
REGISTRATION NO. 333-68749
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
IVILLAGE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7375 13-3845162
(STATE OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
170 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 604-0963
(212) 604-9133 (FAX)
(ADDRESS AND TELEPHONE NUMBER OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CANDICE CARPENTER
CO-CHAIRPERSON OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
IVILLAGE INC.
170 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 604-0963
(212) 604-9133 (FAX)
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Please send copies of all communications to:
<TABLE>
<S> <C>
MARTIN H. LEVENGLICK, ESQ. MARK G. BORDEN, ESQ.
RUBI FINKELSTEIN, ESQ. JAMES R. BURKE, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP HALE AND DORR LLP
30 ROCKEFELLER PLAZA 60 STATE STREET
NEW YORK, NEW YORK 10112 BOSTON, MASSACHUSETTS 02109
(212) 506-5000 (617) 526-6000
(212) 506-3730 (FAX) (617) 526-5000 (FAX)
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
as amended (the "Securities Act"), please check the following box. / /
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 this form is a post-effective amendment filed pursuant to Rule
462(d) 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. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01
par value..................... 4,197,500 $14.00 $58,765,000 $16,337(3)
</TABLE>
(1) Includes 547,500 shares which the underwriters have an option to purchase
from iVillage Inc. to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(3) Includes $12,788 previously paid in connection with the initial filing and
$3,549 which is being paid in connection with Amendment No. 2.
------------------------
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion. Dated February 24, 1999.
3,650,000 Shares
[LOGO] IVILLAGE INC.
Common Stock
------------------------
This is an initial public offering of shares of iVillage Inc. All of the
3,650,000 shares of common stock are being sold by iVillage. iVillage
anticipates that the initial public offering price will be between $12.00 and
$14.00 per share.
At the request of iVillage, the underwriters have reserved at the initial
public offering price up to 538,461 shares of common stock for sale to National
Broadcasting Company, Inc., Liberty Media Corporation and America Online, Inc.
Prior to this offering, there has been no public market for the common
stock. Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol "IVIL".
Please see "Risk Factors" beginning on page 7 to read about certain factors
you should consider before buying shares of the common stock.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Initial public offering price............. $ $
Underwriting discount..................... $ $
Proceeds, before expenses, to iVillage.... $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 547,500 shares from iVillage at the initial public offering price
less the underwriting discount.
------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
------------------------
WIT CAPITAL CORPORATION
Facilitator of Internet distribution
------------------------
<PAGE>
Prospectus dated , 1999.
<PAGE>
The inside front cover contains the following:
Picture of iVillage.com home page and other pages and arrows to indicate that
the site provides information, experts, personalized services, community,
integrated sponsors and transactions. Various other screens within iVillage's
Web sites.
2
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and iVillage's consolidated financial statements and the notes to
those statements appearing elsewhere in this prospectus.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about iVillage and our
industry. These forward-looking statements involve risks and uncertainties.
iVillage's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, as more fully
described in the "Risk Factors" section and elsewhere in this prospectus.
iVillage undertakes no obligation to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.
IVILLAGE INC.
OUR BUSINESS
iVillage Inc. is a leading online women's network and one of the most
demographically targeted online communities on the World Wide Web. iVillage.com
is an easy-to-use, comprehensive online network of sites tailored to the
interests and needs of women aged 25 through 49. We provide advertisers and
merchants with targeted access to women using the Web.
Our network of sites consists of 14 channels organized by subject matter.
The channels cover leading topics of interest to women online, such as family,
health, work, money, food, relationships, shopping, travel, pets and astrology.
We facilitate channel usage by providing common features and functionality
within each channel, including experts, chats, message boards and services.
As of December 31, 1998, iVillage's membership, its core audience and most
valuable users, was 82% female and consisted of approximately 960,000 unique
members, up from approximately 170,000 unique members as of January 31, 1998.
Membership in iVillage is free. For the month ended December 31, 1998,
iVillage.com had approximately 65 million page views and 2.7 million unique
visitors.
We believe that iVillage.com appeals to advertisers, consumers and
merchants because it combines the following attributes to create a powerful
environment for advertising and commerce:
o a highly-targeted and attractive demographic user group;
o a high degree of member involvement within the network, including a
greater level of page views and repeat visits than non-members and
greater participation within the community than the average user through
polls, message boards, chats and community challenges; and
o an interactive sponsorship model that integrates advertising and commerce
into the content of each of the sites.
OUR MARKET OPPORTUNITY
We believe that women are one of the principal driving forces behind the
growth of the Internet and that as of January 1998, women made up 45% of the
online population. We believe that women also represent an attractive
demographic group for advertisers and businesses. Consumers spend $3 trillion
annually, and women control or influence 80% of all purchase decisions.
To effectively reach women online, advertisers, merchants and Web sites
that develop and provide content need to address the differing uses of the
Internet by men and women. We believe that women are interested in
problem-solving, community, researching product information and simple
navigation. They appear to spend less time "surfing" the Internet than men and
more of their time online at fewer destinations.
We have developed innovative sponsorship relationships that go beyond
traditional banner advertising to support broad marketing objectives of brand
promotion, awareness, product introductions, online research and the integration
of advertising with editorial content. These sponsorships and highly-targeted
marketing opportunities attract advertisers and sponsors from whom we derive a
substantial majority of our revenues.
We generate e-commerce revenues from sales through iBaby, Inc., an online
retailer of
3
<PAGE>
baby gifts and products, Knowledge Web, Inc. d/b/a Astrology.Net, an Internet
content provider, and agreements with leading merchants, including Amazon.com,
Inc. iVillage currently owns a majority interest in iBaby and has exercised its
right to acquire the minority interest in iBaby.
OUR STRATEGY
Our objective is to be the leading online women's network. Our strategy
includes:
o building strong brand recognition;
o aggressively growing membership and usage;
o enhancing and expanding the network;
o pursuing strategic acquisitions and alliances;
o increasing sponsor and advertising revenues; and
o generating e-commerce revenues.
We actively promote our brand awareness and site usage through a variety of
online and traditional media, including through recently signed agreements with
AOL, NBC and AT&T to provide both online and offline advertising.
OUR OFFICES
Our executive offices are located at 170 Fifth Avenue, New York, New York
10010. Our telephone number at that location is 212-604-0963 and our Internet
address is www.ivillage.com.
THE OFFERING
<TABLE>
<S> <C>
Shares offered by iVillage................... 3,650,000
Shares to be outstanding after this
offering(1)................................ 23,210,776
Proposed Nasdaq National Market symbol....... IVIL
Use of proceeds.............................. Brand promotion, expansion of sales and marketing, acquisition of the
minority interest in iBaby, working capital and general corporate
purposes, including channel expansion and content development,
expansion and/or relocation of our offices and possible acquisitions.
Please see "Use of Proceeds".
</TABLE>
- ------------------------------
(1) Based on the number of shares actually outstanding on February 15, 1999.
Includes the shares issued or to be issued in connection with (a) the
Astrology.Net acquisition, (b) the acquisition of the iBaby minority
interest and (c) the NBC agreement.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the financial data for our business.
iVillage acquired ParentsPlace.com, Inc. in December 1996 and Health
ResponseAbility Systems, Inc. in May 1997, and the financial data reflect the
results of operations of these subsidiaries since their dates of acquisition.
For the year ended December 31, 1998, a portion of the net loss for iBaby, Inc.
attributable to minority stockholders is included as a reduction to net loss.
<TABLE>
<CAPTION>
JULY 1, 1995 YEAR ENDED DECEMBER 31,
(INCEPTION) TO ---------------------------------
DECEMBER 31, 1995 1996 1997 1998
----------------- ------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues................. $ -- $ 732 $ 6,019 $ 15,012
------- ------- ---------- ----------
Operating expenses:
Production, product and
technology............. 629 4,521 7,606 14,521
Sales and marketing...... 329 2,709 8,771 28,523
General and
administrative......... 656 3,104 7,841 10,612
Depreciation and
amortization........... 17 109 2,886 5,683
------- ------- ---------- ----------
Total operating
expenses............. 1,631 10,443 27,104 59,339
------- ------- ---------- ----------
Loss from operations..... (1,631) (9,711) (21,085) (44,327)
Interest (expense)
income, net............ (7) 28 (216) 591
Loss on sale of Web
site................... -- -- -- (504)
Minority interest........ -- -- -- 586
------- ------- ---------- ----------
Net loss................. $(1,638) $(9,683) $ (21,301) $ (43,654)
------- ------- ---------- ----------
------- ------- ---------- ----------
Basic and diluted net
loss per share......... $ (1.51) $ (8.90) $ (13.65) $ (21.10)
------- ------- ---------- ----------
------- ------- ---------- ----------
Weighted average shares
of common stock
outstanding used in
computing basic and
diluted net loss per
share.................. 1,083 1,087 1,561 2,068
------- ------- ---------- ----------
------- ------- ---------- ----------
Pro forma basic and
diluted net loss per
share.................. $ (2.59)
----------
----------
Shares of common stock
used in computing pro
forma basic and diluted
net loss per share..... 16,854
----------
----------
</TABLE>
The following table indicates a summary of our balance sheet at December
31, 1998 (1) on an actual basis, (2) on a pro forma basis giving effect to (a)
the purchase of the minority interest in iBaby, (b) the acquisition of
Astrology.Net and (c) the shares to be issued in connection with the NBC
agreement and (3) on a pro forma as adjusted basis to reflect the sale of
3,650,000 shares of common stock, after deducting underwriting discounts and
commissions and estimated offering expenses. Please see "Use of Proceeds",
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Events".
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....... $30,825 $21,929 $ 64,557
Working capital................. 19,919 10,848 53,476
Total assets.................... 46,791 60,731 103,359
Long-term liabilities........... -- 23 23
Stockholders' equity............ 32,022 45,650 88,278
</TABLE>
5
<PAGE>
iVillage(Registered), the iVillage logo and Parent Soup(Registered) are
registered marks of iVillage. Community Challenge; Community Challenges;
"iVillage.com. Honest Answers. For The Stuff That Really Matters."; Armchair
Millionaire; Parentsplace; Parentsplace.com; Astrology-dot-net(Registered);
Astrozine(Registered); and KnowledgeWeb(Registered) are marks of iVillage. iBaby
and Internetbaby are marks of iBaby, Inc. All other trademarks and service marks
are the property of their respective owners. The information on our Web sites is
not a part of this prospectus.
Unless otherwise specifically stated, information throughout this
prospectus assumes:
o the underwriters' over-allotment option is not exercised;
o the conversion of all outstanding shares of our convertible preferred
stock into 14,785,205 shares of common stock automatically upon the
closing of this offering;
o the effectiveness of a one-for-three reverse stock split of common stock
and the adjustment of par value to $.01 per share immediately prior to
the effective date of this prospectus; and
o assumes an initial public offering price of $13.00 per share;
and excludes as of February 22, 1999:
o a $5.7 million deemed non-cash dividend to NBC in connection with the
issuance of shares to NBC and an option to be granted to NBC to purchase
up to 594,627 shares;
o 3,141,702 shares issuable upon the exercise of outstanding options and
warrants and an additional 161,333 shares expected to be issuable upon
the exercise of options that are to be granted prior to the effective
date of this prospectus; and
o 515,520 shares reserved for future issuance under our stock option plans.
6
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in the shares of common stock.
WE HAVE A LIMITED OPERATING HISTORY
We have a limited operating history. An investor in our common stock must
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets, including the Internet
advertising market. These risks include our ability to:
o attract a larger audience to our online network;
o increase awareness of our brand;
o strengthen user-loyalty;
o offer compelling content;
o maintain our current, and develop new, strategic relationships;
o attract a large number of advertisers from a variety of industries;
o respond effectively to competitive pressures;
o continue to develop and upgrade our technology; and
o attract, retain and motivate qualified personnel.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our limited operating
history.
WE LACK SIGNIFICANT REVENUES AND HAVE RECENT AND ANTICIPATED CONTINUING LOSSES
We have not achieved profitability and expect to continue to incur
operating losses for the foreseeable future. We incurred net losses of
$11.3 million for the period from July 1995 (inception) through December 31,
1996, $21.3 million for the year ended December 31, 1997, and $43.7 million for
the year ended December 31, 1998. As of December 31, 1998, our accumulated
deficit was $76.3 million. We expect to continue to incur significant operating
and capital expenditures and, as a result, we will need to generate significant
revenues to achieve and maintain profitability.
Although our revenues have grown in recent quarters, we cannot assure you
that we will achieve sufficient revenues for profitability. Even if we do
achieve profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. If revenues grow
slower than we anticipate, or if operating expenses exceed our expectations or
cannot be adjusted accordingly, our business, results of operations and
financial condition will be materially and adversely affected. Please see
"Selected Consolidated Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS
Our revenues and operating results may vary significantly from quarter to
quarter due to a number of factors, many of which are outside our control. These
factors include:
o our ability to attract and retain users and members;
o our ability to attract and retain advertisers and sponsors and maintain
advertiser and sponsor satisfaction;
o our ability to attract and retain customers and maintain customer
satisfaction for our existing and future e-commerce businesses;
o new sites, services or products introduced by us or our competitors;
o the timing and uncertainty of sales cycles;
o the level of Web and online services usage;
o our ability to upgrade and develop our systems and infrastructure and
attract new personnel in a timely and effective manner;
o traffic levels on our Web sites;
o our ability to successfully integrate operations and technologies from
7
<PAGE>
acquisitions or other business combinations;
o technical difficulties or system downtime affecting the Internet
generally or the operation of our Web sites; and
o economic conditions specific to the Internet as well as general economic
conditions.
As a result, our operating results for any particular quarter may not be
indicative of future operating results.
Our revenues for the foreseeable future will remain dependent on user
traffic levels and advertising activity on iVillage.com. Such future revenues
are difficult to forecast. In addition, we plan to increase our sales and
marketing operations and to expand and develop content. We also plan to upgrade
and enhance our technology and infrastructure development in order to support
our growth. We may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall. If we have a shortfall in revenues in relation to
our expenses, or if our expenses precede increased revenues, then our business,
results of operations and financial condition would be materially and adversely
affected. This would likely affect the market price of our common stock in a
manner which may be unrelated to our long-term operating performance.
SEASONAL AND CYCLICAL PATTERNS MAY AFFECT OUR BUSINESS
We believe that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. If our market makes the transition from an emerging to a more developed
market, seasonal and cyclical patterns may develop in the future. As a result,
if our industry follows the same seasonal patterns as those in traditional
media, we may experience lower advertising revenues in the first and third
calendar quarter of each year. Seasonal and cyclical patterns in Internet
advertising may also affect our revenues. In addition, traffic levels on our Web
sites typically fluctuate during the summer and year-end vacation and holiday
periods. Furthermore, we anticipate that sales from iBaby and any other future
consumer goods we may sell will typically increase during the fourth quarter as
a result of the holiday season and may decline during other periods. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales, Marketing and Public Relations" for detailed
information on our quarterly operating results.
THERE ARE RISKS ASSOCIATED WITH OUR BUSINESS MODEL, WHICH IS DEPENDENT ON
SPONSORSHIP AND ADVERTISING REVENUES
We expect to derive a substantial amount of our revenues from sponsorships
and advertising for the foreseeable future, and demand and market acceptance for
Internet advertising solutions is uncertain.
There are currently no standards for the measurement of the effectiveness
of Internet advertising, and the industry may need to develop standard
measurements to support and promote Internet advertising as a significant
advertising medium. If such standards do not develop, existing advertisers may
not continue their levels of Internet advertising. Furthermore, advertisers that
have traditionally relied upon other advertising media may be reluctant to
advertise on the Internet. Our business would be adversely affected if the
market for Internet advertising fails to develop or develops more slowly than
expected.
Different pricing models are used to sell advertising on the Internet. It
is difficult to predict which, if any, will emerge as the industry standard.
This makes it difficult to project our future advertising rates and revenues.
Our advertising revenues could be adversely affected if we are unable to adapt
to new forms of Internet advertising. Moreover, 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.
WE MAY BE UNABLE TO ADEQUATELY TRACK AND MEASURE THE DELIVERY OF ADVERTISEMENTS
It is important to our advertisers that we accurately measure the
demographics of our user base and the delivery of advertisements on our Web
site. We depend on third parties to provide certain of these measurement
services.
8
<PAGE>
If they are unable to provide these services in the future, we would need to
perform them ourselves or obtain them from another provider. This could cause us
to incur additional costs or cause interruptions in our business during the time
we are replacing these services. We are currently 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. Companies may choose to not advertise
on our Web sites or may pay less for advertising if they do not perceive our
measurements or measurements made by third parties to be reliable.
WE MAY BE UNABLE TO SUCCESSFULLY EXPAND OUR BUSINESS
If we are unable to manage our growth effectively, our business could be
adversely affected. We have experienced and are currently experiencing a period
of significant growth. This growth has placed, and our anticipated future growth
in our operations will continue to place, a significant strain on our resources.
As part of this growth, we will have to implement new operational and financial
systems, procedures and controls.
Several members of our senior management joined us in 1998 and 1999,
including our Chief Financial Officer, Chief Operating Officer, Senior Vice
President, Sponsorship, General Counsel, Vice President, Finance, Vice
President, Controller and Chief Accounting Officer and Senior Vice President,
Human Resources. In addition, we have recently hired a Chief Technology Officer
and plan to hire additional technical personnel. These individuals have not
previously worked together and are becoming integrated as a management team. As
a result, our senior managers may not work together effectively as a team to
successfully manage our growth.
WE MAY NOT ATTRACT A SUFFICIENT AMOUNT OF TRAFFIC AND ADVERTISING WITHOUT OUR
CHANNELS BEING CARRIED ON AOL
AOL has accounted for a significant portion of our online traffic based on
the delivery to us of a guaranteed number of impressions. A significant amount
of our visitors and members reach our Web sites through AOL. Our agreement with
AOL does not prohibit AOL from carrying online sites or developing and providing
content that compete with our sites, and AOL is currently carrying additional
competing sites. Our agreement with AOL expires on December 31, 2000 and even
though either party may extend it for an additional year, AOL does not have any
obligation to renew it. If the carrying of our channels on AOL is discontinued,
our business, results of operations and financial condition would be materially
adversely affected.
AOL HAS INVESTED IN COMPANIES THAT ARE COMPETITIVE WITH IVILLAGE
AOL has invested in Oxygen Media, Inc. a new Internet and television
company that is developing cable and interactive content for women and children.
In addition, Oxygen Media has acquired from AOL, the assets of electra.com, an
online women's network, and Thrive Partners LLC, the operator of
thriveonline.com, a health site. In addition, AOL has invested in Excite, Inc.
and in November 1998, announced a merger with Netscape Communications Corp. The
relationship between AOL and Oxygen Media and AOL and other internet companies
may result in potential conflicts of interest for AOL, which may not be resolved
in our favor. Please see "Certain Transactions".
WE HAVE A SMALL NUMBER OF CUSTOMERS AND THE LOSS OF A NUMBER OF THESE CUSTOMERS
COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We have, so far, depended on a limited number of customers for a
significant part of our revenues. Consequently, the loss of a number of these
customers at any one time may adversely affect our financial condition and
results of operations. For the year ended December 31, 1997, no one advertiser
accounted for greater than 10% of total revenues, but revenues from our five
largest advertisers accounted for 26% of total revenues. At December 31, 1997,
one advertiser accounted for 31% of net accounts
9
<PAGE>
receivable. Although no advertiser accounted for more than 10% of total revenues
for the year ended December 31, 1998, our five largest advertisers accounted for
17% of total revenues. At December 31, 1998, one advertiser accounted for 11% of
net accounts receivable.
We anticipate that our results of operations in any given period will
continue to depend to a significant extent upon revenues from a small number of
customers. In addition, we anticipate that such customers will continue to vary
over time, so that the achievement of our long-term goals will require us to
obtain additional significant customers on an ongoing basis. Our failure to
enter into a sufficient number of large contracts during a particular period
could have a material adverse effect on our business, financial condition and
results of operations. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
WE MAY NOT BE ABLE TO INTEGRATE THE OPERATIONS FROM OUR RECENT ACQUISITION OF
ASTROLOGY.NET
We recently acquired KnowledgeWeb, Inc. d/b/a Astrology.Net. We could have
difficulty in assimilating its personnel, operations, technology and software.
In addition, the key personnel of Astrology.Net may decide not to work for us.
These difficulties could disrupt our ongoing business, distract our management
and employees, increase our expenses and adversely affect our results of
operations due to the amortization of goodwill.
WE MAY BE SUED FOR INFORMATION RETRIEVED FROM THE WEB
We may be subjected to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our Web site. These types of claims have been brought,
sometimes successfully, against online services as well as other print
publications in the past. We could also be subjected to claims based upon the
content that is accessible from our Web sites through links to other Web sites
or through content and materials that may be posted by members in chat rooms or
bulletin boards. We also offer e-mail services, which may subject us to
potential risks, such as liabilities or claims resulting from unsolicited
e-mail, lost or misdirected messages, illegal or fraudulent use of e-mail or
interruptions or delays in e-mail service. Our insurance, which covers
commercial general liability, may not adequately protect us against these types
of claims.
WE MAY INCUR POTENTIAL PRODUCT LIABILITY FOR PRODUCTS SOLD OVER THE INTERNET
Consumers may sue us if any of the products that we sell online are
defective, fail to perform properly or injure the user. To date, we have had
very limited experience in the sale of products online and the development of
relationships with manufacturers or suppliers of such products. We plan to
develop a range of products targeted specifically at women through our iBaby
site, Astrology.Net and other e-commerce sites that we may acquire in the
future. We also may foster relationships with manufacturers or companies to
offer such products directly on iVillage.com. Such a strategy involves numerous
risks and uncertainties. Although our agreements with manufacturers typically
contain provisions intended to limit our exposure to liability claims, these
limitations may not prevent all potential claims. Liability claims could require
us to spend significant time and money in litigation or to pay significant
damages. As a result, any such claims, whether or not successful, could
seriously damage our reputation and our business.
THERE IS INTENSE COMPETITION FOR INTERNET-BASED BUSINESS
The number of Web sites competing for the attention and spending of
members, users and advertisers has increased and we expect it to continue to
increase.
We compete for members, users and advertisers with the following types of
companies:
o online services or Web sites targeted at women, such as Women.com
Networks, a joint venture between Women.com Networks and The Hearst
Corp., Microsoft Corporation's womencentral.msn.com, condenet.com and
Oxygen Media's Web sites;
10
<PAGE>
o Web search and retrieval and other online service companies, commonly
referred to as portals, such as Excite, Inc., Infoseek Corporation,
Lycos, Inc. and Yahoo! Inc.; and
o publishers and distributors of traditional media, such as television,
radio and print.
Increased competition could result in price reductions, reduced margins or
loss of market share, any of which could adversely affect our business. Please
see "Business--Competition".
OUR UNCERTAIN SALES CYCLES COULD ADVERSELY AFFECT OUR BUSINESS
The time between the date of initial contact with a potential advertiser or
sponsor and the execution of a contract with the advertiser or sponsor, is often
lengthy, typically ranging from six weeks for smaller agreements to nine months
for larger agreements, and is subject to delays over which we have little or no
control, including:
o customers' budgetary constraints;
o customers' internal acceptance reviews;
o the success and continued internal support of advertisers' and sponsors'
own development efforts; and
o the possibility of cancellation or delay of projects by advertisers or
sponsors.
During the sales cycle, we may expend substantial funds and management
resources and yet not obtain sponsorship or advertising revenues. Accordingly,
our results of operations for a particular period may be adversely affected if
sales to advertisers or sponsors forecasted in a particular period are delayed
or do not otherwise occur.
OUR BUSINESS IS DEPENDENT ON OUR CHIEF EXECUTIVE OFFICER AND EDITOR-IN-CHIEF
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly, Candice
Carpenter, Chief Executive Officer, and Nancy Evans, Editor-in-Chief. The loss
of the services of Mdmes. Carpenter or Evans, or certain other key employees,
would likely have a significantly detrimental effect on our business.
We have no employment agreements with either of these executives. We do not
maintain "key person" life insurance for any of our personnel, other than
Ms. Carpenter. Our future success also depends on our continuing to attract,
retain and motivate highly skilled employees.
COMPETITION FOR PERSONNEL IN OUR INDUSTRY IS INTENSE
We may be unable to retain our key employees or attract, assimilate or
retain other highly qualified employees in the future. We have from time to time
in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications. If we do not succeed in attracting new personnel or retaining
and motivating our current personnel, our business will be adversely affected.
Please see "Business--Human Resources" and "Management" for detailed information
on our key personnel.
WE ARE DEPENDENT ON CONTINUED GROWTH IN USE OF THE INTERNET
Our market is new and rapidly evolving. Our business would be adversely
affected if Internet usage does not continue to grow, particularly usage by
women. A number of factors may inhibit Internet usage, including:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth and its performance and
reliability may decline. In addition, Web sites have experienced interruptions
in their 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 the usage of our Web sites, could grow
more slowly or decline.
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<PAGE>
WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY
Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of the Internet and intense competition in our industry exacerbate these
market characteristics. To achieve our goals, we need to effectively integrate
the various software programs and tools required to enhance and improve our
product offerings and manage our business. Our future success will depend on our
ability to adapt to rapidly changing technologies by continually improving the
performance features and reliability of our services. We may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. In addition, our new
enhancements must meet the requirements of our current and prospective users and
must achieve significant market acceptance. We could also incur substantial
costs if we need to modify our service or infrastructures to adapt to these
changes.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting certain types of
information and content over the Internet. Several telecommunications companies
have petitioned the Federal Communications Commission to regulate Internet
service providers and online service providers in a manner similar to long
distance telephone carriers and to impose access fees on those companies. This
could increase the cost of transmitting data over the Internet. Moreover, it may
take years to determine the extent to which existing laws relating to issues
such as property ownership, libel and personal privacy are applicable to the
Internet. Any new laws or regulations relating to the Internet could adversely
affect our business.
OUR SYSTEMS MAY FAIL OR EXPERIENCE A SLOW DOWN AND OUR USERS DEPEND ON OTHERS
FOR ACCESS TO OUR WEB SITES
Substantially all of our communications hardware and certain of our other
computer hardware operations are located at Exodus Communications, Inc.'s
facilities in Jersey City, New Jersey. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events could damage these
systems. Computer viruses, electronic break-ins or other similar disruptive
problems could also adversely affect our Web sites. Our business could be
adversely affected if our systems were affected by any of these occurrences. Our
insurance policies may not adequately compensate us for any losses that may
occur due to any failures or interruptions in our systems. We do not presently
have any secondary "off-site" systems or a formal disaster recovery plan.
Our Web sites must accommodate a high volume of traffic and deliver
frequently updated information. Our Web sites have in the past and may in the
future experience slower response times or decreased traffic for a variety of
reasons. These types of occurrences could cause users to perceive our Web sites
as not functioning properly and therefore cause them to use another Web site or
other methods to obtain information.
In addition, our users depend on Internet service providers, online service
providers and other Web site operators for access to our Web sites. Many of them
have experienced significant outages in the past, and could experience outages,
delays and other difficulties due to system failures unrelated to our systems.
WE ARE DEPENDENT ON THIRD PARTIES FOR SOFTWARE, SYSTEMS AND RELATED SERVICES
We are dependent on various third parties for software, systems and related
services. Many of these third parties have a limited operating history, have
relatively immature technology and are themselves dependent on reliable delivery
of services from others. As a result, our ability to deliver various services to
our users may be adversely affected by the
12
<PAGE>
failure of these third parties to provide reliable software, systems and related
services to us.
THIRD PARTIES MAY MISAPPROPRIATE PERSONAL INFORMATION ABOUT OUR USERS
If third parties were able to penetrate our network security or otherwise
misappropriate our users' personal information or credit card information, we
could be subject to liability. These could include claims for unauthorized
purchases with credit card information, impersonation or other similar fraud
claims. They could also include claims for other misuses of personal
information, such as for unauthorized marketing purposes. These claims could
result in litigation. In addition, the Federal Trade Commission and state
agencies have been investigating certain Internet companies regarding their use
of personal information. We could incur additional expenses if new regulations
regarding the use of personal information are introduced or if our privacy
practices are investigated.
INTERNET SECURITY CONCERNS COULD HINDER E-COMMERCE
The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. Any well-publicized compromise of security could deter people from
using the Internet or using it to conduct transactions that involve transmitting
confidential information. We may incur significant costs to protect against the
threat of security breaches or to alleviate problems caused by such breaches.
WE HAVE LIMITED PROTECTION OF OUR INTELLECTUAL PROPERTY; OTHERS COULD
MISAPPROPRIATE OUR INTELLECTUAL PROPERTY AND WE MAY NOT BE ABLE TO ENFORCE OUR
RIGHTS
Our actions to protect our trademarks and other proprietary rights may be
inadequate. In addition, it is possible that we could become subject to
infringement actions based upon content we may license from third parties. Any
of these claims, with or without merit, could subject us to costly litigation
and the diversion of our financial resources and technical and management
personnel. Further, if such claims are successful, we may be required to change
our trademarks, alter the content and pay financial damages. Despite our efforts
to protect our proprietary rights from unauthorized use or disclosure, parties
may attempt to disclose, obtain or use our solutions or technologies.
We may need to obtain licenses from others to refine, develop, market and
deliver new services. We cannot assure you that we will be able to obtain any
such licenses on commercially reasonable terms or at all or that rights granted
pursuant to any licenses will be valid and enforceable.
WE ARE INVOLVED IN LITIGATION WITH A FORMER EMPLOYEE
On January 8, 1999, a complaint was filed in the Chancery Court for
Williamson County, Tennessee by a former employee against iVillage and three of
its officers. The complaint alleges breach of an alleged employment agreement
and fraudulent inducement to accept a job in New York and to move from Tennessee
to New Jersey. In addition to unspecified damages, the complaint seeks an award
of options to purchase shares of common stock, which number presumably would be
equivalent to 33,333. We are vigorously defending against these claims. This
litigation, whether or not determined in our favor or settled by us, may be
costly and may divert the efforts and attention of our management from normal
business operations.
WE ARE INVOLVED IN INTELLECTUAL PROPERTY DISPUTES
We filed a service mark application for the mark "PARENTSPLACE.COM". On
July 22, 1998, Jewish Family and Children's Services filed a Notice of
Opposition in the Trademark Trial and Appeal Board of the U.S. Patent and
Trademark Office. On January 22, 1999, we filed an Answer to the Notice of
Opposition, denying that there was any likelihood of confusion between our mark,
"PARENTSPLACE.COM", and the mark used by Children's Services. There can be no
assurance that Children's Services will not be successful in the Opposition
proceeding, thus preventing us from securing a federal registration to the mark
"PARENTSPLACE.COM". Further, there can
13
<PAGE>
be no assurance that Children's Services will not assert a claim to trademark
rights against us in the future with respect to the use of "PARENTSPLACE.COM" or
"PARENTSPLACE", either as currently used or as developed in the future. We are
not able at this time to evaluate the likelihood of an unfavorable outcome in
the event such claims are asserted, or to estimate the amount or range of
potential loss.
On January 28, 1999, an attorney for Dailey & O'Brien sent a formal cease
and desist letter, requesting that we stop using "MONEYLIFE" on our money
channel and provide certain information concerning our use of the term. On
February 22, 1999, a complaint was filed in the U.S. District Court for the
Eastern District of Virginia by Dailey & O'Brien alleging, among other things,
trademark infringement. We have reached an agreement in principle with Dailey &
O'Brien granting us a license to use the term "MONEYLIFE." There can be no
assurance that a final agreement with Dailey & O'Brien can be achieved. Further,
other entities may be using the term "MONEYLIFE". We are not able at this time
to evaluate the likelihood of an unfavorable outcome in the event such claims
are asserted by any other entity, or to estimate the amount or range of
potential loss.
FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00", which the system might consider to be the year 1900 rather than the year
2000. This could result in system failures, delays or miscalculations causing
disruptions to our operations.
Our Year 2000 task force is currently conducting an inventory, and
developing testing procedures, for all software and other systems that it
believes might be affected by Year 2000 issues. Since third parties developed
and currently support many of the systems that we use, a significant part of
this effort will be to ensure that these third-party systems are Year 2000
compliant. We plan to confirm this compliance through a combination of the
representation by these third parties of their products' Year 2000 compliance,
as well as specific testing of these systems. The failure of systems maintained
by third parties to be Year 2000 compliant could cause us to incur significant
expense to remedy any problems, reduce our revenues from such third parties or
otherwise seriously damage our business. A significant Year 2000-related
disruption of the network services or equipment that third-party vendors provide
to us could also cause our members or visitors to consider seeking alternate
providers or cause an unmanageable burden on our technical support.
Our failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, some of our normal business activities or
operations.
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE
We cannot predict the extent to which investor interest in iVillage will
lead to the development of a trading market or how liquid that market might
become. The initial public offering price for the shares will be determined by
negotiations between iVillage and the representatives of the underwriters and
may not be indicative of prices that will prevail in the trading market. The
stock market has experienced significant price and volume fluctuations, and the
market prices of technology companies, particularly Internet-related companies,
have been highly volatile. Investors may not be able to resell their shares at
or above the initial public offering price. Please see "Underwriting".
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. Litigation could result in substantial costs and a diversion of
management's attention and resources.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE
After this offering, there will be outstanding 23,210,776 shares of our
common stock. There will be 23,758,276 shares outstanding if the underwriters'
over-allotment option is exercised in full. Of these shares, the shares sold in
this offering will be freely tradeable except for any
14
<PAGE>
shares purchased by our "affiliates" as defined in Rule 144 under the Securities
Act. The remaining 19,560,776 shares of common stock held by existing
stockholders will be "restricted securities" and will become eligible for sale
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 under the Securities Act. In addition, 180 days after
the date of this prospectus, at least 19,069,982 shares will be available for
sale in the public market, subject in the case of shares held by affiliates to
compliance with certain volume restrictions. Furthermore, 180 days after the
date of this prospectus, at least 869,359 shares will be issuable upon the
exercise of options, subject to vesting and 425,998 shares will be issuable upon
the exercise of warrants. Sales of a large number of shares could have an
adverse effect on the market price of our common stock.
The stockholders have no restrictions on selling any of our securities held
by them, other than as provided in the lock-up agreements with Goldman, Sachs &
Co. and under applicable securities laws. In addition, certain stockholders can
require us to register our securities they own for public sale. Any sales by
these stockholders could adversely affect the trading price of our common stock.
OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER
Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that a stockholder
might consider favorable. These provisions include, among others:
o the division of the board of directors into three separate classes;
o the right of the board to elect a director to fill a space created by the
expansion of the board;
o the ability of the board to alter our bylaws; and
o the requirement that at least 10% of the outstanding shares are needed to
call a special meeting of stockholders.
Furthermore, because we are incorporated in Delaware, we are subject to the
provisions of Section 203 of the Delaware General Corporation Law. These
provisions prohibit certain large stockholders, in particular those owning 15%
or more of the outstanding voting stock, from consummating a merger or
combination with a corporation unless:
o 66 2/3% of the shares of voting stock not owned by this large stockholder
approve the merger or combination; or
o our board of directors approves the merger or combination or the
transaction which resulted in the large stockholder owning 15% or more of
our outstanding voting stock. Please see "Description of Capital Stock".
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<PAGE>
USE OF PROCEEDS
The net proceeds to iVillage from the sale of the shares of common stock
offered hereby are estimated to be $42.6 million, after deducting the estimated
underwriting discount and offering expenses payable by iVillage. If the
underwriters' over-allotment option is exercised in full, we estimate that net
proceeds will be $49.2 million.
iVillage presently intends to use a portion of the net proceeds from this
offering to promote its brand, expand sales and marketing and purchase the
minority interest in iBaby. The balance of the net proceeds of this offering
will be used for working capital and general corporate purposes, including
channel expansion and content development, expansion and/or relocation of its
offices and possible acquisitions. iVillage believes opportunities may exist to
expand its current business through acquisitions and may utilize a portion of
the proceeds for such purpose. In addition, iVillage may consider acquisitions
of complementary businesses. Except for the agreement with iBaby, Inc., iVillage
is not currently a party to any contracts or letters of intent with respect to
any acquisitions, and there can be no assurance that any of iVillage's expansion
plans will be realized or, if realized, will prove profitable for iVillage.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Pending such uses, the net proceeds of this offering
will be invested in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
iVillage has never declared or paid any cash dividends on its capital
stock. iVillage presently intends to retain future earnings, if
any, to finance the expansion of its business and does not expect to pay any
cash dividends in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth iVillage's capitalization as of
December 31, 1998:
o on an actual basis after giving effect to the
one-for-three reverse common stock split,
o on a pro forma basis to reflect (a) the conversion of all of iVillage's
convertible preferred stock into common stock, (b) the purchase of the
minority interest in
iBaby, (c) the acquisition of Astrology.Net,
(d) the issuance of shares in connection with the NBC agreement and
(e) the filing of a charter amendment effective upon the closing of this
offering authorizing blank check preferred stock and
o on a pro forma as adjusted basis to reflect the estimated net proceeds
from the sale of the common stock offered by iVillage after deducting the
estimated underwriting discount and offering expenses payable by
iVillage. Please see "Use of Proceeds".
You should read this information together with iVillage's consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ------------ -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term liabilities.............. $ -- $ 23 $ 23
Stockholders' equity:
Series A convertible preferred
stock, par value $.0005;
1,000,000 shares authorized,
issued and outstanding
(actual); no shares authorized,
issued or outstanding (pro
forma and pro forma as
adjusted)...................... 1 -- --
Series B and B-1 convertible
preferred stock, par value
$.0005; 5,929,846 shares
authorized, 4,777,746 shares
issued and outstanding
(actual); no shares authorized,
issued or outstanding (pro
forma and pro forma as
adjusted)...................... 2 -- --
Series C convertible preferred
stock, par value $.0005;
13,528,762 shares authorized,
13,193,445 shares issued and
outstanding (actual); no shares
authorized, issued or
outstanding (pro forma and pro
forma as adjusted)............. 7 -- --
Series D convertible preferred
stock, par value $.0005;
13,000,000 shares authorized,
issued and outstanding
(actual); no shares authorized,
issued or outstanding (pro
forma and pro forma as
adjusted)...................... 6 -- --
Series E convertible preferred
stock, par value $.0005;
18,953,616 shares authorized,
11,730,948 shares issued and
outstanding (actual); no shares
authorized, issued or
outstanding (pro forma and pro
forma as adjusted)............. 6 -- --
Preferred stock, par value $.01;
no shares authorized, issued or
outstanding (actual); 5,000,000
shares authorized, no shares
issued or outstanding (pro
forma and pro forma as
adjusted)...................... -- -- --
Common stock, par value $.01;
65,000,000 shares authorized,
2,113,385 shares issued and
outstanding, (actual);
19,545,776 and 23,195,776
shares issued and outstanding,
pro forma and pro forma as
adjusted, respectively(1)...... 21 195 232
Additional paid-in capital....... 112,848 141,824 184,415
Accumulated deficit.............. (76,275) (76,275) (76,275)
Stockholders notes receivable.... (565) (16,065) (16,065)
Unearned compensation and
deferred advertising........... (4,029) (4,029) (4,029)
----------- ------------ -------
Total stockholders' equity....... 32,022 45,650 88,278
----------- ------------ -------
Total capitalization............. $ 32,022 $ 45,673 $88,301
----------- ------------ -------
----------- ------------ -------
</TABLE>
- ------------------------------
(1) Based on the number of shares actually outstanding on December 31, 1998.
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<PAGE>
DILUTION
The pro forma net tangible book value of iVillage as of December 31, 1998
was approximately $18.5 million, or approximately $0.95 per share of common
stock. Pro forma net tangible book value per share represents the amount of
iVillage's total tangible assets less total liabilities, divided by the pro
forma number of shares of common stock outstanding after giving effect to
(a) the purchase of the minority interest in iBaby, (b) the acquisition of
Astrology.Net and (c) the shares to be issued in connection with the NBC
agreement. After giving effect to the sale of the common stock offered by
iVillage hereby and after deducting the estimated underwriting discount and
offering expenses payable by iVillage, the pro forma net tangible book value of
iVillage, as adjusted, as of December 31, 1998 would have been approximately
$61.2 million, or $2.64 per pro forma share of common stock. This represents an
immediate increase in net tangible book value of $1.69 per share to iVillage's
existing stockholders and an immediate dilution in net tangible book value of
$10.36 per share to new investors of common stock in this offering. If the
initial public offering price is higher or lower, the dilution to the new
investors will be greater or less, respectively. The following table illustrates
this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............. $13.00
Pro forma net tangible book value per share prior
to this offering................................ $ 0.95
Increase per share attributable to this
offering........................................ 1.69
--------
Adjusted pro forma net tangible book value per
share after this offering....................... 2.64
------
Dilution per share to new investors(1)............ $10.36
------
------
</TABLE>
- ------------------------------
(1) Assuming the exercise in full of the underwriters' over-allotment option,
the pro forma net tangible book value of iVillage at December 31, 1998 would
have been approximately $2.85 per share, representing an immediate increase
in net tangible book value of $1.90 per share to iVillage's existing
stockholders and an immediate dilution in net tangible book value of $10.15
per share to new investors.
------------------------
The following table summarizes, on a pro forma basis, as of December 31,
1998, the number of shares of common stock purchased from iVillage, the total
consideration provided to iVillage and the average price per share provided by
existing stockholders and giving effect to (a) the purchase of the minority
interest in iBaby, (b) the acquisition of Astrology.Net and (c) the shares to be
issued in connection with the NBC agreement and by investors purchasing shares
in this offering. The calculation below is based on an assumed initial public
offering price of $13.00 per share, before deducting the estimated underwriting
discount and offering expenses payable by iVillage.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ -------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... 19,545,776 84.3% $138,946,710 74.5% $7.11
New Investors........... 3,650,000 15.7 47,450,000 25.5 13.00
---------- ------ ------------ ------
Total.............. 23,195,776 100.0% $186,396,710 100.0%
---------- ------ ------------ ------
---------- ------ ------------ ------
</TABLE>
------------------------
This discussion and table assumes no exercise of options outstanding under
iVillage's 1995 Amended and Restated Employee Stock Option Plan and the 1997
Amended and Restated Acquisition Stock Option Plan and no issuance of shares
reserved for future issuance under iVillage's 1999 Employee Stock Option Plan,
1999 Acquisition Stock Option Plan, 1999 Director Option Plan and 1999 Employee
Stock Purchase Plan. As of December 31, 1998, there were options outstanding to
purchase a total of 2,159,274 shares of common stock at a weighted average price
of $6.10 per share and 425,998 shares issuable upon exercise of outstanding
warrants with a weighted average exercise price of $6.54 per share. To the
extent that any of these options are exercised, there will be further dilution
to new investors. Please see "Capitalization", "Management--Stock Option Plans",
"--1999 Employee Stock Purchase Plan" and note 6 and note 9 to iVillage's
consolidated financial statements.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and iVillage's consolidated financial statements and notes to those
statements and other financial information included elsewhere in
this prospectus. The consolidated statement of operations data for the years
ended December 31, 1996, 1997 and 1998 and the consolidated balance sheet data
as of December 31, 1997 and 1998 are derived from the audited consolidated
financial statements of iVillage included in this prospectus. The consolidated
balance sheet data as of December 31, 1996 and 1995 and the consolidated
statement of operations data for the six month period for July 1, 1995
(inception) to December 31, 1995 are derived from the audited financial
statements of iVillage not included herein. The historical results presented
here are not necessarily indicative of future results.
<TABLE>
<CAPTION>
JULY 1, 1995
(INCEPTION)
TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1995 1996 1997 1998
------------ ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues................. $ -- $ 732 $ 6,019 $ 15,012
-------- ------- -------- --------
Operating expenses:
Production, product and
technology........... 629 4,521 7,606 14,521
Sales and marketing.... 329 2,709 8,771 28,523
General and
administrative....... 656 3,104 7,841 10,612
Depreciation and
amortization......... 17 109 2,886 5,683
-------- ------- -------- --------
Total operating
expenses........... 1,631 10,443 27,104 59,339
-------- ------- -------- --------
Loss from operations..... (1,631) (9,711) (21,085) (44,327)
Interest (expense)
income, net............ (7) 28 (216) 591
Loss on sale of Web
site(1)................ -- -- -- (504)
Minority interest........ -- -- -- 586
-------- ------- -------- --------
Net loss................. $ (1,638) $(9,683) $(21,301) $(43,654)
-------- ------- -------- --------
-------- ------- -------- --------
Basic and diluted net
loss per share......... $ (1.51) $ (8.90) $ (13.65) $ (21.10)
-------- ------- -------- --------
-------- ------- -------- --------
Weighted average shares
of common stock
outstanding used in
computing basic and
diluted net loss per
share.................. 1,083 1,087 1,561 2,068
-------- ------- -------- --------
-------- ------- -------- --------
Pro forma basic and
diluted net loss per
share(2)............... $ (2.59)
--------
--------
Shares of common stock
used in computing pro
forma basic and diluted
net loss per
share(2)............... 16,854
<CAPTION>
--------
--------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1995 1996 1997 1998
----- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....... $ 162 $2,102 $ 4,335 $30,825
Working capital (deficit)....... (715) 1,006 1,114 19,919
Total assets.................... 275 4,997 16,236 46,791
Long-term liabilities........... -- -- 139 --
Stockholders' equity
(deficit)..................... (629) 3,259 10,522 32,022
</TABLE>
- ------------------------------
(1) Please see note 5 to iVillage's consolidated financial statements.
(2) Please see note 2 to iVillage's consolidated financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with iVillage's
consolidated financial statements and notes to those statements and the other
financial information appearing elsewhere in this prospectus. In addition to
historical information, the following discussion and other parts of this
prospectus contain forward-looking information that involves risks and
uncertainties. iVillage's actual results could differ materially from those
anticipated by such forward-looking information due to competitive factors,
risks associated with iVillage's expansion plans and other factors discussed
under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
The iVillage network, iVillage.com, provides an easy-to-use, comprehensive
online network of sites tailored to the interests and needs of women using the
Internet. iVillage.com consists of 14 channels organized by subject matter. The
channels cover leading topics of interest to women online, such as family,
health, work, money, food, relationships, shopping, travel, pets and astrology.
We facilitate channel usage by providing common features and functionality
within each channel, including experts, chats, message boards and services.
To date, iVillage's revenues have been derived primarily from the sale of
sponsorship and advertising contracts. Sponsorship and advertising revenues
constituted 80% of total revenues for the year ended December 31, 1998.
Sponsorship revenues are derived principally from contracts ranging from
one to three years. Sponsorships are designed to support broad marketing
objectives, including brand promotion, awareness, product introductions, online
research and the integration of advertising with editorial content. Sponsorship
agreements typically include the delivery of impressions, the online
advertisements displayed to a user, on iVillage's Web sites and the design and
development of customized sites that enhance the promotional objectives of the
sponsor. The portion of sponsorship revenues related to the delivery of
impressions are recognized ratably in the period in which the advertisement is
displayed provided that none of iVillage's significant obligations remain, at
the lesser of the ratio of impressions delivered over total guaranteed
impressions or the straight line basis over the term of the contract. The
portion of sponsorship revenues related to the up-front customized design work,
as specified in the contract, is recognized in the period in which the design
work is performed typically within the first three months of the contract term.
As part of our sponsorship deals, certain sponsors who also sell products
provide us with a commission on sales of their products generated through our
Web site. To date, these amounts have been immaterial.
Advertising revenues are derived principally from short-term advertising
contracts in which iVillage typically guarantees a minimum number of impressions
to be delivered to users over a specified period of time for a fixed fee.
Advertising rates, measured on a cost per thousand impressions basis, or CPMs,
are dependent on whether the impressions are for general rotation throughout
iVillage's Web sites or for targeted audiences and properties within specific
areas of iVillage.com. Advertising revenues are recognized ratably in the period
in which the advertisement is displayed, provided that no significant iVillage
obligations remain, at the lesser of the ratio of impressions delivered over
total guaranteed impressions or the straight line basis over the term of the
contract. To the extent that minimum guaranteed impressions are not met,
iVillage defers recognition of the corresponding revenues until the guaranteed
impressions are achieved.
Sponsorship and advertising revenues also include barter revenues, which
represent an exchange by iVillage of advertising space on iVillage's Web sites
for reciprocal advertising space or traffic on other Web sites. Revenues from
these barter transactions are recorded as advertising revenues at the lower of
the estimated fair value of the advertisements delivered, unless the fair value
of the goods and services received is more objectively determinable, and are
recognized when the advertisements are run on iVillage.com. Barter
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expenses are recognized at the value of advertisements received when iVillage's
advertisements are run on the reciprocal Web sites, which is typically in the
same period as when the advertisements are run on iVillage.com. Barter expenses
are included as part of sales and marketing expenses. Typically, these barter
transactions have no impact on iVillage's cash flows and results of operations.
iVillage believes these barter transactions are important in the marketing of
the iVillage.com brand, and expects to continue to engage in these transactions
in the future.
Commerce revenues are derived principally from sales through iBaby, a
majority-owned joint venture with Ourbaby LLC, d/b/a Kid's Warehouse. Kid's
Warehouse provides all fulfillment services for iBaby. iVillage recognizes
revenues from iBaby product sales, net of any discounts, when products are
shipped to customers and the collection of the receivable is reasonably assured.
On December 9, 1996, iVillage acquired all of the outstanding stock of
ParentsPlace.com, Inc., an Internet content provider, in exchange for 66,666
shares of iVillage's common stock.
In May 1997, iVillage completed the acquisition of Health ResponseAbility
Systems, Inc., an Internet content provider, in exchange for $2.6 million in
cash, 433,400 shares of iVillage's common stock and cash amounts contingent on
future performance levels of Health ResponseAbility Systems and iVillage. In
addition, iVillage issued to AOL 203,000 shares of common stock in exchange for
the release of all equity rights in Health ResponseAbility Systems held by AOL.
The goodwill recorded of approximately $6.0 million is being amortized over a
three-year period. In January 1998, iVillage agreed to pay approximately $1.6
million to the prior owners of Health ResponseAbility Systems in a final
settlement of the cash amounts contingent on future performance levels, as
stipulated in the agreement for the acquisition of Health ResponseAbility
Systems. This amount was recorded as additional goodwill and is being amortized
over the remaining goodwill amortization period.
In September 1997, iVillage acquired substantially all of the assets of
StudentCenter LLC, an Internet content provider, for $125,000 and the issuance
of options to purchase 41,666 shares of common stock at $5.10 per share. In
addition, iVillage was required to make revenue-based and other bonus payments,
of which $30,000 was recorded as of December 31, 1997, based on the amount of
StudentCenter revenues, page views and other criteria. In connection with the
sale of iVillage's About Work content channel in May 1998, iVillage sold the
assets of StudentCenter. At the time of the sale, iVillage paid the former
owners of StudentCenter $520,000 and issued options to purchase an additional
33,333 shares of common stock at $5.10 per share as settlement of all revenue-
based and other bonus payments.
In April 1998, iVillage entered into a joint venture agreement with
Ourbaby, LLC, a California limited liability company, to form iBaby. iVillage
purchased 1,000,000 of the 1,666,666 shares outstanding of iBaby for $1,350,000
and for the delivery of certain promotional rights, including impressions on
iVillage.com.
Since the formation of iBaby in April 1998, the accounts of iBaby have been
consolidated into iVillage's financial statements, as iVillage holds a majority
interest and control of iBaby.
In May 1998, iVillage entered into a production and asset sale agreement
with TMP Worldwide Inc., or TMP, for one of its content channels, About Work,
and the assets of StudentCenter, in exchange for net proceeds of $600,000. In
connection with this sale, iVillage reported a loss of approximately $504,000
due to the bonus payment, the options issued to StudentCenter, the write-off of
remaining goodwill and the accrual for AOL carriage fees to be paid on behalf of
TMP for About Work.
An additional $575,000 was received in exchange for production, sponsorship
and consulting services provided to TMP during 1998. The agreement also required
a $600,000 reimbursement payment to be made to iVillage for maintaining the
About Work tenancy on AOL. In the event the About Work channel is not carried on
AOL through iVillage's distribution agreement, this reimbursement payment will
not be made.
On November 11, 1998, iVillage entered into an agreement with National
Broadcasting Company, Inc., or NBC, which is being
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amended, pursuant to which iVillage will advertise primarily in prime time on
NBC television as well as on Snap.com and NBC.com over the next three years. In
addition, NBC will acquire 4,889,030 shares of series E convertible preferred
stock of iVillage. Please see "--Recent Events".
iVillage has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in the
new and rapidly evolving markets for Internet products and services. These risks
include the failure to develop and extend iVillage's online service brands, the
rejection of iVillage's services by Web consumers, vendors and/or advertisers,
the inability of iVillage to maintain and increase the levels of traffic on its
online services, as well as other risks and uncertainties. In the event that
iVillage does not successfully implement its business plan, certain assets may
not be recoverable.
iVillage has incurred significant net losses and negative cash flows from
operations since its inception, and as of December 31, 1998, had an accumulated
deficit of approximately $76.3 million. These losses have been funded primarily
through the issuance of preferred equity securities. iVillage intends to
continue to invest heavily in marketing and promotion, content development and
technology and infrastructure development. As a result, iVillage believes that
it will continue to incur operating losses and negative cash flows from
operations for the foreseeable future and that the rate at which such losses
will be incurred may increase from current levels.
RESULTS OF OPERATIONS
The following table sets forth the results of operations for iVillage
expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Revenues........................... 100% 100% 100%
---- ---- ----
Operating expenses:
Production, product and
technology.................... 618 126 97
Sales and marketing.............. 370 146 190
General and administrative....... 424 130 71
Depreciation and amortization.... 15 48 38
---- ---- ----
Total operating expenses...... 1,427 450 396
---- ---- ----
Loss from operations............... (1,327)% (350)% (295)%
---- ---- ----
---- ---- ----
Net loss........................... (1,323)% (354)% (291)%
---- ---- ----
---- ---- ----
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 TO DECEMBER 31, 1997
REVENUES
Revenues increased 149% to $15.0 million for the year ended December 31,
1998, from $6.0 million for the year ended December 31, 1997. The increase in
revenues was primarily due to iVillage's ability to generate significantly
higher sponsorship and advertising revenues, and the development of its commerce
strategy through the investment in iBaby. Sponsorship advertising and usage
revenues increased $6.4 million primarily as a result of a higher number of
impressions sold and additional sponsors advertising on iVillage's Web sites.
Commerce revenues accounted for $2.6 million in 1998, with no revenues in 1997.
During 1998, iVillage expanded its sales force and the number of impressions
available on its Web sites increased as additional channels were launched and
additional content was produced. Sponsorship and advertising revenues accounted
for approximately 80% and 93% of revenues for the years ended December 31, 1998
and 1997, respectively. Commerce revenues accounted for approximately 17% of
revenues for the year ended December 31, 1998, with no such revenues for the
comparable period in 1997. iVillage expects revenues to grow in 1999 due to a
full year of iBaby activity and the acquisition of Astrology.Net.
Although no one advertiser accounted for greater than 10% of total revenues
for the year
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ended December 31, 1998, iVillage's five largest advertisers accounted for 17%
of total revenues for the year. At December 31, 1998, one advertiser accounted
for 11% of net accounts receivable due to a significant invoice billed close to
year end. Although iVillage's five largest sponsorship and advertising customers
accounted for 26% of total revenues for the year ended December 31, 1997, no one
advertiser accounted for greater than 10% of total revenues. At December 31,
1997, one customer accounted for approximately 31% of the net accounts
receivable balance. Included in sponsorship and advertising revenues are barter
transactions which accounted for approximately 20% and 10% of revenues for the
years ended December 31, 1998 and 1997, respectively. Barter revenues increased
as a percentage of revenues because of the development of barter as a viable
vehicle for online advertising in the industry.
OPERATING EXPENSES
PRODUCTION, PRODUCT AND TECHNOLOGY. Production, product and technology
expenses consist primarily of salaries, payroll taxes and benefits and
expenditures related to editorial content, community management and support
personnel, technology, software development and operations expenses, and product
costs related to merchandise sales. Production, product and technology expenses
increased to $14.5 million, or 97% of revenues, for the year ended December 31,
1998 from $7.6 million, or 126% of revenues, for the year ended December 31,
1997. The dollar increase was primarily attributable to increased personnel
costs related to enhancing the content and functionality of iVillage's Web sites
which increased by $2.7 million, and product costs of $2.1 million arising from
commerce transactions that did not exist in 1997. Production, product and
technology expenses decreased as a percentage of revenues because of the
increased growth in revenues relative to the growth in iVillage's cost
structure. iVillage believes that significant investments in technology and
product development are required to remain competitive and, therefore, expects
that its production, product and technology expenses will continue to increase
in absolute dollars for the foreseeable future.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
costs of distribution agreements, salaries, payroll taxes and benefits for sales
and marketing personnel, commissions, advertising and other marketing related
expenses. Sales and marketing expenses increased to $28.5 million, or 190% of
revenues, for the year ended December 31, 1998, from $8.8 million, or 146% of
revenues, for the year ended December 31, 1997. The dollar increase in sales and
marketing expenses was primarily due to expanded distribution agreements which
increased by about $6.3 million, increases in advertising expenses related to
iVillage's branding campaign of $5.4 million and higher advertising and sales
personnel expenses of about $3.0 million. iVillage has invested heavily in
distribution arrangements in the past twelve months and currently has agreements
with AOL, Snap and Infoseek. Sales and marketing expenses as a percentage of
revenues increased due to iVillage's branding campaign and distribution
agreements. Included in sales and marketing expenses are barter transactions,
which accounted for approximately 10% and 7% of sales and marketing expenses for
the years ended December 31, 1998 and 1997, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, payroll taxes and benefits and related costs for general
corporate functions, including executive management, finance, facilities, legal
and fees for other professional services. General and administrative expenses
increased to $10.6 million, or 71% of revenues, for the year ended December 31,
1998, from $7.8 million, or 130% of revenues, for the year ended December 31,
1997. The increase in general and administrative expenses was primarily due to
an increase in salaries and benefits, recruiting costs and facilities expenses
resulting from an increase in the number of personnel hired during the year to
support the growth of iVillage's business. General and administrative expenses
decreased as a percentage of total revenues because of the growth in revenues
relative to the growth in iVillage's general and administrative expenses. This
is due to the development of iVillage's infrastructure in 1997 which was
necessary for future growth of revenues. iVillage expects that
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it will incur additional general and administrative expenses as iVillage
continues to hire personnel and incurs expenses related to the growth of the
business and its operations as a public company.
DEPRECIATION AND AMORTIZATION.
Depreciation and amortization expenses increased to $5.7 million, or 38% of
revenues, for the year ended December 31, 1998 from $2.9 million, or 48% of
revenues, for the year ended December 31, 1997. The dollar increase was
primarily attributable to increased depreciation of $1.2 million resulting from
purchases of fixed assets of approximately $6.3 million and increased
amortization expense of $1.6 million due to the Health ResponseAbility Systems
acquisition in May 1997.
INTEREST (EXPENSE) INCOME, NET
Interest (expense) income, net includes interest income from iVillage's
cash balances and interest expense related to iVillage's financing obligations,
including non-cash expenses related to the issuance of warrants associated with
a bridge financing in 1997. Interest (expense) income, net improved to an income
of $0.6 million for the year ended December 31, 1998, from an expense of
$0.2 million for the year ended December 31, 1997. This increase was primarily
due to a higher average net cash and cash equivalents balance from the issuance
of preferred and common stock during the year.
MINORITY INTEREST
Minority interest represents the portion of the net loss of iBaby
attributable to minority stockholders.
INCOME TAXES
As of December 31, 1998, iVillage had approximately $31.3 million of
federal net operating loss carryforwards for tax reporting purposes available to
offset future taxable income. iVillage's federal net operating loss
carryforwards expire beginning in 2010. Certain future changes in the share
ownership of iVillage, as defined in the Tax Reform Act of 1986, may restrict
the utilization of carryforwards. A valuation allowance has been recorded for
the entire deferred tax asset as a result of uncertainties regarding the
realization of the asset due to the lack of iVillage's earnings history.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES
Revenues were $6.0 million and $0.7 million for the years ended
December 31, 1997 and 1996, respectively. The increase was driven by the growth
in sponsorship and advertising revenues, which was the result of more
advertisers and a higher number of impressions sold. Sponsorship and advertising
revenues accounted for 93% and 74% of revenues for the years ended December 31,
1997 and 1996, respectively. Included in advertising and sponsorship revenues
were barter transactions, which accounted for approximately 10% and 1% of
revenues for the years ended December 31, 1997 and 1996, respectively. At
December 31, 1997 and 1996, one customer accounted for 31% and four customers
each represented greater than 10% of the net accounts receivable balance. At
December 31, 1997, iVillage's five largest sponsorship and advertising customers
accounted for 26% of total revenues, but no one customer accounted for greater
than 10% of total revenues. For the years ended December 31, 1997 and 1996,
iVillage derived revenues from usage fees paid by AOL based on visitation to
iVillage.com on the AOL service. Usage fees were $0.4 million and $0.2 million
for the years ended December 31, 1997 and 1996, respectively. During the year
ended December 31, 1997, iVillage entered into a new agreement with AOL that
eliminated usage fees.
OPERATING EXPENSES
PRODUCTION, PRODUCT AND TECHNOLOGY. Production, product and technology
expenses were $7.6 million, or 126% of revenues, and $4.5 million, or 618% of
revenues, for the years ended December 31, 1997 and 1996, respectively. The
increase in production, product and technology expenses was primarily
attributable to increases in personnel and related costs to support enhancement
of iVillage's Web site technology and content. Production, product and
technology expenses as a percentage of revenues have decreased because of the
growth in revenues.
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SALES AND MARKETING. Sales and marketing expenses were $8.8 million, or
146% of revenues, and $2.7 million, or 370% of revenues, for the years ended
December 31, 1997 and 1996, respectively. The increase in sales and marketing
expenses was primarily due to expanded online banner and distribution
arrangements and the addition of a direct sales force, which iVillage began
building in the second half of 1996. Included in sales and marketing are barter
transactions, which accounted for approximately 7% of sales and marketing in the
year ended December 31, 1997. Sales and marketing expenses as a percentage of
revenues have decreased because of the growth in revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$7.9 million, or 130% of revenues, and $3.1 million, or 424% of revenues, for
the years ended December 31, 1997 and 1996, respectively. The increase in
general and administrative expenses was primarily due to increases in the number
of general and administrative personnel and professional services and facility
expenses to support the growth of iVillage's operations. General and
administrative expenses as a percentage of revenues have decreased because of
the growth in revenues.
DEPRECIATION AND AMORTIZATION.
Depreciation and amortization expenses increased to $2.9 million, or 48% of
revenues, for the year ended December 31, 1997 from $0.1 million, or 15% of
revenues, for the year ended December 31, 1996. The dollar increase was
primarily attributable to purchases of fixed assets of approximately $4 million
and acquisitions of Web sites for approximately $2.9 million during the year
ended December 31, 1997.
INTEREST (EXPENSE) INCOME, NET
Interest (expense) income, net was approximately $216,000 expense and
$28,000 income for the years ended December 31, 1997 and 1996, respectively. The
increase in interest (expense) income, net for the year ended December 31, 1997
was primarily due to warrants issued in connection with the receipt of bridge
financing resulting in an interest charge of approximately $650,000.
RECENT EVENTS
Under a prior agreement with iBaby and other parties, on February 10, 1999,
iVillage entered into a definitive agreement to purchase all of the outstanding
shares of iBaby held by the minority stockholders of iBaby for an aggregate
purchase price of $10.8 million. The purchase price consisted of $8 million in
cash, of which $1.5 million was paid on February 12, 1999 and the remaining
$6.5 million is payable within two business days of the closing of this
offering, and an aggregate number of shares of iVillage common stock having an
aggregate value of $2.8 million. The number of shares of iVillage common stock
to be issued to the minority stockholders will be dependent upon the price per
share of common stock in this offering. In addition, subject to its existing
agreements with respect to registration rights, iVillage granted piggyback
registration rights in connection with the shares of iVillage common stock to be
issued pursuant to the agreement.
If this offering is not completed by May 31, 1999, the agreement with iBaby
gives iVillage the right to purchase the outstanding shares of iBaby held by the
minority stockholders for an aggregate purchase price of $9.3 million. To
maintain this right, iVillage must give the minority stockholders written notice
of its intent to purchase their shares by April 15, 1999 and make a
non-refundable $1 million payment to the minority stockholders as a credit
towards the remaining $9.3 million purchase price.
If the shares held by the minority stockholders of iBaby are not purchased
by iVillage, the non-refundable payment will be forfeited and the terms of the
existing agreement between iBaby and iVillage will remain in effect.
On February 18, 1999, iVillage acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a Astrology.Net, an Internet content provider, in
exchange for 802,125 shares of iVillage's common stock and $1 million in cash.
The agreement provides for employment, non-compete and stock option agreements
for the founding stockholders of Astrology.Net.
The terms of the agreement provide that 326,331 of the shares of common
stock are issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be
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accelerated dependent on Astrology.Net meeting revenue targets. In the event
there is no acceleration of the release of these shares by the end of the
five-year term, all remaining shares in escrow will be released to
Astrology.Net's stockholders. In addition, all outstanding options to purchase
Astrology.Net common stock were converted into non-qualified options to purchase
an aggregate of 31,208 shares of iVillage common stock.
In addition to the shares issued, iVillage issued to the founding
stockholders of Astrology.Net options to purchase 150,000 shares of iVillage
common stock at an exercise price equal to the initial public offering price of
the common stock in this offering. These options, which are contingent on
continued employment with Astrology.Net, vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting certain revenue targets.
iVillage also granted to the founding stockholders of Astrology. Net, subject to
its existing agreements with respect to registration rights, piggyback
registration rights in connection with the shares of iVillage common stock to be
issued pursuant to the agreement.
The acquisition will be accounted for as a purchase with an estimated
purchase price of approximately $11.8 million based on a value of iVillage's
common stock of $13.00 per share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net will be
recorded as goodwill and amortized over the period of expected benefit.
On February 22, 1999 iVillage and NBC reached an agreement in principle to
amend, subject to execution of final documentation, the November 11, 1998
advertising and promotional agreement with NBC as follows:
a. iVillage has agreed to purchase, for cash, $8.5 million of advertising
and promotional spots, per annum, over the next three years.
b. Upon signing the amended agreement, iVillage will issue, subject to
certain anti-dilution protection, 4,889,030 shares of series E
convertible preferred stock and grant an option to purchase up to
970,873 shares of series E convertible preferred stock at $5.15 per
share during 2000 and 813,008 shares at $6.15 per share during 2001 in
exchange for a promissory note in the approximate amount of
$15.5 million at 5% interest per annum. The principal amount of the note
and interest is payable in twelve equal installments of approximately
$1.4 million, payable each quarter beginning April 1, 1999.
c. iVillage has also agreed to pay $1.1 million during 1999 for prominent
placement on the NBC.com Web site.
Under the revised agreement and in accordance with Emerging Issues Task
Force No. D-60 "Accounting for the Issuance of Convertible Preferred Stock and
Debt Securities with a Nondetachable Conversion Feature", the $5.7 million
difference between the purchase price of the series E convertible preferred
stock and the fair market value on the date of issuance will be accounted for as
a deemed dividend and amortized using the effective interest method from the
date of issuance through the date the securities are first convertible. iVillage
expects this to occur in March 1999 with the effectiveness of its initial public
offering. In addition, the fair value of the option as of February 22, 1999, of
approximately $3.3 million, will be recorded in stockholders' equity as deferred
advertising costs and amortized to advertising expense-non cash over the
three-year advertising agreement. The fair value of the option was determined
using the Black-Scholes option pricing model in accordance with Statement of
Financial Standards No. 123, "Accounting for Stock-Based Compensation".
QUARTERLY RESULTS OF OPERATIONS
As a result of iVillage's limited operating history, iVillage does not have
historical financial data for a significant number of periods upon which to
forecast quarterly revenues and results of operations. iVillage does not believe
that period-to-period comparisons of its operating results are necessarily
meaningful nor should they be relied upon as indicators of future performance.
In one or more future quarters iVillage's results of operations may fall below
the expectations of securities analysts and investors. In such event, the
trading price of the common stock would likely be materially adversely affected.
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The following table sets forth certain unaudited quarterly consolidated
statement of operations data for each of the eight quarters during the years
ended December 31, 1997 and 1998. In the opinion of management, this information
has been prepared substantially on the same basis as the audited consolidated
financial statements appearing elsewhere in this prospectus, and all necessary
adjustments, consisting only of normal recurring adjustments, have been included
in the amounts stated below to present fairly the unaudited consolidated
quarterly results. The quarterly data should be read in conjunction with the
audited consolidated financial statements of iVillage and the notes to those
statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- ------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $ 891 $ 1,253 $ 1,518 $ 2,357 $ 2,200 $ 2,638 $ 4,288 $ 5,886
------- -------- ------- -------- --------- -------- --------- --------
Production, product and
technology................. 1,507 1,745 1,905 2,449 2,657 3,766 3,985 4,113
Sales and marketing.......... 1,507 1,957 1,935 3,372 4,870 7,184 7,877 8,592
General and administrative... 996 2,216 1,967 2,662 2,145 2,061 3,606 2,800
Depreciation and
amortization............... 510 687 1,034 655 1,120 1,538 1,386 1,639
------- -------- ------- -------- --------- -------- --------- --------
Total operating expenses... 4,520 6,605 6,841 9,138 10,792 14,549 16,854 17,144
------- -------- ------- -------- --------- -------- --------- --------
Loss from operations........... $(3,629) $ (5,352) $(5,323) $ (6,781) $ (8,592) $(11,911) $ (12,566) $(11,258)
------- -------- ------- -------- --------- -------- --------- --------
------- -------- ------- -------- --------- -------- --------- --------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, iVillage has financed its operations primarily through
the private placement of its convertible preferred stock. As of December 31,
1998, iVillage had approximately $30.8 million in cash and cash equivalents.
Net cash used in operating activities increased to $32.3 million for the
year ended December 31, 1998 from $15.3 million for the year ended December 31,
1997 and $8.7 million for 1996. The increase in net cash used resulted primarily
from increasing net losses, offset by the timing of payable settlements and
increased depreciation and amortization expense.
Net cash used in investing activities decreased to $5.8 million for the
year ended December 31, 1998 from $6.9 million for the year ended December 31,
1997 and $0.7 million for 1996, resulting primarily from increased purchases of
property and equipment and the $2.6 million cash portion of the acquisition of
iVillage's health channel in 1997.
Net cash provided by financing activities increased to $64.5 million for
the year ended December 31, 1998 from $24.4 million for 1997 and $11.3 million
for 1996. The increase in 1998 was primarily due to $65.3 million of net cash
proceeds from the sale of shares of iVillage's series E convertible preferred
stock, series D convertible preferred stock and common stock as compared to the
$24.8 million of net cash proceeds from the sale of shares of iVillage's
series C convertible preferred stock in 1997, inclusive of convertible notes. In
1996, iVillage received net cash proceeds of $11.3 million from the sale of
shares of iVillage's series B and B-1 convertible preferred stock, inclusive of
convertible notes.
iVillage's capital requirements depend on numerous factors, including:
o market acceptance of iVillage's services;
o the amount of resources iVillage devotes to investments in the
iVillage.com network;
o the resources iVillage devotes to marketing;
o selling its services and brand promotions; and
o other factors.
iVillage has experienced a substantial increase in its expenditures since
its inception consistent with growth in iVillage's operations and staffing, and
anticipates that this will continue for the foreseeable future. Additionally,
iVillage will continue to evaluate possible investments in businesses, products
and technologies, and plans to expand its sales and marketing programs and
conduct more aggressive brand promotions. iVillage currently anticipates that
its available cash resources combined with the net proceeds from this offering
will be sufficient to meet its anticipated
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needs for working capital and capital expenditures for at least the 12 months
following the date of this prospectus. We may need to raise additional funds,
however, in order to fund more rapid expansion, to develop new or enhance
existing services or products, to respond to competitive pressures or to acquire
complementary products, businesses or technologies. If additional funds are
raised through the issuance of equity or convertible debt securities, the
percentage ownership of our stockholders will be reduced, our stockholders may
experience additional dilution and such securities may have rights, preferences
or privileges senior to those of our stockholders. We cannot assure you that
additional financing will be available on terms favorable to us, or at all. If
adequate funds are not available or are not available on acceptable terms, our
ability to fund our expansion, take advantage of unanticipated opportunities,
develop or enhance services or products or otherwise respond to competitive
pressures would be significantly limited. Our business, results of operations
and financial condition could be materially adversely affected by such
limitation.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
is effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software
development or obtained for internal use including the requirement to capitalize
specified costs and amortization of such costs. iVillage does not expect the
adoption of this standard to have a material effect on iVillage's capitalization
policy.
In April 1998, AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start up
activities and organization costs to be expensed as incurred. As iVillage has
expensed these costs historically, the adoption of this standard is not expected
to have a significant impact on iVillage's results of operations, financial
position or cash flows.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS No. 133"), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The adoption of SFAS No. 133 is not
expected to have an impact on iVillage's results of operations, financial
position or cash flows upon the adoption of this standard.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
STATE OF READINESS
iVillage has made a preliminary assessment of the Year 2000 readiness of
its operating financial and administrative systems, including the hardware and
software that support iVillage's systems. iVillage's assessment plan consists
of:
o quality assurance testing of its internally developed proprietary
software;
o contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of iVillage's services to its users;
o contacting vendors of third-party systems;
o assessing repair or replacement requirements;
o implementing repair or replacement;
o implementation; and
o creating contingency plans in the event of Year 2000 failures.
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iVillage's Year 2000 task force is currently conducting an inventory of and
developing testing procedures for all software and other systems that it
believes might be affected by Year 2000 issues. Since third parties developed
and currently support many of the systems that we use, a significant part of
this effort will be to ensure that these third-party systems are Year 2000
compliant. We plan to confirm this compliance through a combination of the
representation by these third parties of their products' Year 2000 compliance,
as well as specific testing of these systems. iVillage plans to complete this
process prior to the end of the third quarter of 1999. Until such testing is
completed and such vendors and providers are contacted, iVillage will not be
able to completely evaluate whether its systems will need to be revised or
replaced.
COSTS
To date, iVillage has spent an immaterial amount on Year 2000 compliance
issues but expects to incur an additional $350,000 to $500,000 in connection
with identifying, evaluating and addressing Year 2000 compliance issues. Most of
iVillage's expenses have related to, and are expected to continue to relate to,
the operating costs associated with time spent by employees and consultants in
the evaluation process and Year 2000 compliance matters generally. Such
expenses, if higher than anticipated, could have a material adverse effect on
iVillage's business, results of operations and financial condition.
RISKS
iVillage is not currently aware of any Year 2000 compliance problems
relating to its systems that would have a material adverse effect on iVillage's
business, results of operations and financial condition, without taking into
account iVillage's efforts to avoid or fix such problems. There can be no
assurance that iVillage will not discover Year 2000 compliance problems in its
systems that will require substantial revision. In addition, there can be no
assurance that third-party software, hardware or services incorporated into
iVillage's material systems will not need to be revised or replaced, all of
which could be time-consuming and expensive. The failure of iVillage to fix or
replace its internally developed proprietary software or third-party software,
hardware or services on a timely basis could result in lost revenues, increased
operating costs, the loss of customers and other business interruptions, any of
which could have a material adverse effect on iVillage's business, results of
operations and financial condition. Moreover, the failure to adequately address
Year 2000 compliance issues in its internally developed proprietary software
could result in claims of mismanagement, misrepresentation or breach of contract
and related litigation, which could be costly and time-consuming to defend.
iVillage is heavily dependent on a significant number of third-party
vendors to provide both network services and equipment. A significant Year
2000-related disruption of the network, services or equipment that third-party
vendors provide to iVillage could cause iVillage's members and visitors to
consider seeking alternate providers or cause an unmanageable burden on its
technical support, which in turn could materially and adversely affect
iVillage's business, financial condition and results of operations.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of iVillage's control will be Year 2000 compliant. The failure by such
entities to be Year 2000 compliant could result in a systemic failure beyond the
control of iVillage, such as a prolonged Internet, telecommunications or
electrical failure, which could also prevent iVillage from delivering its
services to its customers, decrease the use of the Internet or prevent users
from accessing its Web sites which could have a material adverse effect on
iVillage's business, results of operations and financial condition.
CONTINGENCY PLAN
As discussed above, iVillage is engaged in an ongoing Year 2000 assessment
and has not yet developed any contingency plans. The results of iVillage's Year
2000 simulation testing and the responses received from third-party vendors and
service providers will be taken into account in determining the nature and
extent of any contingency plans.
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BUSINESS
IVILLAGE INC.
iVillage is a leading online women's network and one of the most
demographically targeted online communities on the World Wide Web. iVillage.com
is an easy-to-use, comprehensive online network of sites tailored to the
interests and needs of women aged 25 through 49. We provide advertisers and
merchants with targeted access to women using the Web.
iVillage's network of sites consists of 14 channels organized by subject
matter. The channels cover leading topics of interest to women online, such as
family, health, work, money, food, relationships, shopping, travel, pets and
astrology. We facilitate channel usage by providing common features and
functionality within each channel, including experts, chats, message boards and
services.
As of December 31, 1998, iVillage's membership, its core audience and most
valuable users, was 82% female and consisted of approximately 960,000 unique
members as compared to approximately 170,000 unique members as of January 31,
1998. For the month ended December 31, 1998, iVillage.com had approximately 65
million page views and 2.7 million unique visitors.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet has emerged as a significant global communications medium,
enabling millions of people to share information and conduct business
electronically and providing advertisers and businesses with an attractive means
of marketing and selling their products and services. International Data
Corporation estimates the number of users associated with devices accessing the
Web to increase from approximately 69 million at the end of 1997 to
approximately 320 million by the end of 2002. According to International Data
Corporation, worldwide commerce revenue on the Internet is expected to increase
from approximately $12.4 billion at the end of 1997 to more than $425 billion in
2002. Jupiter Communications, a new media research firm that specializes in
online research and analysis, estimates that the amount of advertising dollars
spent on the Internet is expected to increase from approximately $1.9 billion in
1998 to $7.7 billion by 2002, a compound annual growth rate of 42%. The Internet
enables features and functions that are unavailable in traditional media,
permitting online retailers to interact effectively with customers and
advertisers to target specific demographic groups by capturing valuable data on
customer tastes, preferences and shopping and buying patterns.
WOMEN'S INCREASING USE OF THE INTERNET AND THEIR IMPORTANCE IN THE ECONOMY
Women represent an attractive demographic group for advertisers and
businesses. The number of female AOL subscribers increased from 16% of total
subscribers in 1994 to 51% in June 1998. According to Jupiter Communications,
45% of the Internet audience was female as of January 1998. These trends are
important to advertisers because women are estimated to have disproportionate
control or influence over consumer spending in the United States. For example,
according to a November 1997 Advertising Age article, women controlled or
influenced 80% of all purchase decisions, 80% of new vehicle purchases, 66% of
home computers, 46% of men's wear and 70% of appliance choices. We believe that
women are increasing their use of the Internet for commercial purposes. Although
women are underrepresented in the online spending category, accounting for only
25% of online sales in 1996, as reported by Jupiter Webtrack, this gap is
expected to narrow over the next several years and grow to approximately 47% by
2000.
Spending on advertising targeted to women is generally considered to
represent the largest single category of advertising in the United States. Also,
iVillage believes that women online spend fewer hours watching television or
reading print media than they did prior to using the Internet in comparison to
their male counterparts. Thus, as women move online, advertisers will likely
follow suit.
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NEED FOR WOMEN'S NETWORK
For advertisers to effectively reach women online, they need to address the
fact that women use the Internet differently than men. iVillage believes that
women want an environment built to meet their needs for problem-solving,
time-efficiency, integration of information, peer advice and simple navigation.
According to an International Data Corporation article, women appear to spend
less time "surfing" the Internet than men. Accordingly, women spend more of
their online time at a single destination. In addition, the varied social roles
of women, which include, among other things, primary child care provider, wage
earner, consumer and investor, create stress and underscore the need for
efficient problem-solving mechanisms. For example, a working mother might find
herself at midnight applying for a mortgage, trading stocks or researching a
disease on the Internet, a time when traditional service providers cannot be
reached. The Internet provides a powerful communications vehicle where a woman
can find answers and seek advice from women with relevant life experiences at
any time of the day and from work or home.
iVillage believes that the major Web search and retrieval services are
generally designed for all major demographic audiences, and, therefore, have
historically not created an environment focused on the specific programming
needs and buying habits of women. Consequently, iVillage believes that women
online and advertisers and merchants seeking to reach concentrations of women
online are underserved.
THE IVILLAGE SOLUTION
iVillage.com is one of the largest online women's networks and one of the
most demographically targeted online communities on the Web. iVillage focuses on
the needs of women online and has created an environment that solves everyday
problems quickly in those areas of life most important to women, including
family, parenting, work, money and health. The user's experience on iVillage.com
centers on solving these problems in one destination through targeted community,
access to experts, useful interactive tools and commerce opportunities.
iVillage believes its success to date can be attributed to the following
factors:
FOCUS ON HIGHLY TARGETED DEMOGRAPHIC GROUP
iVillage.com is primarily tailored to the interests and needs of women
online between the ages of 25 and 49. iVillage believes that these women want:
o powerful, quick and easily accessible problem-solving content;
o emotional support, a sense of identification and access to sympathetic
listeners; and
o a consistent navigation and programming experience.
iVillage believes that its network creates the experience women are seeking
and distinguishes iVillage.com from AOL, other women's networks and other online
services. iVillage.com offers a series of integrated tools, community resources,
experts and information databases to help women solve their everyday problems
quickly and effectively. For example, a woman who learns that she has a disease
can quickly:
o access other members who have lived through this experience and can
provide both guidance and emotional relief;
o access Healthwise Knowledgebase, a medical database to research the
topic; and
o select and purchase books on the topic.
iVillage.com provides a place where women can find support from like-minded
women and the comfort of knowing that other women have shared similar
experiences and have come through them successfully. This program enables women
to work together towards breaking the cycle of dieting and weight gain.
iVillage.com also offers daily polls that provide women with an immediate sense
of belonging and connection.
iVillage.com offers a consistent navigation and programming experience
across all channels and functions. Each channel is organized in a consistent
manner around tools, experts, resources and community. During December 1998,
iVillage.com's home page on both the Internet and AOL provided users with links
each week to approximately 50 experts, 700 chats and 1,500 message boards.
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ACTIVE MEMBERSHIP AND COMMUNITY PARTICIPATION
iVillage encourages active participation in its community and offers a
number of programs to increase levels of participation. Believing that members
form iVillage.com's core audience and are its most valuable customers, iVillage
created a membership services group in January 1998. iVillage has built an
organization of over 1,000 community leaders who volunteer a significant amount
of time hosting message boards and chats and contributing to iVillage.com's
proprietary content and innovative bottoms-up programming. iVillage.com also
sends approximately 5.9 million electronic newsletters per week to its members,
visitors and newsletter subscribers.
POSITIVE ENVIRONMENT FOR ADVERTISING AND COMMERCE
iVillage believes that iVillage.com appeals to advertisers and consumers
because it combines the following attributes:
o a high degree of member involvement within the network, through polls,
message boards, chats, community challenges and personalized interactive
services;
o an interactive sponsorship model that integrates advertising and commerce
into the content of each of the sites;
o a highly-targeted demographic group; and
o a consistency of brand promotion and navigation throughout the network.
iVillage believes that this combination has resulted in effective CPMs
above the industry average, and above the average for other women's sites. In
addition, iVillage.com offers a scalable business platform from which iVillage
can generate multiple revenue streams, including:
o banner advertising;
o sponsorship;
o production; and
o e-commerce.
BUSINESS STRATEGY
iVillage's objective is to be the premier site for women online. We have
made a number of recent executive hires in an effort to strengthen our
management infrastructure in order to successfully manage our growth and
implement our strategy. Key elements of iVillage's strategy are as follows:
BUILD STRONG BRAND RECOGNITION
iVillage believes that building brand recognition of iVillage.com is
critical to attracting and expanding its global Internet user base. iVillage's
market leadership position has been driven by partnership and distribution
agreements with other leading Internet-based companies. iVillage believes
aggressive brand-building will become increasingly important to sustain its
leadership position and has begun to allocate some of its branding expenditures
toward offline branding on television and radio, through direct media spending
and through strategic alliances with traditional media partners. These alliances
are relatively new and iVillage is just beginning to see their benefits.
iVillage believes that it can build offline brand awareness and attract traffic
by leveraging the reach of traditional media partners. For example, in November
1998 iVillage entered into a contract with NBC pursuant to which NBC will
promote iVillage.com during prime time programs as well as through its Web
sites. iVillage also entered into an agreement in October 1998 with AT&T where
AT&T will promote iVillage through TV and mass media marketing.
iVillage also plans to build brand recognition and develop new commerce
opportunities through the marketing and packaging of its content. For example,
iVillage currently runs a syndicated column with Copley News Services based upon
its content and has arranged to publish four books under the Parent Soup brand
in order to reach offline audiences.
AGGRESSIVELY GROW MEMBERSHIP
iVillage intends to grow its membership base and increase member usage
through member promotions, interactive services, community building and
relationships with national women's organizations. iVillage also plans to offer
additional members-only services, including multi-player games, and to
transition
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portions of its programming to member-only areas. Once the user has visited
iVillage.com, iVillage's mission is to convert that user to a member.
ENHANCE AND EXPAND THE NETWORK
iVillage intends to expand the network by developing additional channels
and expand the content of its existing channels. In addition, iVillage intends
to develop these additional channels with sponsors and media partners in order
to maintain low development costs while creating high utility for users.
PURSUE STRATEGIC ACQUISITIONS AND
ALLIANCES
iVillage plans to bolster its traffic, market share and revenues through
strategic acquisitions that offer opportunities to increase market share in
iVillage's content categories, offer high traffic or are sites categorized by
high retention statistics. iVillage also intends to form alliances with larger
companies to leverage their brands, while incorporating content that is
consistent with the network. iVillage may also expand its revenue opportunities
through alliances with other retailers, online service and content providers,
commerce providers and advertisers.
INCREASE SPONSOR AND ADVERTISING
REVENUES
iVillage views its relationships with its sponsors and advertisers as
critical to its success. iVillage has been a pioneer in developing innovative
sponsorship advertising relationships with leading brand marketers which go
beyond traditional banner advertising to support broad marketing objectives,
including brand promotion, awareness, product introductions, online research and
the integration of advertising with editorial content. iVillage plans to
continue to seek additional sponsorship arrangements, which have longer-term
contracts and higher dollar values than typical banner deals and independence
from page views as the sole measurement basis. In addition, iVillage intends to
continue to attract banner advertising and has recently created a discrete sales
force to concentrate on this area of the business, which is sold primarily
through agencies. iVillage has recently increased the size its sales force to
concentrate on increasing iVillage's advertising and sponsorship relationships
with leading brand marketers.
GENERATE E-COMMERCE REVENUES
iVillage intends to identify new commerce, revenue and acquisition
opportunities that enhance iVillage.com by offering transaction services in
categories that:
o have a high degree of relevance to iVillage.com members;
o are appropriate for the Internet; and
o fit with a current or complementary iVillage.com content site.
iVillage also generates e-commerce revenues through agreements with leading
merchants interested in targeting iVillage.com members. These merchants receive
exposure through banner advertising, the integration of advertising with
editorial content and promotional offers in exchange for which iVillage collects
a fixed fee and a share of revenue from sales to iVillage.com users. iVillage
also plans to create relationships with key retailers and manufacturers
interested in building new channels while protecting their core distribution
channels. In addition to enhancing user retention, these retailing opportunities
can be used to identify valuable purchasing trends that can be used in future
advertising and commerce.
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THE IVILLAGE NETWORK
iVillage's network is organized around 14 content specific channels.
iVillage.com is a single point of entry to the iVillage network of sites and is
updated daily to promote content and community, including channel highlights.
The following table provides a brief description of each channel's features as
of February 22, 1999:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- ----------------------- -------------------------------------------------------
<S> <C>
astrology net A site providing users with horoscopes, celebrity
profiles, romance charts and monthly guidance.
book club A book and reading site for readers interested in a
wide range of books that allows users to discuss
featured books and offers Monthly Book Picks, Question
of the Week, Reading Groups and iVillage.com
Bestsellers.
career A career planning site that provides women with tools
and resources relating to professional development and
career-related issues.
fitness & beauty A fitness and beauty site which includes Body
Calculators, Nutrition Experts and Community Challenges
to improve one's fitness level.
food A food site providing information on meal planning,
nutrition and recipes and includes Food Experts and
Cooking Basics.
health A health site to assist users in becoming better health
care decision makers that includes on AOL and the Web,
approximately 200 bulletin boards and approximately 150
weekly chats on AOL.
money A financial planning site providing users with
information on savings and investment strategies and
includes Five Steps to Financial Freedom, The Model
Portfolio and an investment center sponsored by Charles
Schwab.
parents soup A parenting site providing users with a branded online
community where parents share parenting solutions, talk
with experts and find answers and support.
parent's place.com A parenting community center site that includes, on AOL
and the Web, approximately 700 bulletin boards and
approximately 80 weekly chats in addition to
information regarding childhood diseases.
pets A site designed in partnership with Ralston Purina
Company that provides information on caring for your
pet, selecting a breed and features an automated
adoption and veterinarian-finder tool sponsored by the
American Humane Association and American Animal
Hospital Association.
</TABLE>
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<TABLE>
<S> <C>
relationships A site offering users information and conversation on
love, marriage, sex and family.
shopping A one-stop online shopping destination offering users
easy access to retail Web sites such as Virtual
Vineyards, Gymboree, Music Boulevard, Godiva and iBaby.
travel A travel site that offers tools for planning a
vacation, articles on travel-related issues, a link to
a travel reservation center and a currency converter.
work from home A site providing women who work from home with tools
and resources such as Home Office Basics, a Tax Guide
and a Software Library.
</TABLE>
iVillage believes that user support is critical in order to attract and
retain users. iVillage provides user support primarily through e-mail-based
correspondence. Help and feedback buttons are prominently displayed throughout
iVillage.com, and iVillage's user support staff attempts to respond to all
e-mail queries within 24 hours. In addition, community leaders provide on-site
and e-mail support for broad-ranging issues. iVillage does not charge for these
services.
SPONSORSHIP AND ADVERTISING REVENUES
iVillage has derived a significant amount of its revenues to date from the
sale of sponsorships and advertisements. For the years ended December 31, 1998
and December 31, 1997, sponsorship and advertising revenues represented 80% and
93%, respectively, of iVillage's revenues.
iVillage's strategy is focused in part on generating a majority of its
advertising revenues from sponsors and merchants who seek a cost-effective means
to reach women online. iVillage is aggressively building its leadership position
as the preeminent women's brand to the advertising community. iVillage's
sponsorship arrangements typically differ from traditional banner advertising in
that they are designed to achieve broad marketing objectives such as brand
promotion, awareness, product introductions, online research and the integration
of advertising with editorial content. Sponsorships allow iVillage.com to cater
to the specific goals of advertisers in the areas of impressions, product
research, market research, new product launches, list development, product
information, repositioning, new account openings, lead generation and
transactions. Sponsors also have the opportunity to talk one-on-one with members
on the network's message boards, chats, polls and special events, which allow
sponsors the opportunity to gain insights into their customers. iVillage's
sponsorship arrangements generally have longer terms than typical banner
advertising placements and provide for CPMs per advertiser and independence from
page-views as the measure of value. In addition, iVillage develops extensive
editorial and marketing content to support the marketing initiatives of
advertisers. iVillage's sponsorship agreements are typically exclusive and are
for a period of one to three years.
To a lesser extent, iVillage also derives a portion of its sponsorship and
advertising revenues from banner advertisements that are prominently displayed
at the top of pages throughout the iVillage.com network. From each banner
advertisement, viewers can hyperlink directly to the advertiser's own Web site,
thus providing the advertiser the opportunity to directly interact with an
interested customer. iVillage has recently created a discrete sales force to
concentrate on banner advertising, which is sold primarily through agencies. As
a result of its sales and advertising strategy, iVillage believes that it has
CPMs significantly above the industry average, and above the reported average
for other women's sites.
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During the years ended December 31, 1997 and December 31, 1998,
iVillage's five largest advertisers accounted for approximately 26% and 17%,
respectively, of iVillage's revenues. No advertiser accounted for more than 10%
of iVillage's revenues during either year. The following is a select list of
iVillage's advertisers:
Amazon.com, Inc.
Astra Pharmaceuticals,
L.P.
Charles Schwab & Co.,
Inc.
First USA, Inc.
Ford Motor Media
Glaxo Wellcome Inc.
Green Tree Nutrition,
Inc.
Kimberly-Clark
Corporation
MovieStreet, Inc.
MyBasics.com
Ortho-McNeil, Ortho
Dermatological &
McNeil-PPC, Inc.
The Hertz Corporation
Westpoint Stevens, Inc.
MEMBERSHIP
iVillage believes a large and active membership base is critical to its
success. Membership is free and available to iVillage.com visitors who disclose
their name, e-mail address, zip code, age and gender and choose a member name
and password to be used throughout members-only areas. Members form
iVillage.com's core audience and are its most valuable users. iVillage has
launched an aggressive member-acquisition campaign, which includes the creation
of free services and support for members.
iVillage recognizes the importance of maintaining confidentiality of member
information and has established a privacy policy to protect such information.
iVillage's current privacy policy is set forth on iVillage.com in a member's
terms of service, which is linked to the site where a person initially registers
for membership. When a user registers as an iVillage.com member, iVillage
requests the user to provide, among other things, his or her name, address,
e-mail address, zip code, gender and a private password. iVillage's current
policy is to never sell to any third party any member's personal identifying
information, such as his or her name or address, unless the member has provided
written consent. In certain situations, iVillage does allow a third-party
partner access to database information if it is necessary for the delivery of a
member service, such as e-mail. In these instances, the partner has agreed to be
bound by iVillage's current policy. iVillage does share aggregated member
information with third parties, such as a member's zip code, gender or age.
iVillage also reserves the right to offer members products and services.
iVillage may use information revealed by members and information built from user
behavior to target advertising, content and e-mail. For instance, iVillage may,
on behalf of an advertiser, send e-mail offers to all members from a certain
region or target advertisements to all users who frequent a specific area of the
site.
E-COMMERCE
OVERVIEW
iVillage has identified the opportunity to generate new commerce revenues
by selling products or services that:
o have a high degree of relevance to its members;
o fit within a current content area or provide an opportunity for future
development; and
o are appropriate for the Internet.
iVillage also generates commerce revenues through agreements with leading
merchants from which iVillage collects a fixed fee and a share of sales from its
users.
IBABY
iBaby offers more than 14,000 products from over 500 manufacturers
representing an extensive assortment of products for children under three years
of age. The site's comprehensive selection, combined with easy site navigation
and time-saving features such as a baby registry, superior product search and a
gift-finder service, makes iBaby convenient for new and expectant parents. iBaby
had 25 full-time employees as of January 31, 1999.
Please see note 5 of notes to iVillage's consolidated financial statements.
iBaby targets parents through newsletters, message boards, content
integration, banner ads and key word buys. iBaby has distribution agreements
with online services such as AOL and the Microsoft Network.
Online orders are taken 24 hours a day, seven days per week and products
are shipped
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within 48 hours of placement of most orders. In accordance with an
inventory and services agreement between iBaby and Kid's Warehouse, Kid's
Warehouse sells inventory to iBaby and provides space to iBaby for storage.
Substantially all of iBaby's products are currently sourced through Kid's
Warehouse. This arrangement is expected to continue at least for an additional
year after iVillage's acquisition of the minority interest in iBaby. Although
iBaby holds no inventory, iVillage anticipates that it may maintain in the
future an inventory of a small amount of the most popular products.
ASTROLOGY.NET
Astrology.Net is a leading destination for women online seeking daily
horoscopes, astrology content and personalized forecasts, serving more than one
million unique visitors in January 1999. Through its network of sites organized
by topics of interest to women such as family, love, money and career,
Astrology.Net provides a timely, personalized experience for the user,
stimulates commerce sales of monthly and annual forecasts by subject and creates
an advertising environment that is appealing to advertisers due to targeting
possibilities within the site and through e-mail communication.
Astrology.Net brings iVillage a content and commerce site that is appealing
to our core demographic of women, represents one of the best customer
acquisition tools as demonstrated by our strong clickthrough performance in
online media, and a vehicle to drive repeat visits to iVillage through the use
of daily horoscopes. Astrology.Net has also created an interactive commerce
system that provides instantaneous, digital astrology reports. iVillage intends
to use this commerce platform to enter other businesses with similar
characteristics that appeal to its users.
ALLIANCES
iVillage pursues strategic relationships to increase its access to online
customers, build brand recognition and expand iVillage's online presence.
Historically, iVillage has pursued strategic alliances to reach online
customers. iVillage currently plans to shift its focus to building offline brand
recognition and to increasing its access to offline customers. iVillage's
principal strategic alliances and relationships include the following:
MEDIA ARRANGEMENT
In November 1998, iVillage entered into an agreement with NBC pursuant to
which NBC will promote iVillage.com on television, primarily during prime-time
programs, as well as through its Web sites. In addition, NBC has agreed to
promote the content centers programmed by iVillage on Snap! LLC. On
February 22, 1999, iVillage and NBC reached an agreement in principle to amend,
subject to execution of final documentation, the agreement to provide for the
purchase by iVillage, for cash, of $8.5 million of advertising and promotional
spots, per annum, over the next three years. In addition, iVillage will issue
4,889,030 shares of series E convertible preferred stock to NBC and grant an
option to NBC to purchase additional shares of stock at predetermined exercise
prices during 2000 and 2001 in exchange for a promissory note in the approximate
amount of $15.5 million at 5% interest per annum. The note is payable in twelve
equal installments, payable each quarter beginning April 1, 1999. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Recent Events".
SPONSORSHIP ARRANGEMENTS
In October 1998, iVillage entered into a two-year agreement with AT&T under
which iVillage will promote and market specified AT&T telecommunication services
in exchange for minimum payments based upon delivered impressions. In return,
AT&T will display a text link for iVillage.com on the AT&T WorldNet Service and
promote and market iVillage.com through AT&T television, mass media marketing or
other mass media.
iVillage entered into an Online Services Agreement with Charles Schwab &
Co., Inc. in December 1997, under which Schwab was granted the right to an
exclusive sponsorship of all brokerage and mutual fund categories on all money,
financial or investing related sites. iVillage and Schwab also developed The
Investor Center, a co-branded site. The agreement's term is for a period of
three years; however, Schwab may terminate the agreement
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by providing notice to iVillage at least ninety days prior to each one-year
anniversary of the agreement.
iVillage entered into an agreement with Amazon.com, Inc. in February 1998,
under which Amazon.com, Inc. was granted the right to become the exclusive book
sponsor and retailer throughout the iVillage.com network. In addition,
iVillage.com users are offered book-related features and content across all the
iVillage.com channels. Each of the channels provides recommended reading lists,
book reviews, online book chats and access to an interactive Book Club. The
agreement expires on July 1, 1999 and may be renewed for additional 12-month
periods upon the mutual agreement of iVillage and Amazon.com, Inc.
In October 1998, iVillage entered into an agreement with Ralston Purina
under which the two parties agreed to create the pet channel and an online pet
store. In addition, Ralston Purina agreed to provide content, experts, customer
service and distribution for the pet channel and to assist iVillage in the
marketing, distribution and fulfillment of Ralston Purina products within the
pet channel. The agreement's term is for a period of two years.
DISTRIBUTION ARRANGEMENTS
iVillage believes that its most effective means of generating traffic and
building brand recognition has resulted from its online media and distribution
relationships. iVillage considers branding an important aspect of its
distribution arrangements and seeks distribution relationships where its brand
is promoted. iVillage has also entered into distribution and content
relationships with a number of major online service companies on the Internet.
iVillage and Snap entered into a two-year promotion agreement in November
1998, under which iVillage has been granted the exclusive right to program the
content on the front pages of the Health Center, with health-related content
from iVillage.com and Snap's Family Center with content from Parent Soup. Snap
may, in its discretion, promote iBaby throughout the Kids and Family, Health,
Living and Shopping channels. In addition, iVillage's health channel and Parent
Soup content and links will be included as an initial default option for Snap's
"My Snap!" personalized home page. Snap is required to deliver a minimum number
of impressions during the term of the agreement and Snap's ability to display
content promoting other health and parenting sites is limited.
In December 1998, iVillage entered into an interactive services agreement
with AOL that supersedes all prior services agreements between iVillage and AOL
and expires December 31, 2000. Either party may extend the agreement for an
additional year. The agreement provides that some of iVillage's icons will be
placed within the AOL service and that iVillage will receive guaranteed
impressions. In consideration for these services, iVillage is obligated to pay
AOL minimum quarterly installments and to provide advertising to AOL. Please see
"Risk Factors--We may not attract a sufficient amount of traffic and advertising
without our channels being carried on AOL".
CONTENT CHANNELS
iVillage has entered into agreements with third parties in order to expand
its channel offerings. Such agreements provide iVillage with a cost-effective
means of acquiring content and provides iVillage's users with high utility.
In June 1998, iVillage entered into an agreement with Intel Corporation,
under which Intel purchased shares of iVillage's series D convertible preferred
stock. iVillage agreed to use the proceeds from Intel's purchase of series D
convertible preferred stock to add new features to the health site, such as a
health profiling tool, personal home health pages and a ranking of health
organizations. Personal Health Profile, which was introduced in June 1998,
allows users to assess potential health risks by entering lifestyle and
hereditary information. Customized information, from risk rankings to a disease
screening guide to tips for improving one's "Health Quotient", is bundled with a
Reuters news feed tailored to specific conditions and health interests. iVillage
plans to provide users with their own password-protected sites designed to
deliver to each user timely, comprehensive information on issues that directly
impact the user's personal health. In addition, iVillage.com's health channel
now lists health plan quality rankings by J.D. Power & Associates.
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SALES, MARKETING AND PUBLIC RELATIONS
SALES
As of January 31, 1999, iVillage had a direct sales organization,
consisting of 13 sales professionals with an average of 15 years of experience,
11 of whom were hired since April 1998 and 25 sales operations staff. iVillage's
sales organization consults regularly with advertisers and agencies on design
and placement of its Web-based advertising and the production and management of
bridge sites, provides customers with advertising management analysis and
focuses on providing a high level of customer satisfaction. Ten sales
professionals focus on sponsorship relationships and two are responsible for
banner advertising. iVillage generally seeks to hire individuals with
significant experience in selling advertising and preexisting relationships with
advertisers in a variety of media.
MARKETING AND PUBLIC RELATIONS
iVillage employs a variety of methods to promote the iVillage.com brand and
to attract traffic and new members, including advertising on other Internet
sites, targeted publications, radio stations, cable television, cross
promotional arrangements to secure advertising and other promotional
considerations. iVillage distributes promotional materials at select targeted
events, such as PTA conferences, and engages in an ongoing public relations
campaign. To extend the iVillage.com brand, iVillage has also entered into
several strategic alliances with offline partners. Please see "--Alliances". In
addition, iVillage leverages other audience building strategies, including
working closely with search engine submissions, news group postings and cross-
promotion with affinity sites to properly index materials. iVillage's marketing
department consisted of 22 marketing professionals as of January 31, 1999.
iVillage has recently begun to market its brand offline. In November 1998,
iVillage entered into an agreement with NBC, under which iVillage will receive
advertising on the NBC network. iVillage has, from time to time, advertised on
cable television in New York, San Francisco and Chicago and intends to advertise
on the radio as well. iVillage focuses on leveraging its community leaders and
membership for offline brand building and membership acquisition. iVillage plans
to meet with local community leaders and leaders of local women's organizations
to identify sponsorship and grassroots marketing opportunities. In addition,
iVillage is identifying live events and conferences for sponsorships.
iVillage's internal public relations staff oversees a comprehensive public
relations program which iVillage believes is a key component of its marketing
and brand recognition strategy. Organized into two primary components that
promote iVillage and the iVillage.com brand, the program targets a
trade/business and consumer audience, respectively. iVillage has developed a
consumer outreach effort which centers on providing non-technology reporters
with "news-you-can-use" information taken directly from iVillage.com, to
demonstrate to readers/viewers the content's utility and service, and usage of
and traffic to the network. iVillage has also implemented national long-lead
consumer initiatives, such as radio media tours, regional broadcast media tours,
consumer publicity of iVillage's Parent Soup book series and other related
activities, and multiple daily media advisories sent to consumer outlets
throughout the United States.
OPERATING INFRASTRUCTURE
iVillage's operating infrastructure has been designed and implemented to
support the delivery of millions of page views a day. Web pages are generated
and delivered, in response to end-users requests, by any one of nearly 20
servers. Key attributes of this infrastructure include scalability, performance
and service availability.
iVillage's servers run on the Sun Solaris and Microsoft NT operating
systems and use Netscape Enterprise, Apache and Microsoft Corporation's IIS Web
server software.
iVillage maintains all of its production servers at the New Jersey Data
Center of Exodus Communications, Inc. iVillage's operations are dependent upon
Exodus's ability to protect its systems against damage from fire, hurricanes,
power loss, telecommunications failure, break-ins and other events.
Exodus provides comprehensive facilities management services including
human and technical monitoring of all production servers
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24 hours per day, seven days per week. Exodus provides the means of connectivity
for iVillage's servers to end-users via the Internet through multiple
connections. The facility is powered by multiple uninterruptible power supplies.
Please see "Risk Factors--We may be unable to respond to the rapid technological
change in our industry" and "--Internet security concerns could hinder
e-commerce".
All of iVillage's production data are copied to backup tapes each night and
stored at a third party, off-site storage facility. iVillage is in the process
of developing a comprehensive disaster recovery plan to respond to system
failures. iVillage keeps all of its production servers behind firewalls for
security purposes and does not allow outside access, at the operating systems
level, except via special secure channels. Strict password management and
physical security measures are followed. Computer security response team alerts
are read, and, where appropriate, recommended action is taken to address
security risks and vulnerabilities.
Our Web sites must accomodate a high volume of traffic and deliver
frequently updated information. Components or features of our Web sites have in
the past suffered outages or experienced slower response times because of
equipment or software downtime. This has not had a material effect on our
business.
COMPETITION
The market for members, visitors and Internet advertising is new and
rapidly evolving, and competition for members, visitors and advertisers is
intense and is expected to increase significantly in the future. With no
substantial barriers to entry, iVillage expects that competition will continue
to intensify.
iVillage believes that the primary competitive factors in creating
community on the Internet are functionality, brand recognition, member affinity
and loyalty, demographic focus, variety of value-added services, ease-of-use,
quality of service, reliability and critical mass. Other companies or sites
which are primarily focused on targeting women online are Women.com networks, a
joint venture between Women.com networks and The Hearst Corp., Microsoft
Corporation's womencentral.msn.com, condenet.com and Oxygen Media's Web sites.
iVillage will likely also face competition in the future from developers of Web
directories, search engine providers, shareware archives, content sites,
commercial online services, sites maintained by Internet service providers and
other entities that attempt to or establish communities on the Internet by
developing their own or purchasing one of iVillage's competitors. In addition,
iVillage could face competition in the future from traditional media companies,
a number of which, including Disney, CBS and NBC, have recently made significant
acquisitions of or investments in Internet companies. Further, there can be no
assurance that iVillage's competitors and potential competitors will not develop
communities that are equal or superior to those of iVillage or that achieve
greater market acceptance than iVillage's community.
iVillage also competes with traditional forms of media such as newspapers,
magazines, radio and television, for advertisers and advertising revenues.
iVillage believes that the principal competitive factors in attracting
advertisers include the amount of traffic on its Web sites, brand recognition,
customer service, the demographics of iVillage's members and visitors,
iVillage's ability to offer targeted audiences and the overall
cost-effectiveness of the advertising medium offered by iVillage. iVillage
believes that the number of Internet companies relying on Web-based advertising
revenues will increase greatly in the future. Accordingly, iVillage will likely
face increased competition, resulting in increased pricing pressures on its
advertising rates which could in turn have a material adverse effect on
iVillage's business, results of operations and financial condition.
Many of iVillage's current and potential competitors, including developers
of Web directories and search engines, have longer operating histories,
significantly greater financial, technical and marketing resources, greater name
recognition and larger existing customer bases than iVillage. Such competitors
are able to undertake more extensive marketing campaigns for their brands and
services, adopt more aggressive advertising pricing policies and make more
attractive offers to potential employees, distribution partners, commerce
companies, advertisers and third-party content providers. There can be no
assurance that Internet content providers and
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Internet service providers, including developers of Web directories, search
engines, sites that offer professional editorial content and commercial online
services, will not be perceived by advertisers as having more desirable Web
sites for placement of advertisements. In addition, many of iVillage's current
advertising customers and strategic partners also have established collaborative
relationships with certain of iVillage's competitors or potential competitors,
and other high-traffic Web sites. Accordingly, there can be no assurance that:
o iVillage will be able to grow its membership, traffic levels and
advertiser customer-base at historical levels; or
o retain its current members, traffic levels or advertiser customers; or
o competitors will not experience greater growth in traffic than iVillage
as a result of such relationships which could have the effect of making
their Web sites more attractive to advertisers; or
o that iVillage's strategic partners will not sever or will elect not to
renew their agreements with iVillage.
There can be no assurance that iVillage will be able to compete
successfully against its current or future competitors or that competitive
pressures faced by iVillage will not have a material adverse effect on
iVillage's business, results of operations and financial condition.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS
AND DOMAIN NAMES
iVillage regards its copyrights, service marks, trademarks, trade dress,
trade secrets, proprietary technology and similar intellectual property as
critical to its success, and relies on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with its employees,
customers, independent contractors, partners and others to protect its
proprietary rights. iVillage strategically pursues the registration of its
trademarks and service marks in the United States, and has applied for and
obtained registration in the United States for certain of its trademarks and
service marks, including "iVillage". Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which iVillage's products and services are made available online.
iVillage has licensed in the past, and expects that it may license in the
future, certain of its proprietary rights, such as trademarks or copyrighted
material, to third parties. While iVillage attempts to ensure that the quality
of its brand is maintained by such licenses, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of iVillage's proprietary rights or reputation, which could have a material
adverse effect on iVillage's business, financial condition and results of
operations. There can be no assurance that the steps taken by iVillage to
protect its proprietary rights will be adequate or that third parties will not
infringe or misappropriate iVillage's copyrights, trademarks, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert claims of infringement of intellectual property or alter
proprietary rights against iVillage.
iVillage has been subject to claims and expects to be subject to legal
proceedings and claims from time to time in the ordinary course of its business,
including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by iVillage and its licensees.
Such claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources. Further, if such claims are
successful, iVillage may be required to change its trademarks, alter its content
and pay financial damages. There can be no assurance that such changes of
trademarks, alteration of content or payment of financial damages will not
adversely affect iVillage's business.
iVillage's ability to use and successfully develop its channels will depend
upon its ability to continue to use, develop and protect its proprietary marks.
iVillage currently uses the term "better health" in connection with its online
operation of a channel including information concerning health-related topics
and iVillage, or Health ResponseAbility Systems, Inc., the company iVillage
acquired in May 1997, has made use of the term since 1996. iVillage currently
holds the domain name "betterhealth.com". The Hospital of Saint Raphael owns
federal trademark registrations for the marks "Better Health" and "St. Raphael's
Better Health". On August 26, 1998, iVillage received notice from counsel for
the
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Hospital objecting, among other things, to iVillage's use of the term "better
health". iVillage has agreed with the Hospital to phase out use of the term
"better health" other than in a descriptive, non-trademark sense by March 31,
1999. iVillage is in the process of developing a new, proprietary brand for its
channel concerning health-related matters.
iVillage filed a service mark application for the mark "PARENTSPLACE.COM".
On July 22, 1998, Jewish Family and Children's Services filed a Notice of
Opposition in the Trademark Trial and Appeal Board of the U.S. Patent and
Trademark Office. On January 22, 1999, we filed an Answer to the Notice of
Opposition, denying that there was any likelihood of confusion between our mark,
"PARENTSPLACE.COM", and the mark used by Children's Services. There can be no
assurance that Children's Services will not be successful in the Opposition
proceeding, thus preventing iVillage from securing a federal registration to the
mark "PARENTSPLACE.COM". Further, there can be no assurance that Children's
Services will not assert a claim to trademark rights against iVillage in the
future with respect to the use of "PARENTSPLACE.COM" or "PARENTSPLACE", either
as currently used or as developed in the future. iVillage is not able at this
time to evaluate the likelihood of an unfavorable outcome in the event such
claims are asserted, or to estimate the amount or range of potential loss.
On January 28, 1999, an attorney for Dailey & O'Brien sent a formal cease
and desist letter, requesting that we stop using "MONEYLIFE" on our money
channel and provide certain information concerning our use of the term. On
February 22, 1999, a complaint was filed in the U.S. District Court for the
Eastern District of Virginia by Dailey & O'Brien alleging, among other things,
trademark infringement. We have reached an agreement in principle with Dailey &
O'Brien granting us a license to use the term "MONEYLIFE". There can be no
assurance that a final agreement with Dailey & O'Brien can be achieved. Further,
other entities may be using the term "MONEYLIFE". We are not able at this time
to evaluate the likelihood of an unfavorable outcome in the event such claims
are asserted by any other entity, or to estimate the amount or range of
potential loss.
iVillage may be required to obtain licenses from others to refine, develop,
market and deliver new services. There can be no assurance that iVillage will be
able to obtain any such license on commercially reasonable terms or at all or
that rights granted pursuant to any licenses will be valid and enforceable.
HUMAN RESOURCES
As of January 31, 1999, iVillage employed 200 full-time employees, of whom
64 were in sales and marketing, 63 were in editorial and community, 32 were in
administration and 41 were in operations and support. As iVillage continues to
grow and introduce more products, it expects to hire more personnel,
particularly in the areas of product development and sponsorship. None of
iVillage's current employees is represented by a labor union or is the subject
of a collective bargaining agreement. iVillage believes that relations with its
employees are good.
FACILITIES
iVillage is headquartered in New York, New York, where it leases an
aggregate of approximately 31,000 square feet of space primarily in two
buildings located across the street from each other. These leases are short
term, expiring between 1999 and 2001, and cover three floors at 170 Fifth Avenue
that are approximately 3,650 square feet each and two floors at 149 Fifth Avenue
that are approximately 10,000 square feet each. iVillage currently anticipates
that it will require additional space as more personnel are hired. iVillage is
actively searching for larger space in New York City to serve as a permanent
space for the long-term future of iVillage.
iVillage leases a sales office located at 645 North Michigan Avenue,
Chicago, Illinois on a month-to-month basis. In addition, iBaby is currently
leasing approximately 5,115 square feet on a month-to-month basis at 8400
Miramar Road, San Diego, California.
LEGAL PROCEEDINGS
On January 8, 1999, a complaint was filed in the Chancery Court for
Williamson County, Tennessee by a former employee against iVillage and three of
its officers. The complaint alleges breach of an alleged employment
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agreement and fraudulent inducement to accept a job in New York and to move from
Tennessee to New Jersey. In addition to unspecified damages, the complaint seeks
an award of options to purchase shares of common stock, which number presumably
would be equivalent to 33,333.
On January 29, 1999, the case was removed from the Chancery Court to the
U.S. District Court for the Middle District of Tennessee. On February 2, 1999,
iVillage filed a motion to dismiss the case based on lack of personal
jurisdiction, and, in the event that the motion is denied, to transfer the case
to the U.S. District Court for the Southern District of New York. We believe
that the suit is without merit and intend to vigorously defend against such
claims.
This litigation, whether or not determined in our favor or settled by us,
may be costly and may divert the efforts and attention of our management from
normal business operations.
iVillage is not currently subject to any other material legal proceedings
other than as set forth in "--Intellectual Property, Proprietary Rights and
Domain Names". iVillage may from time to time become a party to various legal
proceedings arising in the ordinary course of its business.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors and executive officers of
iVillage, their ages
and the positions held by them with iVillage as of February 22, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ---------------------------------------------
<S> <C> <C>
Candice Carpenter........ 46 Co-Chairperson of the Board and Chief
Executive Officer
Nancy Evans.............. 48 Co-Chairperson of the Board and Editor-
in-Chief
Craig T. Monaghan........ 42 Chief Financial Officer
Allison Abraham.......... 36 Chief Operating Officer
John W. Glascott......... 45 Senior Vice President, Sponsorship
Caterina A. Conti........ 36 General Counsel and Secretary
Donna M. Introcaso....... 41 Senior Vice President,
Human Resources
Sanjay Muralidhar........ 36 Vice President, Finance
Scott Levine............. 34 Vice President, Controller and Chief
Accounting Officer
Alan Colner**............ 44 Director
Jay C. Hoag*............. 40 Director
Habib Kairouz**.......... 32 Director
Lennert J. Leader*....... 43 Director
Michael Levy**........... 52 Director
Douglas McCormick........ 49 Director
Daniel Schulman.......... 41 Director
Martin Yudkovitz*........ 44 Director
</TABLE>
- ------------------
* Member of the audit committee.
** Member of the compensation committee.
CANDICE CARPENTER is a founder of iVillage and has been Chairperson of the
Board and Chief Executive Officer since inception of iVillage in June 1995 and
Co-Chairperson of the Board since December 1998. Prior to founding iVillage,
Ms. Carpenter was President of Q2, the upscale QVC, Inc. shopping channel, from
1993 through 1995. Ms. Carpenter was also a consultant to AOL and Discovery
Communications, Inc. in 1995. From 1989 to 1993, Ms. Carpenter was President of
Time Life Inc.'s Time Life Video and Television and previously was Vice
President in Consumer Marketing at American Express Company. Ms. Carpenter
received an M.B.A. from Harvard Business School and a B.A. from Stanford
University.
NANCY EVANS is a founder of iVillage and has been Editor-in-Chief since
inception in June 1995 and Co-Chairperson of the Board since December 1998.
Ms. Evans is primarily responsible for the editorial quality and content for all
of iVillage's editorial products online, in print or on television. Prior to
founding iVillage, Ms. Evans created Family Life magazine in 1991, which she
published in partnership with Jann Wenner. From 1987 to 1991, Ms. Evans served
as President and Publisher of Doubleday. Prior to her employment at Doubleday,
Ms. Evans was Vice President and Editor-In-Chief of the Book-of-the-Month Club,
where she launched the Children's Book-of-the-Month Club. Ms. Evans graduated
from Skidmore College with a B.A. and is also a graduate fellow at Columbia
University.
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CRAIG T. MONAGHAN has been Chief Financial Officer of iVillage since June
1998. From 1991 to June 1998, Mr. Monaghan held various positions at Reader's
Digest Association Inc., including Vice President and Treasurer, Vice President,
Business Development and Controller, Reader's Digest Europe. Prior to joining
Reader's Digest, Mr. Monaghan served as Director of International Finance and
Director of Corporate Finance at Bristol-Myers Squibb Company. Mr. Monaghan
received an M.B.A. from The Wharton School at the University of Pennsylvania and
a B.S. in Engineering from Lehigh University.
ALLISON ABRAHAM has been Chief Operating Officer since November 1998. From
June 1998 to October 1998, Ms. Abraham was the Executive Vice President of
iVillage. From August 1996 to May 1998, Ms. Abraham was President and Chief
Operating Officer of OnCart, an online grocery shopping service. From 1992 to
1996, she served as Vice President of Marketing for Ameritech Corporation, a
telephone and cellular telecommunications company, as well as other sales and
marketing positions. From 1988 to 1992, Ms. Abraham was employed by American
Express Travel Related Services, where she focused on loyalty programs and new
product development. Ms. Abraham received an M.B.A. from The Darden School at
the University of Virginia and a B.A. from Tufts University.
JOHN W. GLASCOTT has been Senior Vice President, Sponsorship since April
1998. From September 1996 to March 1998, Mr. Glascott was Senior Vice President
and Director of Corporate Marketing and Sales for Hearst Magazines. From August
1994 to September 1996, Mr. Glascott was a publisher and partner of SmartHealth
at Meigher Communications L.P., a magazine publisher. Prior to such time,
Mr. Glascott held various sales management positions at Whittle Communications
L.P., a media company, from 1982 to 1994. Mr. Glascott received an M.B.A. from
New York University and a B.A. from Ohio Wesleyan University.
CATERINA A. CONTI has been General Counsel and Secretary since November
1998. From January 1998 to November 1998, Ms. Conti was a partner with the law
firm of Orrick, Herrington & Sutcliffe LLP. From December 1995 to January 1998,
she was an associate with the same firm. From September 1988 to December 1995,
Ms. Conti was an associate with the law firm of Kelley Drye & Warren LLP.
Ms. Conti received her J.D. from St. John's University School of Law and her
B.S. from St. John's University.
DONNA M. INTROCASO has been Senior Vice President, Human Resources since
February 1999. From October 1998 to February 1999, Ms. Introcaso was Vice
President, Human Resources. From March 1996 to September 1998, Ms. Introcaso was
Vice President of Human Resources for WinStar Communications, Inc., a
telecommunications company, where she focused on executive compensation and
employee benefit programs. From April 1995 until February 1996, Ms. Introcaso
was the Director of Human Resources at iGuide, an on-line Internet service
provider. From July 1991 to March 1995, she was the manager of Human Resources
of Wm. H. McGee and Co., Inc., a marine insurance company. Ms. Introcaso
received her M.B.A from Cornell University and her B.A. from the College of
Notre Dame.
SANJAY MURALIDHAR has been Vice President, Finance and Assistant Secretary
since September 1998. From 1992 to 1998, Mr. Muralidhar held various positions
at Reader's Digest Association Inc., including Vice President, Finance-Reader's
Digest U.S.A., Vice President, Controller of QSP Inc., a division of Reader's
Digest and Director, Corporate Financial Planning. Prior to joining Reader's
Digest, Mr. Muralidhar held various positions in Financial Analysis and
Corporate Finance at Bristol-Myers Squibb Company between 1987 and 1992.
Mr. Muralidhar received an M.B.A. from The Wharton School at the University of
Pennsylvania and a Bachelor of Commerce from Bombay University.
SCOTT LEVINE has been Vice President, Controller and Chief Accounting
Officer since February 1999. From July 1998 to February 1999, Mr. Levine was
Controller for Fundtech Ltd., a financial software company. From April
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1997 to July 1998, Mr. Levine was the Controller of AmeriCash, Inc., an operator
of a network of automated teller and electronic commerce machines. From 1993 to
1997, Mr. Levine was employed by Coopers & Lybrand L.L.P. Mr. Levine is a
Certified Public Accountant and received his M.B.A. from Baruch College and his
B.A. from State University of New York, Buffalo.
ALAN COLNER has been a director of iVillage since February 1999. Since
August 1996, Mr. Colner has served as Managing Director, Private Equity
Investments at Moore Capital Management, Inc. Before joining Moore, he was a
Managing Director of Corporate Advisors, L.P., the general partner of Corporate
Partners, a private equity fund affiliated with Lazard Freres & Co. LLC. Mr.
Colner also serves as a director of several privately held companies. Mr. Colner
received an M.B.A. from the Stanford University Graduate School of Business and
a B.A. from Yale University.
JAY C. HOAG has been a director of iVillage since February 1999. Since June
1995, Mr. Hoag has been a General Partner of Technology Crossover Ventures, a
venture capital firm. From 1982 to 1994, Mr. Hoag served in a variety of
capacities at Chancellor Capital Management, Inc. Mr. Hoag is currenty a
director of ONYX Software Corporation, a provider of customer management
software. He also serves as a director of several privately held companies.
Mr. Hoag received his M.B.A. from the University of Michigan and a B.A. in
Economics and political science from Northwestern University.
HABIB KAIROUZ has been a director of iVillage since March 1998. Currently,
Mr. Kairouz is Managing Director of Rho Management Company, Inc., an investment
company, and has been with Rho since 1993. He also serves as a director at
Bellwether Exploration Company, Inc., an oil drilling company, and a number of
other private companies. Mr. Kairouz received a B.S. in Engineering and a B.A.
in Economics from Cornell University and an M.B.A. in Finance from Columbia
University.
LENNERT J. LEADER has been a director of iVillage since July 1998.
Currently, Mr. Leader is President of AOL Investments, a division of America
Online, Inc. Mr. Leader served as Senior Vice President, Chief Financial Officer
and Treasurer of AOL from September 1989 until July 1998 and was Chief
Accounting Officer from October 1993 until July 1998. Prior to joining AOL, Mr.
Leader was Vice President, Finance, of LEGENT Corporation, a computer software
and services company, from March 1989 to September 1989, and Chief Financial
Officer of Morino, Inc., a computer software and services company, from 1986 to
March 1989 and its Director of Finance from 1984 to 1986. Prior to joining
Morino, Inc. in 1984, he was an audit manager at Price Waterhouse. Mr. Leader
graduated with a B.S. in Accounting in 1977 from the University of Baltimore.
MICHAEL LEVY has been a director of iVillage since November 1998. Mr. Levy
currently serves as President and Chief Executive Officer at Sportsline USA,
Inc., a position he has held since February 1994. Prior to joining Sportsline
USA, Inc., Mr. Levy was a private investor. Mr. Levy received a B.S. in
Electrical Engineering from the Georgia Institute of Technology.
DOUGLAS MCCORMICK has been a director of iVillage since February 1999. From
1993 to 1998, Mr. McCormick was President and Chief Executive Officer of
Lifetime Television, a joint venture of The Hearst Corporation and The Walt
Disney Company. Mr. McCormick held various positions at Lifetime from 1984 to
1994 in the sales, marketing and research areas. Mr. McCormick received an
M.B.A. from the Columbia University School of Business and a B.A. in
speech/communications from the University of Dayton.
DANIEL H. SCHULMAN has been a director of iVillage since February 1999.
Since October 1998, Mr. Schulman has been an Executive Vice President at AT&T
Corp. and was President of AT&T WorldNet Services from January 1997 to October
1998. From January 1996 to January 1997, Mr. Schulman was a Vice President of
Business Services at AT&T Corp. From December 1994 to January 1996, he served as
a Marketing Vice President at AT&T Corp. and also was a General Manager at AT&T
Corp. from June 1993 to December 1994. Mr. Schulman received an M.B.A. from New
York University and a B.S. from Middlebury College.
MARTIN YUDKOVITZ has been a director of iVillage since February 1999. Since
December 1995, Mr. Yudkovitz has been the President
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and Chief Executive Officer of NBC Multimedia, Inc., a division of the National
Broadcasting Company, Inc. In January 1997, Mr. Yudkovitz also became the Senior
Vice President of Business Development, Broadcast Network Applications for NBC.
From 1994 to 1999, Mr. Yudkovitz was Senior Vice President of NBC Multimedia.
From 1992 to 1994, he served as Senior Vice President of Strategic Development
at NBC. His other positions at NBC have included Vice President of Business
Affairs for NBC's 1992 Olympics Unit; First General Counsel and Vice President
for Business Affairs at CNBC and Senior Counsel to NBC's 1988 Seoul Olympics
Unit in NBC Sports. Mr. Yudkovitz joined NBC in January 1984 in the law
department. Mr. Yudkovitz received his J.D. from Columbia University and his
B.A. from Rutgers University.
BOARD COMPOSITION
In accordance with the terms of iVillage's Amended and Restated Certificate
of Incorporation, effective upon the closing of this offering, the terms of
office of the members of the board of directors will be divided into three
classes, which will be determined prior to completion of this offering. At each
annual meeting of stockholders after the initial classification, the successors
to directors whose term will then expire will be elected to serve from the time
of election and qualification until the third annual meeting following election.
In addition, iVillage's Bylaws provide that the authorized number of directors
may be changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors
will be distributed among the three classes so
that, as nearly as possible, each class will
consist of one-third of the total number of directors. This classification of
the board of directors may have the effect of delaying or preventing changes in
control or management of iVillage. The composition of the board of directors is
expected to change in connection with this offering. Please see "Certain
Transactions".
Each officer is elected by, and serves at the discretion of, the board of
directors. Each of iVillage's officers and directors, other than nonemployee
directors, devotes full time to the affairs of iVillage. iVillage's nonemployee
directors devote such time to the affairs of iVillage as is necessary to
discharge their duties. There are no family relationships among any of the
directors, officers or key employees of iVillage.
BOARD COMMITTEES
The audit committee of the board of directors reviews the internal
accounting procedures of iVillage and consults with and reviews the services
provided by iVillage's independent accountants. The audit committee currently
consists of Jay C. Hoag, Lennert J. Leader and Martin Yudkovitz.
The compensation committee of the board of directors reviews and recommends
to the Board the compensation and benefits of all executive officers of
iVillage, administers iVillage's stock option plan and establishes and reviews
general policies relating to compensation and benefits of employees of iVillage.
The compensation committee currently consists of Alan Colner, Habib Kairouz and
Michael Levy. Except as set forth in "Certain Transactions", no interlocking
relationships exist between iVillage's board of directors or compensation
committee and the board of directors or compensation committee of any other
company, nor has any such interlocking relationship existed in the past.
The composition of the audit committee and the compensation committee is
subject
to change prior to completion of this offering.
DIRECTOR COMPENSATION
Directors do not currently receive cash compensation from iVillage for
their service as members of the board of directors, although they are reimbursed
for certain expenses in connection with attendance at board and committee
meetings. iVillage does not provide additional compensation for committee
participation or special assignments of the board of directors.From time to
time, certain directors of iVillage have received grants of options to purchase
shares of iVillage's common stock pursuant to the 1995 Amended and Restated
Employee Stock Option Plan. Beginning on the date of this offering, nonemployee
directors of iVillage will be eligible to receive nondiscretionary, automatic
grants of options to purchase shares of iVillage's common stock pursuant to the
1999 Director Option Plan. Please see "--Stock Option Plans" and "Certain
Transactions".
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EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 for iVillage's Chief Executive Officer and its
four most highly compensated executive officers, other than its Chief Executive
Officer, whose salary and bonus for such fiscal year were in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
----------------------- OPTIONS/SARS
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) (#)(1)
- ----------------------------------- ---------- --------- ------------
<S> <C> <C> <C>
Candice Carpenter
Chief Executive Officer.......... $225,000 $ -- 153,333
Nancy Evans
Editor-in-Chief.................. 195,000 -- 76,667
John W. Glascott
Senior Vice President,
Sponsorship...................... 155,906 50,000 66,667
Stephen Lake
Vice President, Business
Development...................... 146,250 -- 8,333
Steven Elkes
Vice President, Business
Affairs.......................... 158,968 12,150 16,667
</TABLE>
- ------------------
(1) Options were granted under iVillage's 1995 Amended and Restated Employee
Stock Option Plan and vest 1/4 of the total after one year and 1/4 of the
total at the end of each year thereafter.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to iVillage's Chief
Executive Officer and its four most highly compensated executive officers, other
than its Chief Executive Officer, for the year ended December 31, 1998. iVillage
has never granted any stock appreciation rights. The exercise price per share of
each option was equal to the fair market value of the common stock on the date
of grant as determined by the board of directors. The potential realizable value
is calculated based on the term of the option at its time of grant (seven
years). It is calculated assuming that the fair market value of common stock on
the date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. These numbers are
calculated based on the requirements of the Securities and Exchange Commission
and do not reflect iVillage's estimate of future stock price growth.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
PERCENT OF TOTAL STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES IN PRICE PER OPTION TERM
OPTIONS FISCAL SHARE EXPIRATION --------------------
NAME GRANTED (#) YEAR (%)(1) ($/SH) DATE 5%($) 10%($)
- -------------------- ----------- ---------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Candice Carpenter... 153,333 10% $6.00 5/25/05 $374,532 $872,820
Nancy Evans......... 76,667 5 6.00 5/25/05 187,266 436,410
John W. Glascott.... 66,667 4 6.00 4/4/05 162,840 379,487
Stephen Lake........ 8,333 1 6.00 5/25/05 20,355 47,436
Steven Elkes........ 16,667 1 6.00 4/1/05 40,710 94,872
</TABLE>
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<PAGE>
- ------------------
(1) Based on options to purchase an aggregate of 1,515,143 shares of common
stock granted under the 1995 Amended and Restated Employee Stock Option Plan
and the 1997 Amended and Restated Acquisition Stock Option Plan by iVillage
in the year ended December 31, 1998 to employees, consultants and directors
of iVillage.
FISCAL YEAR END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1998 by iVillage's Chief Executive Officer and
its four most highly compensated executive officers, other than its Chief
Executive Officer. No options were exercised during fiscal 1998 by any of the
officers. The value of unexercised in-the-money options at fiscal year-end is
based on $9.45 per share, the assumed fair market value of the common stock at
December 31, 1998, less the exercise price per share.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF
UNEXERCISED OPTIONS UNEXERCISED IN-THE-MONEY
AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Candice Carpenter... 23,333 223,333 $ 101,500 $ 833,500
Nancy Evans......... -- 76,667 -- 264,500
John W. Glascott.... -- 66,667 -- 230,000
Stephen Lake........ 14,583 52,083 63,438 219,063
Steven Elkes........ 9,583 40,417 41,688 160,813
</TABLE>
STOCK OPTION PLANS
iVillage's currently active stock option plans include: the 1995 Amended
and Restated Employee Stock Option Plan, the 1997 Amended and Restated
Acquisition Stock Option Plan, and subject to stockholder approval, the 1999
Employee Stock Option Plan, the 1999 Acquisition Stock Option Plan and the 1999
Director Option Plan. Each of the plans, except for the 1999 Director Option
Plan, provides for:
o the grant of incentive stock options and non-qualified stock options;
o the administration of the plan by the board of directors and the
compensation committee; and
o the exercise price of options granted under the plan to be as determined
by the board, except that the exercise price of incentive stock options
must be at least as equal to the fair market value of iVillage's common
stock on the date of grant.
Each of the plans provides for option vesting to accelerate and become
fully vested in the event of a change of control of iVillage and the options are
not assumed or substituted by a successor corporation.
Under the 1999 Director Option Plan, commencing with the 2000 annual
meeting of stockholders, each nonemployee director will automatically be granted
a nonstatutory option to purchase 1,666 shares of common stock, provided that he
or she shall have served on the board of directors for at least the preceding
six months. The exercise price of each of these options will be equal to the
fair market value of the common stock on the date of grant. Each option granted
will vest on a cumulative monthly basis over a four-year period. As of
February 15, 1999, 133,333 shares were authorized under the 1999 Director Option
Plan, options to purchase an aggregate of 33,333 shares had been granted and
100,000 shares were available for future grant.
As of February 15, 1999, under the 1995 Amended and Restated Employee Stock
Option Plan, options to purchase 1,684,882 shares were outstanding and no shares
were available for future grant. Under the 1997 Amended and Restated Acquisition
Stock Option Plan, options to purchase 360,726 shares were outstanding and no
shares were available for future grant. As of February 15, 1999, under the 1999
Employee Stock Option Plan, 796,951 shares
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<PAGE>
were authorized, options to purchase 616,889 shares had been granted, or are
expected to be granted prior to the effective date of this prospectus, and
180,062 shares were available for future grant. As of February 15, 1999, under
the 1999 Acquisition Stock Option Plan, 333,333 shares were authorized and
options to purchase 181,208 shares had been granted.
1999 EMPLOYEE STOCK PURCHASE PLAN
The 1999 Employee Stock Purchase Plan is intended to qualify under Section
423 of the Internal Revenue Code and will be administered by the board of
directors or by the compensation commitee. Any employee who is currently
employed for at least 20 hours per week and more than five (5) months in any
calendar year with or by iVillage or a majority-owned subsidiary of iVillage,
will be eligible to participate. A total of 83,333 shares are authorized and
reserved for issuance under the plan.
Under the plan, iVillage will withhold a specified percentage, which shall
not exceed 15% of each salary payment to participating employees over certain
offering periods. Unless determined otherwise, each offering period will run for
24 months and will be divided into four consecutive purchase periods of
approximately six months. The first offering period and the first purchase
period will commence three months after the date of this prospectus. In the
event of a change of control of iVillage, the offering and purchase periods will
be shortened unless the rights to purchase stock are assumed by the succesor or
acquiring company. The price at which common stock will be purchased under the
plan is equal to 85% of the fair market value of the common stock on the first
day of the applicable offering period or the last day of the applicable purchase
period, whichever is lower.
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<PAGE>
CERTAIN TRANSACTIONS
In August 1995, iVillage issued to Candice Carpenter and Nancy Evans
666,668 and 333,333 shares of common stock, respectively, at a purchase price of
$.0015 per share. Ms. Carpenter and Ms. Evans currently serve as officers and
directors of iVillage.
In August 1995, iVillage entered into a promissory note agreement with AOL,
a principal stockholder of iVillage, whereby iVillage issued a note in the
principal amount of $500,000, with interest payable at the rate of 8% per annum.
In September 1995, iVillage and AOL entered into a securities purchase
agreement pursuant to which:
o iVillage issued 1,000,000 shares of series A convertible preferred stock
to AOL in exchange for the cancellation of the $500,000 note and the
payment by AOL to iVillage of $496,494; and
o AOL agreed to make an additional loan to iVillage in the form of a
convertible secured note in an aggregate principal amount not to exceed
$1 million, whereby iVillage received $650,000.
In connection with such agreement, iVillage also issued to AOL a stock
subscription warrant representing the right to purchase 52,100 shares of
iVillage's series B convertible preferred stock at an exercise price of $2.50
per share or 17,366 shares, on a post-split basis, at an exercise price of $7.50
per share. In February 1996, the note whereby iVillage received $650,000 in
September 1995 was cancelled in exchange for a new convertible secured note in
an aggregate principal amount not to exceed $1.75 million, whereby iVillage
received $1.1 million. Upon completion of this offering, the series A
convertible preferred stock will automatically convert into an aggregate of
333,333 shares of common stock.
In September 1995, iVillage entered into an information provider agreement
with AOL, whereby AOL agreed to carry iVillage's programming material on AOL for
a period of one year. As a result of this agreement, AOL received a percentage
of iVillage's revenues and paid iVillage a usage fee based upon hours of
viewership of the iVillage site on the AOL network.
In April 1996, iVillage issued to AOL a promissory note in the principal
amount of $500,000 with interest payable at the rate of 10% per annum.
In May 1996, iVillage entered into another information provider agreement
with AOL, pursuant to which AOL agreed to carry up to four additional iVillage
channels for a period of two years. As an inducement to, and in consideration
of, AOL entering into such agreement, iVillage issued to AOL a warrant to
purchase 800,000 shares of series B convertible preferred stock at an exercise
price of $2.50 per share or 266,666 shares, on a post-split basis, at an
exercise price of $7.50 per share.
In May 1996, iVillage issued shares of series B convertible preferred stock
and series B-1 convertible preferred stock to certain investors, including AOL,
at a purchase price of $2.50 per share. iVillage issued to AOL 797,130 shares of
series B convertible preferred stock and 300,000 shares of series B-1
convertible preferred stock. iVillage issued such shares to AOL in exchange for
the cancellation of the notes whereby iVillage received $1.1 million and
$500,000 in February and April 1996, respectively. Upon completion of this
offering, the series B convertible preferred stock and series B-1 convertible
preferred stock will automatically convert into an aggregate of 1,810,407 shares
of common stock.
In February 1997, iVillage entered into a note and warrant purchase
agreement with AOL and several other investors. iVillage issued to AOL a
convertible secured promissory note in an aggregate principal amount of
$900,000. In connection with the issuance of these notes, iVillage issued a
stock subscription warrant to AOL, representing the right to purchase 66,875
shares of common stock at an exercise price of $5.86 per share.
In April 1997, iVillage issued to AOL a convertible secured promissory note
in an aggregate principal amount of $1 million. In April 1997, AOL exchanged the
note issued to it in February 1997 for an amended and restated convertible
secured promissory note in an
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<PAGE>
aggregate principal amount of approximately $1.3 million.
In May 1997, iVillage issued shares of series C convertible preferred stock
to certain investors, including AOL, CIBC Wood Gundy Ventures, Inc., Cox
Interactive Media, Inc. and Rho Management Trust I, at a purchase price of
$1.954 per share. AOL converted the note it received in April 1997 for
approximately $1.3 million and $200,000 of the note for $1 million it received
in April 1997 for 793,245 shares of series C convertible preferred stock. Upon
completion of this offering, the series C convertible preferred stock will
automatically convert into an aggregate of 4,397,815 shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES C
NAME OF INVESTOR PREFERRED STOCK
- ---------------------------------- ----------------
<S> <C>
ENTITIES AFFILIATED WITH DIRECTORS
America Online, Inc............... 1,202,661
Rho Management Trust I............ 3,070,624
</TABLE>
In connection with the acquisition of Health ResponseAbility Systems, Inc.
in May 1997, iVillage issued to AOL 203,000 shares of common stock for AOL's
equity rights in Health ResponseAbility Systems.
In July 1997, iVillage entered into an interactive services agreement with
AOL, in which some of iVillage's icons are placed within the AOL service. In
consideration for AOL carrying certain channels of iVillage, iVillage received a
guaranty of a minimum number of impressions per year. Lennert Leader, a director
of iVillage, currently serves as President of AOL Investments.
In July 1997, iVillage entered into a one-year agreement with Tenet
Healthcare Corporation, a principal stockholder of iVillage, in which Tenet
sponsored one of iVillage's channels and developed content for use on the
channel in exchange for a fee paid in quarterly installments. For the year ended
December 31, 1998, this agreement generated revenues of approximately $247,000.
In December 1997, AOL converted the remaining $800,000 aggregate principal
amount of the note it received in April 1997 into 409,416 shares of series C
convertible preferred stock.
In January 1998, iVillage entered into a shopping channel promotional
agreement with AOL, in which AOL agreed to promote iVillage and its services on
the AOL shopping channel and provide access to iVillage's online sites. The
shopping channel agreement expires on October 1, 1999. iVillage makes payments
to AOL in monthly installments for AOL's promotion of iVillage.
In February 1998, iVillage issued 284,317 shares of common stock to Tenet.
In February 1998, March 1998 and May 1998, iVillage issued shares of
series D convertible preferred stock to certain entities affiliated with
directors of iVillage and certain 5% stockholders of iVillage at a purchase
price of $2.50 per share. The number of shares of series D convertible preferred
stock issued to each entity is set forth below. Upon completion of this
offering, the series D convertible preferred stock will automatically convert
into an aggregate of 4,333,333 shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES D
NAME OF INVESTOR PREFERRED STOCK
- ---------------------------------- ----------------
<S> <C>
ENTITIES AFFILIATED WITH DIRECTORS
America Online, Inc............... 1,200,000
Rho Management Trust I............ 1,080,000
OTHER 5% STOCKHOLDERS
Tenet Healthcare Corporation...... 1,333,334
</TABLE>
On June 5, 1998, Candice Carpenter executed a promissory note in favor of
iVillage for borrowings up to a maximum principal amount of $500,000, of which
$500,000 was outstanding at December 31, 1998. Subject to prepayment or
acceleration, any loans made to Ms. Carpenter under the note mature on
December 31, 2001. Borrowings made under the note bear interest at 5.58% per
annum and is payable on an annual basis on December 31 of each year commencing
on December 31, 1998. The note is collateralized by a pledge by Ms. Carpenter of
166,666 shares of common stock.
In September 14, 1998, iVillage entered into a sponsorship agreement with
Re.Store, Inc. now known as MyBasics.com. In 1998, iVillage recognized $546,875
as revenue from the agreement. As of December 31, 1998, MyBasics.com has paid
$312,500 of such amount. The balance of $234,375 is expected to be invoiced in
1999. In addition, in 1998, iVillage received 2,243 shares of common
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<PAGE>
stock of MyBasics.com in accordance with the agreement. Candice Carpenter is a
director of MyBasics.com.
In November 1998, iVillage entered into a one-year content distribution
agreement with Cox Interactive Media, a principal stockholder of iVillage,
whereby iVillage agreed to provide content for Cox's Web sites in return for
displaying the iVillage logo on the Cox Web sites and establishing links on Cox
Web sites to iVillage's network.
In December 1998, iVillage issued shares of series E convertible preferred
stock to certain entities affiliated with directors of iVillage and certain 5%
stockholders of iVillage at a purchase price of $2.85 per share. The number of
shares of series E convertible preferred stock issued to each entity is set
forth below. Upon completion of this offering, the series E convertible
preferred stock will automatically convert into an aggregate of 3,910,316 shares
of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES E
NAME OF INVESTOR PREFERRED STOCK
- ---------------------------------- ----------------
<S> <C>
ENTITIES AFFILIATED WITH DIRECTORS
America Online, Inc............... 701,754
Rho Management Trust I............ 477,079
OTHER 5% STOCKHOLDERS
Tenet Healthcare Corporation...... 701,754
</TABLE>
In December 1998, iVillage entered into an interactive services agreement
with AOL, in which some of iVillage's icons are placed within the AOL service.
The AOL agreement supersedes all prior services agreements between iVillage and
AOL and expires December 21, 2000. Either party may extend the agreement for an
additional year. In consideration for AOL carrying certain channels, iVillage
received a guaranty of a minimum number of impressions. iVillage is obligated to
pay AOL in quarterly installments, provide AOL with or purchase from AOL
advertising and provide in-kind commitments to AOL consisting of specific
references to AOL through specified media.
Subject to the consummation of this offering, on February 4, 1999, Candice
Carpenter and Nancy Evans were granted incentive stock options under the 1999
Employee Stock Option Plan to purchase 333,333 and 116,666 shares of common
stock, respectively, at an exercise price equal to the initial public offering
price of the common stock in this offering. The stock options granted to Ms.
Carpenter vest 20% upon each of the second and third anniversaries of the date
of grant and 30% upon each of the fourth and fifth anniversaries of the date of
grant. Ms. Evans' options vest at the rate of 25% per year beginning on the
second anniversary of the date of grant.
Upon being elected to the board of directors, Douglas McCormick was granted
stock options under the 1999 Director Option Plan to purchase 33,333 shares of
common stock at an exercise price equal to the initial public offering price of
the common stock in this offering. One-third of the options vested upon the date
of grant and one-third vest upon each of the second and third anniversaries of
the date of grant.
On February 22, 1999, iVillage and NBC reached an agreement in principle to
amend, subject to execution of final documentation, the November 11, 1998
advertising and promotional agreement with NBC as follows:
a. iVillage has agreed to purchase, for cash, $8.5 million of advertising
and promotional spots per annum, over the next three years.
b. Upon signing the amended agreement, iVillage will issue, subject to
certain anti-dilution protection, 4,889,030 shares of series E
convertible preferred stock and grant an option to purchase up to
970,873 shares of series E convertible preferred stock at $5.15 per
share during 2000 and 813,008 shares at $6.15 per share during 2001 in
exchange for a promissory note in the approximate amount of $15.5
million at 5% interest per annum. The principal amount of the note and
interest is payable in twelve equal installments of approximately $1.4
million, payable each quarter beginning April 1, 1999.
c. iVillage has also agreed to pay $1.1 million during 1999 for prominent
placement on the NBC.com Web site.
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On September 19, 1995, Candice Carpenter and Nancy Evans and certain other
stockholders executed a voting trust agreement whereby each deposited his or her
shares of common stock with Ms. Carpenter, as trustee, in exchange for the
receipt of voting trust certificates. The voting trust agreement provides the
trustee with the unqualified right and power to vote and to act in the same
manner as if she was the absolute owner of the common stock, except the trustee
has no rights with respect to any pledge or transfer of the common stock. The
depositors are entitled to all distributions paid upon the common stock and may
transfer the voting trust certificates, subject to any other agreement
restricting their transfer. The voting trust agreement may be terminated by the
trustee 10 days after written notice of termination is mailed to the depositors
or by written agreement among all the depositors.
Pursuant to the Fourth Amended and Restated Stockholders' Agreement dated
December 4, 1998, the holders of iVillage's preferred stock agreed to vote their
shares to fix the number of directors at fifteen. Pursuant to this agreement,
the board was to consist of one director designated by the holders of iVillage's
series A convertible preferred stock; two directors to be designated by the
holders of iVillage's series B convertible preferred stock; two directors to be
designated by the holders of iVillage's series C convertible preferred stock;
one director to be designated by the holders of iVillage's series D convertible
preferred stock; one director to be designated by NBC; two directors to be
designated by Candice Carpenter, Nancy Evans and Robert Levitan; one director to
be designated jointly by the chairman of the board and all holders of iVillage's
outstanding capital stock; one director to be designated by Rho Management
Trust I; and two directors, or two-sevenths of the board of directors if the
board consists of more than seven directors, to be designated by certain of the
stockholders each of whom hold at least two and one-half percent of the
outstanding capital stock of iVillage immediately prior to this offering, which
right to designate shall commence upon this offering for a period of six months
after this offering. The agreement terminates upon completion of an initial
public offering at an offering price to the public of not less than $11.79 per
share and with aggregate proceeds to iVillage of not less than $20,000,000.
iVillage has entered into indemnification agreements with its officers and
directors containing provisions which may require iVillage, among other things,
to indemnify its officers and directors against certain liabilities that may
arise by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the common stock, as of February 22, 1999 and as adjusted to
reflect the sale of common stock offered by iVillage in this offering, for
(i) each person known by iVillage to beneficially own more than 5% of the common
stock, (ii) each director of iVillage, (iii) each executive officer named in the
Summary Compensation Table, and (iv) all directors and executive officers of
iVillage as a group. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and includes voting or
investment power with respect to the securities. The address for each listed
director and officer is c/o iVillage Inc., 170 Fifth Avenue, New York, New York
10010. Except as indicated by footnote, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned by
them. The number of shares of common stock outstanding used in calculating the
percentage for each listed person includes the shares of common stock underlying
options or warrants held by such person that are exercisable within 60 days of
February 22, 1999 but excludes shares of common stock underlying options or
warrants held by any other person. Percentage of beneficial ownership is based
on 19,560,776 shares of common stock outstanding as of February 22, 1999, after
giving effect to the conversion of the convertible preferred stock, and
23,210,776 shares of common stock outstanding after completion of this offering.
"Shares Beneficially Owned" includes "Shares Issuable Upon Exercise of Stock
Options or Warrants".
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES ISSUABLE BENEFICIALLY OWNED
SHARES UPON EXERCISE OF --------------------------------------------
BENEFICIALLY STOCK OPTIONS PRIOR TO AFTER
OWNED OR WARRANTS OFFERING OFFERING
------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
NAME OF BENEFICIAL OWNER
America Online, Inc. .............. 2,363,174 350,908 11.9% 10.0%
22000 AOL Way
Dulles, Virginia 20166-9323
CIBC Wood Gundy Ventures, Inc. .... 909,451 -- 4.6 3.9
425 Lexington Avenue
New York, New York 10017
Cox Interactive Media, Inc. ....... 912,185 -- 4.7 3.9
1400 Lake Hearn Drive
Atlanta, Georgia 30319
National Broadcasting Company, 1,629,676 -- 8.3 7.0
Inc. ............................
30 Rockefeller Plaza
New York, New York 10112
Rho Management Trust I(1) ......... 1,542,567 -- 7.9 6.6
767 Fifth Avenue
New York, New York 10153
Tenet Healthcare Corporation ...... 962,679 -- 4.9 4.1
3820 State Street
Santa Barbara, California 93105
Candice Carpenter.................. 690,001 23,333 3.5 3.0
Nancy Evans........................ 333,333 -- 1.7 1.4
Alan Colner(2)..................... 743,293 -- 3.8 3.2
Jay Hoag(3)........................ 594,632 -- 3.0 2.6
Habib Kairouz(4)................... 1,542,567 -- 7.9 6.6
Lennert J. Leader(5)............... 2,363,174 350,908 11.9 10.0
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES ISSUABLE BENEFICIALLY OWNED
SHARES UPON EXERCISE OF --------------------------------------------
BENEFICIALLY STOCK OPTIONS PRIOR TO AFTER
OWNED OR WARRANTS OFFERING OFFERING
------------ -------------------- -------------------- --------------------
Michael Levy....................... 50,000 50,000 * *
<S> <C> <C> <C> <C>
Douglas McCormick.................. 11,111 11,111 * *
Daniel Schulman.................... -- -- * *
Martin Yudkovitz(6)................ 1,629,676 -- 8.3 7.0
Steven Elkes....................... 15,000 10,883 * *
Stephen Lake....................... 29,166 29,166 * *
John W. Glascott................... 16,666 16,666 * *
All directors and executive
officers as a group
(17 persons) .................... 6,344,777 452,018 31.7 26.8
</TABLE>
- ------------------------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1) Rho Management Partners L.P., a Delaware limited partnership, may be deemed
the beneficial owner of the 1,542,567 shares registered in the name of Rho
Management Trust I, according to an investment advisory relationship by
which Rho Management Partners L.P. exercises voting and investment control
over such shares.
(2) Mr. Colner is Managing Director, Private Equity Investments at Moore
Management, Inc., the investment advisor to Moore Global Investments, Ltd.
and Remington Investment Strategies, L.P. Mr. Colner does not have voting
or investment power with respect to the shares of common stock owned by
Moore or Remington. Mr. Colner disclaims beneficial ownership of the shares
of common stock beneficially owned by Moore Global Investments, Ltd.
(3) Mr. Hoag is the General Partner of Technology Crossover Ventures II, L.P.
In this capacity and in his capacity as one of the Managing Members of
Technology Crossover Management II, L.L.C., the sole General Partner of
each of the following funds, Mr. Hoag may be deemed to have beneficial
ownership of 38,810 shares owned by TCV II Strategic Partners, L.P.,
218,695 shares owned by TCV II (Q), L.P., 9,240 shares owned by TCV II
V.O.F., 43,430 shares owned by Technology Crossover Ventures II, C.V. and
284,457 shares owned by Technology Crossover Ventures II, L.P. Mr. Hoag
shares voting and investment power with Richard H. Kimball.
(4) Mr. Kairouz is Managing Director of Rho Management Company, Inc., an
affiliate of Rho Management Partners L.P. In such capacity, Mr. Kairouz may
be deemed to have beneficial ownership of the 1,542,567 shares owned by Rho
Management Trust I. Mr. Kairouz disclaims beneficial ownership of the
shares reported by Rho Management Trust I, other than 16,222 shares in
which Mr. Kairouz has a pecuniary interest.
(5) Consists of 2,363,174 shares of common stock beneficially owned by America
Online, Inc., including 350,908 shares of common stock issuable upon the
exercise of warrants. Mr. Leader shares voting power with America Online,
Inc. Mr. Leader disclaims beneficial ownership of the shares of common
stock beneficially owned by America Online, Inc.
(6) Mr. Yudkovitz is President and Chief Executive Officer of NBC Multimedia,
Inc., a division of the National Broadcasting Company, Inc. Mr. Yudkovitz
does not have voting or investment power with respect to the shares of
common stock owned by NBC. Mr. Yudkovitz disclaims beneficial ownership of
the shares of common stock beneficially owned by NBC.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
iVillage's amended and restated certificate of incorporation, which will
become effective upon the closing of this offering, authorizes the issuance of
up to 65,000,000 shares of common stock, par value $0.01 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share, the rights and
preferences of which may be established from time to time by iVillage's board of
directors. As of December 31, 1998, 2,113,385 shares of common stock were
outstanding and 43,702,139 shares of convertible preferred stock convertible
into 14,785,205 shares of common stock upon the completion of this offering were
issued and outstanding. As of
December 31, 1998, iVillage had 75 stockholders.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences that may be applicable to any preferred stock
outstanding at the time, holders of common stock are entitled to receive ratably
dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of iVillage, holders of common stock
would be entitled to share in iVillage's assets remaining after the payment of
liabilities and liquidation preferences on any outstanding preferred stock.
Holders of common stock have no preemptive or conversion rights or other
subscription rights and there are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and
the shares of common stock offered by iVillage in this offering, when issued and
paid for, will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the board of directors will be
authorized, subject to Delaware law, without stockholder approval, from time to
time to issue up to an aggregate of 5,000,000 shares of preferred stock in one
or more series. The board of directors can fix the rights, preferences and
privileges of the shares of each series and any qualifications, limitations or
restrictions. Issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire a majority of the
outstanding voting stock of iVillage. iVillage has no present plans to issue any
shares of preferred stock.
WARRANTS
Upon the completion of this offering, iVillage will have outstanding
warrants to purchase 425,998 shares of common stock at a weighted average
exercise price of $6.54 per share. These warrants have net exercise provisions
under which the holder may, in lieu of payment of the exercise price in cash,
surrender the warrant and receive a net amount of shares, based on their fair
market value of iVillage's common stock at the time of the exercise of the
warrant, after deducting the aggregate exercise price. These warrants expire on
dates ranging from September 2000 to May 2003.
REGISTRATION RIGHTS
According to the terms of the Fourth Amended and Restated Rights Agreement,
after the closing of the offering, the holders of 40% of the outstanding shares
of common stock, including shares issuable upon the exercise of warrants to
purchase common stock, will be entitled to demand that iVillage file a
registration statement with respect to the registration of such shares under the
Securities Act. iVillage is not required to effect:
o more than four registrations;
o a registration during any period in which any other registration
statement has been filed or has been declared effective within the prior
180 days;
o a registration within 60 days following the determination of the board of
directors of iVillage to file a registration statement; or
o a registration for a period not to exceed 60 days, if the board of
directors of iVillage has made a good faith determination that it would
be seriously detrimental to iVillage or the holders of registration
rights for a registration statement to be filed.
In addition, one stockholder is entitled to one separate demand
registration right with respect to the registration of its 1,629,676 shares of
common stock under the Securities Act, subject to the limitations set forth
above.
57
<PAGE>
Furthermore, according to the terms of the registration rights agreement,
after the closing of this offering, the holders of 19,938,441 shares of common
stock, including shares issuable upon the exercise of warrants to purchase
common stock, will be entitled to piggyback registration rights in connection
with any registration by iVillage of its securities for its own account or the
account of other securityholders. In the event that iVillage proposes to
register any shares of common stock under the Securities Act, the holders of the
piggyback registration rights are entitled to receive notice and are entitled to
include their shares in the registration statement.
At any time after iVillage becomes eligible to file a registration
statement on Form S-3, certain holders of demand registration rights may require
iVillage to file an unlimited number of registration statements on Form S-3
under the Securities Act with respect to their shares of common stock. iVillage
is not required to effect more than one such registration in any six-month
period.
The registration rights of any holder terminate when the shares held by the
holder may be sold under Rule 144 during any three-month period. iVillage is
generally required to bear all of the expenses of all registrations under the
registration rights agreement, except underwriting discounts and commissions.
The registration rights agreement also contains a commitment of iVillage to
indemnify the holders of registration rights.
CERTAIN CHARTER AND BYLAWS PROVISIONS AND DELAWARE ANTI-TAKEOVER STATUE
iVillage is subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. This section prevents Delaware corporations 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", or a stockholder who owns 15% or more of the
corporation's outstanding voting stock, as well as affiliates and associates of
any such persons, for three years following the date such stockholder became an
"interested stockholder" unless:
o the transaction in which such stockholder became an "interested
stockholder" is approved by the board of directors prior to the date the
"interested stockholder" attained such status;
o upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers; or
o on or after the date the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.
iVillage's amended and restated certificate of incorporation provides that,
upon the closing of this offering, the board of directors will be divided into
three classes of directors with each class serving a staggered three-year term.
The classification system of electing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of
iVillage and may maintain the incumbency of the board of directors, as the
classification of the board of directors generally increases the difficulty of
replacing a majority of the directors. iVillage's amended and restated
certificate of incorporation eliminates the right of stockholders to act by
written consent without a meeting and iVillage's bylaws eliminate the right of
stockholders to call special meetings of stockholders. The amended and restated
certificate of incorporation and bylaws do not provide for cumulative voting in
the election of directors. The authorization of undesignated preferred stock
makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of iVillage. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of iVillage. The amendment of any of these provisions would require
approval by holders of at least 66 2/3% of the outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Continental Stock
Transfer & Trust Company.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale described below, sales
of substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
23,210,776 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining 19,560,776 shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 or 701 under the Securities Act, which rules are summarized below.
LOCK-UP AGREEMENTS
All of our officers, directors and stockholders have signed lock-up
agreements under which they agreed not to transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock, for a period of 180 days
after the date of this prospectus. Transfers or dispositions can be made sooner:
o with the prior written consent of Goldman, Sachs & Co.;
o in the case of certain transfers to affiliates;
o as a bona fide gift; or
o to any trust.
Subject to the provisions of Rule 144, 144(k) and 701, restricted shares
totaling 19,069,982 will be available for sale in the public market, subject in
the case of shares held by affiliates to compliance with certain volume
restrictions, 180 days after the date of this prospectus.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
o 1% of the number of shares of common stock then outstanding, which will
equal approximately 232,108 shares immediately after this offering; or
o the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
RULE 144(K)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner other than an affiliate, is entitled to sell such shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144. Therefore, unless otherwise restricted,
"144(k) shares" may be sold immediately upon the completion of this offering.
59
<PAGE>
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with certain restrictions,
including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 19,938,441 shares of our
common stock, or their transferees, including shares issuable upon the exercise
of warrants to purchase common stock, will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock--Registration Rights".
STOCK OPTIONS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 3,392,560 shares of common stock reserved for
issuance under our 1995 Amended and Restated Employee Stock Option Plan, 1997
Amended and Restated Acquisition Stock Option Plan, 1999 Employee Stock Option
Plan, 1999 Aquisition Stock Option Plan, 1999 Employee Stock Purchase Plan and
the 1999 Director Stock Option Plan. As of December 31, 1998, options to
purchase 2,159,274 shares of common stock were issued and outstanding.
Upon the expiration of the lock-up agreements described above, at least
869,359 shares of common stock will be subject to vested options, based on
options outstanding as of December 31, 1998. Such registration statement is
expected to be filed and are effective as soon as practicable after the
effective date of this offering. Accordingly, shares registered under such
registration statement will, subject to vesting provisions and Rule 144 volume
limitations applicable to our affiliates be available for sale in the open
market immediately after the 180-day lock-up agreements expire.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
iVillage by Orrick, Herrington & Sutcliffe LLP, New York, New York. Certain
legal matters will be passed upon for the underwriters by Hale and Dorr LLP,
Boston, Massachusetts. A partner of Orrick, Herrington & Sutcliffe LLP owns an
aggregate of 13,225 shares of iVillage's series C and series E convertible
preferred stock.
EXPERTS
The consolidated balance sheets of iVillage Inc. and subsidiaries as of
December 31, 1997 and 1998 and the consolidated statements of operations,
stockholders' equity and cash flows for the three years in the period ended
December 31, 1998 and the balance sheets of Health ResponseAbility Systems, Inc.
as of December 31, 1995 and 1996 and the statements of operations, stockholders'
(deficit) equity and cash flows for the two years then ended have been included
in reliance on the reports of PricewaterhouseCoopers LLP, iVillage's independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
60
<PAGE>
AVAILABLE INFORMATION
iVillage has filed with the Securities and Exchange Commission, a
registration statement on Form S-1 (including the exhibits and schedules
thereto) under the Securities Act with respect to the shares to be sold in this
offering. This prospectus does not contain all the information set forth in the
registration statement. For further information with respect to iVillage and the
shares to be sold in this offering, reference is made to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to, are not necessarily complete,
and in each instance reference is made to the copy of each contract, agreement
or other document filed as an exhibit to the registration statement, each
statement being qualified in all respects a more complete description of the
matter involved, and each statement shall be deemed by the reference to the
registration statement.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information iVillage files at the Commission's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.C.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee, by writing to the Commission.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. iVillage's Commission filings,
including the registration statement will also be available to you on the
Commission's Internet site (http://www.sec.gov).
iVillage intends to send to its stockholders annual reports containing
audited consolidated financial statements and quarterly reports containing
unaudited consolidated financial statements for the first three quarters of each
fiscal year.
61
<PAGE>
INDEX TO FINANCIAL STATEMENTS
IVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
-------------------
<S> <C>
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets at December 31, 1997 and
1998.................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998........................ F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998............ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998........................ F-6
Notes to Consolidated Financial Statements................ F-7 - F-23
Schedule of Valuation and Qualifying Accounts............. F-24
IVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Financial
Information............................................. F-25 - F-26
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 1998................................. F-27
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1998......... F-28
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements as of and for the year ended
December 31, 1998....................................... F-29
HEALTH RESPONSEABILITY SYSTEMS, INC.
FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-30
Balance Sheets at December 31, 1995 and 1996 and May 29,
1997 (unaudited)........................................ F-31
Statements of Operations for the years ended December 31,
1995 and 1996 and the periods ended May 29, 1996 and
1997 (unaudited)........................................ F-32
Statements of Stockholder's (Deficit) Equity for the years
ended December 31, 1995 and 1996 and the period ended
May 29, 1997 (unaudited)................................ F-33
Statements of Cash Flows for the years ended December 31,
1995 and 1996 and the periods ended May 29, 1996 and
1997 (unaudited)........................................ F-34
Notes to Financial Statements............................. F-35 - F-38
IVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Condensed Consolidated Financial Information
(unaudited)............................................. F-39
Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997 (unaudited)........ F-40
Notes to Pro Forma Condensed Consolidated Financial
Statements for the year ended December 31, 1997
(unaudited)............................................. F-41
</TABLE>
F-1
<PAGE>
After the approval by the Board of Directors of the one-for-three reverse
stock split discussed in Note 13 to the consolidated financial statements of
iVillage Inc. and Subsidiaries, we expect to be in a position to render the
following audit report.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
February 4, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
iVillage Inc. and Subsidiaries:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of iVillage
Inc. and Subsidiaries (the "Company") at December 31, 1998 and 1997, and the
consolidated results of operations and cash flows for each of the three years
then ended, in conformity with generally accepted accounting principles. In
addition, in our opinion, the accompanying financial statement schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
New York, New York
February 4, 1999
F-2
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA AS OF
DECEMBER 31, DECEMBER 31,
---------------------------- 1998
1997 1998
------------ ------------ ---------------
(UNAUDITED)
(SEE NOTE 2)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 4,334,721 $ 30,824,869 $ 30,824,869
Accounts receivable, less allowance of $279,829
and $746,349, respectively...................... 2,199,520 3,147,561 3,147,561
Other current assets.............................. 153,985 715,161 715,161
------------ ------------ -------------
Total current assets.......................... 6,688,226 34,687,591 34,687,591
------------ ------------ -------------
Fixed assets, net................................. 3,802,823 7,380,366 7,380,366
Goodwill and other intangible assets, net......... 5,598,233 4,535,148 4,535,148
Other assets...................................... 146,801 187,860 187,860
------------ ------------ -------------
Total assets.................................. $ 16,236,083 $ 46,790,965 $ 46,790,965
------------ ------------ -------------
------------ ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............. $ 3,989,945 $ 11,559,711 $ 11,559,711
Capital leases payable............................ 247,943 136,573 136,573
Deferred revenue.................................. 1,004,199 2,909,740 2,909,740
Other current liabilities......................... 332,531 162,859 162,859
------------ ------------ -------------
Total current liabilities..................... 5,574,618 14,768,883 14,768,883
Capital leases payable, net of current portion.... 139,346 -- --
------------ ------------ -------------
Total liabilities............................. 5,713,964 14,768,883 14,768,883
------------ ------------ -------------
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock--par value
$.0005,
1,000,000 shares authorized, issued and
outstanding..................................... 500 500 --
Series B and B-1 convertible preferred stock--par
value $.0005, 5,929,846 shares authorized,
4,777,746 issued and outstanding................ 2,389 2,389 --
Series C convertible preferred stock--par value
$.0005,
13,528,765 shares authorized, 13,193,445 issued
and outstanding................................. 6,597 6,597 --
Series D convertible preferred stock--par value
$.0005,
13,000,000 shares authorized, issued and
outstanding..................................... -- 6,500 --
Series E convertible preferred stock--par value
$.0005,
18,953,616 shares authorized, 11,730,948 issued
and outstanding................................. -- 5,865 --
Common stock, par value $.01, 35,000,000 and
65,000,000 shares authorized, 1,819,735 and
2,113,385 issued and outstanding at
December 31, 1997 and 1998, respectively;
16,898,590 issued and oustanding, pro forma
(unaudited)..................................... 18,197 21,133 168,986
Additional paid-in capital........................ 43,180,649 112,848,505 112,722,503
Accumulated deficit............................... (32,621,213) (76,274,895) (76,274,895)
Stockholders notes receivable..................... (65,000) (565,000) (565,000)
Unearned compensation and deferred advertising.... -- (4,029,512) (4,029,512)
------------ ------------ -------------
Total stockholders' equity.................... 10,522,119 32,022,082 32,022,082
------------ ------------ -------------
Total liabilities and stockholders' equity.... $ 16,236,083 $ 46,790,965 $ 46,790,965
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Sponsorship, advertising and usage......... $ 732,045 $ 6,018,696 $ 12,450,620
Commerce................................... -- -- 2,561,203
----------- ------------ ------------
Total revenues........................... 732,045 6,018,696 15,011,823
----------- ------------ ------------
Operating expenses:
Production, product and technology......... 4,521,410 7,606,355 14,521,015
Sales and marketing........................ 2,708,779 8,770,581 28,522,874
General and administrative................. 3,103,864 7,840,588 10,612,434
Depreciation and amortization.............. 108,956 2,886,256 5,683,006
----------- ------------ ------------
Total operating expenses................. 10,443,009 27,103,780 59,339,329
----------- ------------ ------------
Loss from operations......................... (9,710,964) (21,085,084) (44,327,506)
Interest income (expense), net............... 28,282 (215,876) 591,186
Loss on sale of Web site..................... -- -- (503,961)
Minority interest............................ -- -- 586,599
----------- ------------ ------------
Net loss..................................... $(9,682,682) $(21,300,960) $(43,653,682)
----------- ------------ ------------
----------- ------------ ------------
Basic and diluted net loss per share......... $ (8.90) $ (13.65) $ (21.10)
----------- ------------ ------------
----------- ------------ ------------
Weighted average shares of common stock
outstanding used in computing basic and
diluted net loss per share................. 1,087,353 1,560,957 2,068,473
----------- ------------ ------------
----------- ------------ ------------
Pro forma basic and diluted net loss per
share (Note 2) $ (2.59)
------------
------------
Shares of common stock used in computing pro
forma basic and diluted net loss per share
(Note 2)................................... 16,853,678
------------
------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES C SERIES D SERIES E
----------------- ----------------- ------------------ ------------------ ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------ ---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.... 1,000,000 $500
Issuance of warrants in
connection with interest on
convertible notes............
Issuance of common stock in
connection with
acquisition..................
Issuance of Series B and
Series B-1 convertible
preferred stock.............. 4,777,746 $2,389
Issuance of stock options to
consultants and directors....
Issuance of warrants to AOL
for channel services.........
Net loss......................
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
Balance at December 31,
1996......................... 1,000,000 500 4,777,746 2,389
Issuance of common stock in
connection with exercise of
stock options................
Notes receivable due from
stockholders in connection
with exercise of options.....
Issuance of Series C
convertible preferred
stock........................ 13,193,445 $6,597
Issuance of warrants in
connection with interest on
convertible notes............
Issuance of common stock and
options in connection with
business acquisitions........
Issuance of stock options to
consultants and directors....
Net loss......................
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
Balance at December 31,
1997......................... 1,000,000 500 4,777,746 2,389 13,193,445 6,597
Issuance of common stock for
cash.........................
Issuance of Series D
convertible preferred
stock........................ 13,000,000 $6,500
Issuance of Series E
convertible preferred
stock........................ 11,730,948 $5,865
Issuance of stock options to
consultants and directors....
Issuance of common stock in
connection with exercise of
stock options................
Issuance of stock options in
connection with business
transactions.................
Officer loan receivable.......
Issuance of options to NBC....
Net loss......................
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
Balance at December 31,
1998......................... 1,000,000 $500 4,777,746 $2,389 13,193,445 $6,597 13,000,000 $6,500 11,730,948 $5,865
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
<CAPTION>
COMMON STOCK
------------------
SHARES AMOUNT
--------- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996.... 1,083,335 $10,833
Issuance of warrants in
connection with interest on
convertible notes............
Issuance of common stock in
connection with
acquisition.................. 66,667 667
Issuance of Series B and
Series B-1 convertible
preferred stock..............
Issuance of stock options to
consultants and directors....
Issuance of warrants to AOL
for channel services.........
Net loss......................
--------- -------
Balance at December 31,
1996......................... 1,150,002 11,500
Issuance of common stock in
connection with exercise of
stock options................ 33,333 333
Notes receivable due from
stockholders in connection
with exercise of options.....
Issuance of Series C
convertible preferred
stock........................
Issuance of warrants in
connection with interest on
convertible notes............
Issuance of common stock and
options in connection with
business acquisitions........ 636,400 6,364
Issuance of stock options to
consultants and directors....
Net loss......................
--------- -------
Balance at December 31,
1997......................... 1,819,735 18,197
Issuance of common stock for
cash......................... 284,317 2,843
Issuance of Series D
convertible preferred
stock........................
Issuance of Series E
convertible preferred
stock........................
Issuance of stock options to
consultants and directors....
Issuance of common stock in
connection with exercise of
stock options................ 9,333 93
Issuance of stock options in
connection with business
transactions.................
Officer loan receivable.......
Issuance of options to NBC....
Net loss......................
--------- -------
Balance at December 31,
1998......................... 2,113,385 $21,133
--------- -------
--------- -------
<CAPTION>
UNEARNED
ADDITIONAL STOCKHOLDERS COMPENSATION
PAID IN NOTES AND DEFERRED ACCUMULATED
CAPITAL RECEIVABLE ADVERTISING COST DEFICIT TOTAL
----------- ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996.... $ 997,037 $ (1,637,571) $ (629,201)
Issuance of warrants in
connection with interest on
convertible notes............ 30,101 30,101
Issuance of common stock in
connection with
acquisition.................. 499,333 500,000
Issuance of Series B and
Series B-1 convertible
preferred stock.............. 11,941,976 11,944,365
Issuance of stock options to
consultants and directors.... 62,007 62,007
Issuance of warrants to AOL
for channel services......... 1,034,838 1,034,838
Net loss...................... (9,682,682) (9,682,682)
----------- --------- ------------ ------------ ------------
Balance at December 31,
1996......................... 14,565,292 (11,320,253) 3,259,428
Issuance of common stock in
connection with exercise of
stock options................ 99,667 100,000
Notes receivable due from
stockholders in connection
with exercise of options..... $ (65,000) (65,000)
Issuance of Series C
convertible preferred
stock........................ 24,823,398 24,829,995
Issuance of warrants in
connection with interest on
convertible notes............ 334,339 334,339
Issuance of common stock and
options in connection with
business acquisitions........ 3,292,558 3,298,922
Issuance of stock options to
consultants and directors.... 65,395 65,395
Net loss...................... (21,300,960) (21,300,960)
----------- --------- ------------ ------------ ------------
Balance at December 31,
1997......................... 43,180,649 (65,000) (32,621,213) 10,522,119
Issuance of common stock for
cash......................... 1,663,823 1,666,666
Issuance of Series D
convertible preferred
stock........................ 31,481,978 31,488,478
Issuance of Series E
convertible preferred
stock........................ 32,089,088 32,094,953
Issuance of stock options to
consultants and directors.... 146,994 $ (68,845) 78,149
Issuance of common stock in
connection with exercise of
stock options................ 47,507 47,600
Issuance of stock options in
connection with business
transactions................. 277,799 277,799
Officer loan receivable....... (500,000) (500,000)
Issuance of options to NBC.... 3,960,667 (3,960,667)
Net loss...................... (43,653,682) (43,653,682)
----------- --------- ------------ ------------ ------------
Balance at December 31,
1998......................... $112,848,505 $(565,000) $ (4,029,512) $(76,274,895) $(32,022,082)
----------- --------- ------------ ------------ ------------
----------- --------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $(9,682,682) $(21,300,960) $(43,653,682)
Adjustments to reconcile net loss to net cash used in operating
activities:
Expense recognized in connection with issuance of warrants and
stock options.................................................... 92,108 1,434,572 255,954
Depreciation and amortization...................................... 108,956 2,886,256 5,683,006
Bad debt expense................................................... -- 746,589 855,000
Loss on sale of Web site........................................... -- -- 503,961
Minority interest.................................................. -- -- (586,599)
Changes in operating assets and liabilities:
Accounts receivable.............................................. (528,968) (2,410,489) (1,878,637)
Other current assets............................................. (71,787) (194,781) (360,580)
Accounts payable and accrued expenses............................ 1,034,070 2,609,437 5,144,391
Deferred revenue................................................. 294,998 709,201 1,905,541
Other liabilities................................................ 64,236 268,295 (169,672)
----------- ------------ ------------
Net cash used in operating activities.......................... (8,689,069) (15,251,880) (32,301,317)
----------- ------------ ------------
Cash flows from investing activities:
Purchase of fixed assets............................................. (665,148) (4,001,052) (5,315,516)
Acquisitions of Web sites............................................ -- (2,865,000) (1,040,000)
Proceeds from sale of Web sites...................................... -- -- 600,000
----------- ------------ ------------
Net cash used in investing activities.......................... (665,148) (6,866,052) (5,755,516)
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from convertible notes payable.............................. 1,800,000 3,775,000 --
Proceeds from issuance of common stock............................... -- 37,500 1,714,266
Proceeds from issuance of convertible preferred stock, net........... 9,494,365 21,054,995 63,583,431
Principal payments on capital leases................................. -- (516,621) (250,716)
Stockholder note receivable.......................................... -- -- (500,000)
----------- ------------ ------------
Net cash provided by financing activities...................... 11,294,365 24,350,874 64,546,981
----------- ------------ ------------
Net increase in cash for the period.................................... 1,940,148 2,232,942 26,490,148
Cash and cash equivalents, beginning of period......................... 161,631 2,101,779 4,334,721
----------- ------------ ------------
Cash and cash equivalents, end of period............................... $ 2,101,779 $ 4,334,721 $ 30,824,869
----------- ------------ ------------
----------- ------------ ------------
Cash paid during the period for interest............................... $ -- $ 66,223 $ 37,392
----------- ------------ ------------
----------- ------------ ------------
Supplemental disclosure of non-cash investing and financing activities:
During 1996 and 1997, certain convertible notes were converted into preferred stock (see Note 8).
During December 1996, iVillage acquired ParentsPlace.com in exchange for the issuance of common stock (see
Note 5).
During 1997, iVillage entered in capital leases for computer equipment totaling $1,015,460.
During 1997, iVillage acquired several Web site assets through the issuance of stock (see Note 5).
During 1998, iVillage recorded a liability of $1,040,000 in connection with a contingent payment to be provided
to the prior owners of Health ResponseAbility Systems, Inc. (see Note 5).
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
iVillage Inc. was incorporated in the State of Delaware on June 8, 1995 and
commenced operations on July 1, 1995. iVillage Inc. and its subsidiaries
("iVillage" or the "Company") is engaged in the development of programming
material for distribution through online service providers and the Internet and
is involved in the sale of products through its Web sites. The Company has
sustained net losses and negative cash flows from operations since its
inception. The Company's ability to meet its obligations in the ordinary course
of business is dependent upon its ability to establish profitable operations and
raise additional financing through public or private equity financings,
collaborative or other arrangements with corporate sources, or other sources of
financing to fund operations. During 1998, the Company has received additional
financing of approximately $65.3 million through the issuance of common stock
and Series D and Series E convertible preferred stock. Management believes that
its current funds will be sufficient to enable the Company to meet its planned
expenditures through at least December 31, 1999. If anticipated operating
results are not achieved, management has the intent and believes it has the
ability to delay or reduce expenditures so as not to require additional
financial resources, if such resources were not available on terms acceptable to
the Company.
The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. These
risks include the failure to develop and extend the Company's online service
brands, the rejection of the Company's services by Web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online services, as well as other risks and uncertainties. In the
event that the Company does not successfully implement its business plan,
certain assets may not be recoverable.
2. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany balances and transactions have been
eliminated.
REVENUE RECOGNITION
To date, the Company's revenues have been derived primarily from the sale
of sponsorship and advertising contracts and commerce revenues.
Sponsorship and Advertising
Sponsorship revenues are derived principally from contracts ranging from
one to three years in which the Company commits to provide sponsors promotional
opportunities in addition to traditional banner advertising. Typically,
sponsorship agreements provide for the delivery of impressions (on-line
advertisements displayed to a user) on the Company's Web sites, exclusive
relationships and the design and development of customized sites designed to
enhance the promotional objective of the sponsor. The portion of sponsorship
revenues related to the delivery of impressions are recognized ratably in the
period in which the advertisement is displayed, provided that none of the
Company's significant obligations remain, at the lesser of the ratio of
impressions delivered over total guaranteed impressions or the straight line
basis over the term of the contract. The portion of sponsorship revenues related
to the up-front customized design work, as specified in the contract, is
recognized in the period in which the design work is performed, typically within
the first three months of the contract term.
Advertising revenues are derived principally from short-term advertising
contracts in which the Company typically guarantees a minimum number of
impressions or pages to be delivered to users over a specified period of time
for a fixed fee. Advertising revenues are recognized ratably in the period in
which the advertisement is displayed, provided that no significant Company
obligations remain, at the lesser of the ratio of impressions delivered over
total guaranteed impressions or the straight line basis over the term of the
contract. To the extent that minimum guaranteed impressions are not met, the
F-7
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company defers recognition of the corresponding revenues until the guaranteed
impressions are achieved. Sponsorship and advertising revenues were
approximately 74%, 93% and 80% of total revenues for the years ended
December 31, 1996, 1997 and 1998, respectively.
Sponsorship and advertising revenues include barter revenues, which is the
exchange by the Company of advertising space on the Company's Web sites for
reciprocal advertising space or traffic on other Web sites. Revenues from these
barter transactions are recorded as advertising revenues at the estimated fair
value of the advertisements delivered, unless the fair value of the goods and
services received is more objectively determinable, and are recognized when the
advertisements are run on the Company's Web sites. Barter expenses are
recognized at the value of advertisements received when the Company's
advertisements are run on the reciprocal Web sites, which typically occurs in
the same period as when the revenue is recognized, and are included as part of
sales and marketing expenses. Barter revenues represented 1%, 10% and 20% of
total revenues for the years ended December 31, 1996, 1997 and 1998,
respectively.
Usage revenues received from America Online, Inc. ("AOL"), which totaled
approximately $187,000 and $390,000 for the years ended December 31, 1996 and
1997, are derived from AOL customers visiting the Company's site on the AOL
online service and are recognized as they are earned (based upon visitations to
the site). As discussed in Note 4, the Company signed a new agreement with AOL
during 1997 which eliminated future usage revenues.
In 1996, no one advertiser accounted for greater than 10% of total
revenues. In 1997, revenues from the Company's five largest advertisers
accounted for approximately 26% of total revenues, however, no one advertiser
accounted for greater than 10% of total revenues. In 1998, revenues from the
Company's five largest advertisers accounted for approximately 17% of total
revenues, however, no one advertiser accounted for greater than 10% of total
revenues. At December 31, 1996, four customers individually represented greater
than 10% of the net accounts receivable balance. At December 31, 1997, one
customer accounted for approximately 31% of the net accounts receivable balance.
At December 31, 1998, one customer accounted for 11% of the net accounts
receivable balance.
Commerce
As discussed in Note 5, in April 1998, the Company acquired a majority
interest in a subsidiary, iBaby, an on-line distributor of children's products.
The Company recognizes revenue from product sales, net of any discounts, when
products are shipped to customers and the collection of the receivable is
reasonably assured. Outbound shipping and handling charges billed to customers
are included in sales. The Company provides an allowance for sales returns,
which have not been significant, based on iBaby's historical experience. Total
net revenues of iBaby were approximately $2.6 million for the period April 1998
(date of acquisition) through December 31, 1998.
FIXED ASSETS
Depreciation of equipment, furniture and fixtures, and purchased computer
software is provided for by the straight-line method over their estimated useful
lives ranging from three to five years. Amortization of leasehold improvements
is provided for over the lesser of the term of the related lease or the
estimated useful life of the improvement. The cost of additions and betterments
is capitalized, and repairs and maintenance costs are charged to operations in
the periods incurred.
GOODWILL AND INTANGIBLE ASSETS
Goodwill and intangible assets consist of trademarks and the excess of
purchase price paid over identified intangible and tangible net assets of
acquired companies. Goodwill and intangible assets are amortized using the
straight-line method over the period of expected benefit, generally between
three and five years. The Company assesses the recoverability of its goodwill
and intangible assets by determining whether the amortization of the unamortized
balance over its remaining life can be recovered through forecasted cash flows.
If undiscounted forecasted cash flows indicate that the
F-8
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
unamortized amounts will not be recovered, an adjustment will be made to reduce
the net amounts to an amount consistent with forecasted future cash flows
discounted at the Company's incremental borrowing rate. Cash flow forecasts are
based on trends of historical performance and management's estimate of future
performance, giving consideration to existing and anticipated competitive and
economic conditions. Amortization expense for goodwill and intangible assets for
the years ended December 31, 1997 and 1998 was approximately $1,100,000 and
$2,996,000, respectively.
INCOME TAXES
The Company recognizes deferred taxes by the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income taxes are recognized for differences between the financial statement and
tax basis of assets and liabilities at enacted statutory tax rates in effect for
the years in which the differences are expected to reverse. The effect on
deferred taxes of a change in tax rates is recognized in income in the period
that includes the enactment date. In addition, valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include money market accounts and all highly
liquid investments purchased with original maturities of three months or less.
The Company maintains its cash and cash equivalents in highly rated financial
institutions.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable and accrued
liabilities, approximate fair value because of their short maturities. The
carrying amount of the Company's capital lease and other equipment financing
obligations approximates the fair value of such instruments based upon
management's best estimate of interest rates that would be available to the
Company for similar debt obligations at December 31, 1998.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Significant
estimates made by the Company include the useful lives of fixed assets and the
recoverability of fixed assets, capitalized software, goodwill and deferred tax
assets.
NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
No. 128"). SFAS No. 128 replaced primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Basic earnings per share is computed using the
weighted-average number of common shares outstanding during the period. Diluted
earnings per share is computed using the weighted-average number of common and
common stock equivalent shares outstanding during the period. Common stock
equivalent shares are excluded from the computation if their effect is
antidilutive. The pro forma net loss per share is computed by dividing the net
loss by the sum of the weighted average number of shares of common stock
outstanding and the shares resulting from the assumed conversion of all
outstanding shares of Convertible Preferred Stock and the issuance of shares to
holders of Series B Convertible Preferred Stock resulting from anti-dilution
protection.
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). This statement requires companies to classify items of
other comprehensive income by their nature in the financial statements and
display the accumulated balance of other comprehensive income
F-9
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 130 is effective for
financial statements issued for fiscal years beginning after December 15, 1997.
The Company adopted SFAS No. 130 in the first quarter of 1998. The Company has
had no other comprehensive income items to report.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with the current
year's presentation.
PRO FORMA INFORMATION (UNAUDITED)
The pro forma balance sheet as of December 31, 1998 reflects the
issuance/conversion of the following equity securities into an aggregate of
14,785,205 shares of common stock:
i. 1,000,000 shares of Series A Convertible Preferred Stock;
ii. 4,777,746 shares of Series B and B-1 Convertible Preferred Stock;
iii. 13,193,445 shares of Series C Convertible Preferred Stock;
iv. 13,000,000 shares of Series D Convertible Preferred Stock;
v. 217,825 shares of common stock to holders of Series B and B-1
Convertible Preferred Stock resulting from anti-dilution protection;
and
vi. 11,730,948 shares of Series E Convertible Preferred Stock.
Excludes (a) such number of shares that may be issuable in connection with
the acquisition of the minority interest in iBaby and (b) 4,889,030 shares of
Series E Convertible Preferred Stock issuable to National Broadcasting Company,
Inc. ("NBC") over the next three years pursuant to the Company's agreement with
NBC, plus an option granted to NBC to purchase up to 1,783,882 additional shares
of Series E Convertible Preferred Stock and (c) 802,125 shares issuable in
connection with the acquisition of KnowledgeWeb, Inc. d/b/a/Astrology.Net and
181,208 options to purchase shares issuable in conjunction with employment
agreements with certain stockholders and employees of KnowledgeWeb, Inc.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
is effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software developed
or obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The Company does not expect the adoption
of this standard to have a material effect on the Company's capitalization
policy.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5, which is effective for
fiscal years beginning after December 15, 1998, provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start up activities and organization costs to be expensed as incurred. As the
Company has expensed these costs historically, the adoption of this standard is
not expected to have a significant impact on the Company's results of
operations, financial position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS No. 133"), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company does not expect the adoption of
this statement to have a significant impact on the Company's results of
operations, financial position or cash flows.
F-10
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. FIXED ASSETS:
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Computer equipment..................................................... $ 2,579,083 $ 6,949,815
Capitalized software................................................... 2,295,138 2,655,838
Furniture and fixtures................................................. 283,024 1,165,283
Leasehold improvements................................................. 462,262 1,113,386
-------------- --------------
5,619,507 11,884,322
Less, accumulated depreciation and amortization...................... (1,816,684) (4,503,956)
-------------- --------------
$ 3,802,823 $ 7,380,366
-------------- --------------
-------------- --------------
</TABLE>
Depreciation and amortization of fixed assets was approximately $109,000,
$1,780,000 and $2,687,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
4. RELATED-PARTY TRANSACTIONS:
AOL
In September 1995, the Company entered into an information provider
agreement with AOL, a holder of different classes of iVillage stock, whereby AOL
had agreed to carry the Company's programming material on the AOL service for a
period of one year. As a result of this agreement, AOL received a percentage, as
defined, of the Company's revenues and paid the Company a usage fee based upon
hours of viewership of the iVillage site on the AOL network.
In May 1996, the Company entered into an information provider agreement
with AOL whereby AOL agreed to carry up to four Company channels for a period of
two years. In return, the Company issued to AOL 266,666 warrants (on a
post-split basis) convertible into Series B Convertible Preferred Stock at an
exercise price of $7.50 per warrant. In accordance with Statement of Financial
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
the Company valued the warrants issued to AOL, using the Black-Scholes option
pricing model, at $3.87 per share. The following assumptions were used in the
option pricing model: stock price of $7.50, exercise price of $7.50, option term
of 5 years, risk free rate of interest of 6.5%, 50% volatility and a dividend
yield of 0%. The cost of the warrants were to be expensed over the life of each
channel, however, the agreement was canceled in 1997; as a result, the Company
expensed the unamortized value of these warrants, $1,034,838, in 1997.
In July 1997, the Company entered into an interactive services agreement
with AOL (the "AOL Agreement"), whereby the Company received anchor tenant
distribution within the AOL service. This agreement superseded any prior
agreements between the Company and AOL. The AOL Agreement, which was due to
expire on February 28, 1999, provided both parties with the right to extend the
agreement. In consideration for AOL carrying certain channels of the Company,
the Company receiving guaranteed impressions and other services, the Company was
obligated to pay AOL monthly payments of approximately $229,000 until
September 1, 1998 and approximately $201,000 thereafter until February 28, 1999,
make certain additional payments based on revenues and provide $2,334,000 of in-
kind commitments to AOL which primarily consisted of the mentioning of "AOL
Keyword: iVillage" within iVillage advertisements and other promotions. These
commitments were not valued as part of the obligation to AOL as no incremental
costs were incurred and fair value could not be reasonably determined. At
December 31, 1997, the Company owed AOL approximately $947,000 in connection
with the AOL Agreement and other expenses.
In January 1998, iVillage entered into a shopping channel promotional
agreement with AOL (the "Shopping Channel Agreement"), whereby AOL agreed to
promote iVillage and its services on the AOL shopping channel and provide access
to iVillage's online sites. The Shopping Channel Agreement provided for monthly
installments of $10,417 paid to AOL through December 31, 1998.
On December 31, 1998, the Company entered into an interactive services
agreement with AOL (the "1998 AOL Agreement"), which supersedes the AOL
Agreement. The 1998 AOL Agreement
F-11
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expires on December 31, 2000 and allows both parties to extend the term of the
agreement for an additional year. The 1998 AOL Agreement provides for the
Company to receive anchor tenant distribution on certain AOL channels,
guaranteed impressions, and other services. In consideration for such services
the Company is obligated to (i) pay AOL minimum quarterly payments of
approximately $921,000 until March 31, 1999, approximately $611,000 from
April 1, 1999 through December 31, 1999 and approximately $807,000 from
January 1, 2000 through December 31, 2000, and (ii) provide up to $2 million of
advertising to AOL, as defined in the 1998 AOL Agreement. At December 31, 1998
no amounts were owed to AOL in connection with the 1998 AOL Agreement, however,
the Company recorded a prepaid expense of approximately $201,000 as a result of
an advance payment on the new agreement.
The Company estimates that a significant portion of its traffic is derived
from AOL and if the financial condition and operations of AOL were to
deteriorate significantly, or if the traffic to the Company's site generated by
AOL were to substantially decrease, the Company's advertising revenues could be
adversely affected.
OTHER RELATED PARTIES
In July 1997, iVillage entered into a one-year agreement with Tenet
Healthcare Corporation ("Tenet"), a stockholder, whereby Tenet was a sponsor of
one of iVillage's channels and developed content for use on the channel in
exchange for a fee paid in quarterly installments. For the year ended
December 31, 1998, this agreement generated revenues of approximately $247,000.
As of December 31, 1998, the Company was owed approximately $75,000 from this
stockholder.
During 1997 and 1998, the Company had sponsorship and advertising
agreements with Intel Corp., a stockholder, which generated revenues of
approximately $19,000 and $130,000, respectively. As of December 31, 1997 and
1998, the Company was owed approximately $16,000 and $120,000, respectively,
from this stockholder.
In November 1998, iVillage entered into a one-year content distribution
agreement with Cox Interactive Media ("Cox"), a stockholder, whereby iVillage
agreed to provide content for Cox's Web sites in return for displaying the
iVillage logo on the Cox Web sites and establishing links on the Cox Web sites
to iVillage's network.
OFFICER LOAN RECEIVABLE
In June 1998, the Company accepted a non-recourse promissory note in the
principal amount of $500,000 (the "Note") from its chief executive officer
("CEO"). The Note is collateralized by 166,666 shares of the Company's common
stock which is held by the Company. Interest is payable annually on December 31
of each year, commencing December 31, 1998, at the rate of 5.58%. The
outstanding principal balance on the Note is payable on June 5, 2001. As of
December 31, 1998, the CEO has borrowed $500,000 under the note, which is
recorded as a stockholder note receivable and classified as a reduction of
equity.
5. BUSINESS ACQUISITIONS AND DISPOSITIONS:
PARENTSPLACE.COM
On December 9, 1996, the Company acquired all of the outstanding stock of
ParentsPlace.com, an Internet content provider, in exchange for 66,666 shares of
the Company's common stock. The cost of the acquisition was allocated to the
assets and liabilities assumed based upon their estimated fair values as
follows:
<TABLE>
<S> <C>
Working capital.................................................................. $ (77,323)
Equipment........................................................................ 19,726
Goodwill......................................................................... 557,597
-----------
$ 500,000
-----------
-----------
</TABLE>
F-12
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
HRS
In May 1997, the Company completed the acquisition of Health
ResponseAbility Systems, Inc. ("HRS"), an Internet content provider, in exchange
for $2,600,000 in cash, 433,400 shares of the Company's common stock valued at
$2,210,340 or $5.10 per share, and additional cash amounts contingent on future
performance levels of HRS and the Company. In addition, the Company issued to
AOL 203,000 shares of common stock in exchange for the release of all equity
rights in HRS held by AOL valued at $1,035,300.
The cost of the acquisition was allocated to the assets acquired and
liabilities assumed based upon their estimated fair values as follows:
<TABLE>
<S> <C>
Working capital................................................................ $ (159,991)
Equipment...................................................................... 50,300
Goodwill....................................................................... 5,955,331
-------------
$ 5,845,640
-------------
-------------
</TABLE>
In January 1998, the Company agreed to pay $1,560,000 to the prior owners
of HRS in a final settlement of the cash amounts contingent upon future
performance levels, as stipulated in the agreement for the acquisition of HRS.
This amount was recorded as additional goodwill and is being amortized over the
remaining period of expected benefit.
The following unaudited pro forma summary presents consolidated results of
operations for the Company as if the acquisition of HRS had been consummated on
January 1, 1996. The acquisitions of ParentsPlace.com and StudentCenter would
not have had a significant impact on the pro forma information. The pro forma
information does not necessarily reflect the actual results that would have been
achieved, nor is it necessarily indicative of future consolidated results of the
Company.
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
Revenues............................................................. $ 1,674,226 $ 6,381,437
Net loss............................................................. $ (12,092,617) $ (22,910,945)
</TABLE>
STUDENTCENTER
In September 1997, the Company acquired substantially all of the assets of
StudentCenter LLC ("StudentCenter"), an Internet content provider, for $125,000
and the issuance of options to purchase 41,666 shares of common stock of the
Company at $5.10 per share. These options were valued at approximately $53,000
using the Black-Scholes option pricing model. The following assumptions were
used in the option pricing model: stock price of $5.10, exercise price of $7.50,
term of 3 years, risk free rate of interest of 6%, 50% volatility and a dividend
yield of 0%. In addition, the Company was required to make revenue-based and
other bonus payments, of which $30,000 was recorded as of December 31, 1997,
based on the amount of StudentCenter revenues, page views and other criteria.
The $208,000 purchase price was allocated to goodwill and intangible assets and
is being amortized over three years.
In May 1998, the Company sold the assets of StudentCenter as part of the
sale of About Work.
ABOUT WORK
In May 1998, the Company sold About Work, one of the Company's channels, as
well as the assets of StudentCenter, to TMP Worldwide Inc. ("TMP") in exchange
for net proceeds of $600,000. In connection with the sale of About Work, the
Company paid the former owners of StudentCenter $520,000 and issued options to
purchase 33,333 shares at $5.10 per share as settlement of all revenue-based and
other bonus payments. The options were valued at approximately $100,000 using
the Black-Scholes option pricing model using the following assumptions: stock
price of $6.00, exercise price of $6.00, term of 5 years, risk free rate of
interest of 5.44%, 50% volatility and a dividend yield of 0%. In addition, the
Company accrued a cost of $340,000 in connection with AOL carriage fees to be
paid on behalf of TMP for About Work. The Company recorded a loss of
approximately $504,000 on this sale due to the bonus payment, the options issued
to StudentCenter, the write off of approximately $195,000 of remaining goodwill
and the accrual for AOL carriage fees.
F-13
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
An additional $575,000 was received in exchange for production, sponsorship
and consulting services provided to TMP during 1998. The agreement also calls
for a $600,000 reimbursement payment to be made to the Company for maintaining
the About Work tenancy on AOL for a one year period beginning May 1, 1999. In
the event that the About Work site is not carried on AOL after April 1999
through iVillage's distribution agreement, this reimbursement payment will not
be made.
IBABY
In April 1998, the Company entered into a joint venture agreement (the
"iBaby Agreement") with Ourbaby, LLC, d/b/a Kids Warehouse, a California limited
liability company, to form iBaby, Inc., a Delaware corporation ("iBaby"). The
Company has purchased 1,000,000 shares of iBaby (of the total 1,666,666 shares
outstanding) for $1,350,000 and for the delivery of certain promotional rights,
including impressions on the iVillage web site. In connection with the
acquisition, the Company recorded approximately $500,000 of goodwill to be
amortized over a period of three years. The Company's equity ownership in iBaby
may be altered due to various provisions included in the joint venture agreement
including: (i) conversion of any convertible notes issued in connection with any
bridge loan financing provided to iBaby by the Company, (ii) the issuance of
iBaby shares upon exercise of stock options and grants of restricted stock,
(iii) the Company's failure to meet certain promotional obligations or (iv) the
occurrence of an initial public offering of the Company's stock or a merger,
consolidation or sale transaction ("call event" or "put event").
Since the formation of iBaby in April 1998, the accounts of iBaby have been
consolidated into the Company's financial statements, as the Company holds a
majority interest and has control of iBaby.
In connection with the formation of iBaby, iBaby entered into an inventory
and services agreement with Kids Warehouse, the minority interest holder of
iBaby. The agreement, dated April 8, 1998, has a one-year term and provides for
Kids Warehouse to make available to iBaby at least $2,000,000 of inventory at
wholesale value, as defined, for iBaby to sell to customers. In addition, Kids
Warehouse is to stock and provide storage of iBaby inventory. In consideration
for such services, iBaby is to pay Kids Warehouse an inventory fee, as defined,
based on the cost of items sold by iBaby. This agreement is terminable at the
sole option of iBaby.
In connection with the joint venture agreement, the Company also entered
into a rights agreement with the minority stockholders which provides for
various rights including:
o The right and option by the Company, exercisable upon the occurrence of a
call or put event, to purchase all of the shares held by the minority
stockholders ("call option"); and
o The right and option by the minority stockholders, exercisable upon the
occurrence of a put event, to require iVillage to purchase the shares
held by the minority stockholders ("put option").
In December 1998, the board of directors of iVillage opted to exercise the
call option to acquire the minority interest in iBaby.
6. STOCK OPTION PLANS:
1995 Amended and Restated Employee Stock Option Plan
In 1995, iVillage's Board of Directors and stockholders adopted the
Company's 1995 Amended and Restated Employee Stock Option Plan (the "ESOP"),
which was amended in May 1997. The ESOP provides for the granting, at the
discretion of the Stock Option Committee of the board of directors (the "SOC"),
of: (i) options that are intended to qualify as incentive stock options, within
the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), as
amended, to employees and (ii) options not intended to so qualify to employees,
officers, consultants and directors. The total number of shares of common stock
for which options may be granted under the ESOP is 1,798,548.
The exercise price of all stock options granted under the ESOP is
determined by the SOC at the time of grant. The maximum term of each option
granted under the ESOP is 10 years from the date of grant. Options shall become
exercisable at such times and in such installments as the SOC shall provide in
the terms of each individual option.
The exercise price of all of the options under the ESOP which range from
$3.00-$9.45, were determined based upon the fair market value of iVillage's
common stock on the date of grant. Generally, the options vest equally over a
period of four years and expire 5-10 years from the date of grant.
F-14
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1998, there were no shares available for future grants
under the ESOP.
Changes in options outstanding under the ESOP, the fair value per option
and weighted average exercise price of stock option activity for the years ended
December 31, 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
FAIR VALUE EXERCISE PRICE
OPTIONS PER OPTION PER SHARE
--------- ---------- --------------
<S> <C> <C> <C>
Outstanding, January 1, 1996.................................. 108,666 $ .78 $ 3.15
Granted....................................................... 254,048 2.10 4.56
--------- ------ ------
Outstanding, December 31, 1996................................ 362,714 1.71 3.96
Granted....................................................... 687,833 1.41 5.10
Exercised..................................................... (33,333) 1.05 3.00
Canceled...................................................... (215,750) 1.62 3.84
--------- ------ ------
Outstanding, December 31, 1997................................ 801,464 1.50 5.04
Granted....................................................... 1,256,750 1.92 6.90
Exercised..................................................... (9,333) 2.49 5.10
Canceled...................................................... (250,333) 1.38 5.25
--------- ------ ------
Outstanding, December 31, 1998................................ 1,798,548 $ 1.80 $ 6.30
--------- ------ ------
--------- ------ ------
Options exercisable at December 31, 1996...................... 35,500 $ 1.08 $ 3.63
Options exercisable at December 31, 1997...................... 103,333 $ 1.71 $ 4.92
Options exercisable at December 31, 1998...................... 287,057 $ 1.77 $ 5.28
</TABLE>
At December 31, 1998, the weighted average remaining contractual life of
the options outstanding, under the ESOP, was approximately 6.3 years.
1997 AMENDED AND RESTATED ACQUISITION STOCK OPTION PLAN
In May 1997, the Company's Board of Directors and stockholders adopted the
Company's 1997 Amended and Restated Acquisition Stock Option Plan (the "ASOP").
The ASOP provides for the granting, at the discretion of the SOC of:
(i) options that are intended to qualify as incentive stock options, within the
meaning of Section 422 of the Code, as amended, to directors who are employees
of the Company or any of its subsidiaries, or as part of one or more of such
acquisitions and (ii) options not intended to so qualify to employees, officers,
consultants and directors of the Company, or as part of one or more of such
acquisitions. The total number of shares of common stock for which options may
be granted under the ASOP is 360,726.
The exercise price of all stock options granted under the ASOP is
determined by the SOC at the time of grant. The maximum term of each option
granted under the ASOP is 10 years from the date of grant. Options shall become
exercisable at such times and in such installments as the SOC shall provide in
the terms of each individual option.
Generally, the options vest equally over a period of four years and expire
7-10 years from the date of grant. The exercise price of all of the options
under the ASOP is $5.10, which was determined based upon the fair market value
of the Company's common stock on the date of grant.
In September 1997, the SOC adjusted the exercise price of all outstanding
options of the ASOP from the original exercise price of $7.50 a share to $5.10 a
share, based on the then determined current fair market value of the Company's
common stock.
As of December 31, 1998, no shares were available for future grants under
the ASOP.
F-15
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Changes in options outstanding under the ASOP, the fair value per option
and weighted average exercise price of stock option activity for the years ended
December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
FAIR VALUE EXERCISE PRICE
OPTIONS PER OPTION PER SHARE
-------- ---------- --------------
<S> <C> <C> <C>
Outstanding, January 1, 1997................................... -- $ -- $ --
Granted........................................................ 393,393 1.44 5.10
-------- ------ ------
Outstanding, December 31, 1997................................. 393,393 1.44 5.10
Granted........................................................ 258,393 3.00 5.10
Canceled....................................................... (291,060) 1.35 5.10
-------- ------ ------
Outstanding, December 31, 1998................................. 360,726 $ 2.64 $ 5.10
-------- ------ ------
-------- ------ ------
Options exercisable at December 31, 1997....................... 10,833 $ 1.98 $ 5.10
Options exercisable at December 31, 1998....................... 305,226 $ 2.79 $ 5.10
</TABLE>
At December 31, 1998, the weighted average remaining contractual life of
the options outstanding, under the ASOP, was approximately 6.4 years.
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock option issuances. The Company has adopted the disclosure-only provisions
of SFAS No. 123. Had compensation cost for the Company's stock options issued at
the fair value of the Company's stock been determined based on the fair value of
the stock options at the grant date for awards in 1996, 1997 and 1998 consistent
with the provisions of SFAS No. 123, the Company's net loss would have been
adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1997 1998
-------------- --------------- ---------------
<S> <C> <C> <C>
Net loss as reported................................. $ (9,682,682) $ (21,300,960) $ (43,653,682)
Net loss pro forma................................... $ (9,767,127) $ (21,693,415) $ (44,213,487)
</TABLE>
The fair value of each option grant is estimated using the minimum value
method of the Black-Scholes option pricing model which assumes no volatility.
The weighted average assumptions used for grants made in 1996, 1997 and 1998 are
as follows:
<TABLE>
<CAPTION>
OPTIONS GRANTED DURING THE
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rate................................ 6.10% 6.22% 5.44%
Expected option life................................... 5 years 5 years 5 years
Dividend yield......................................... 0.0% 0.0% 0.0%
</TABLE>
In 1997, in connection with the exercise of options by former employees, the
Company accepted two promissory notes, with recourse, from the former employees
to cover the costs to exercise the options.
F-16
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
IBABY, INC. 1998 STOCK OPTION PLAN
In 1998, the Board of Directors and stockholders of iBaby adopted the
iBaby, Inc. 1998 Stock Option Plan ("iBaby SOP"). The iBaby SOP provides for the
granting, at the discretion of the iBaby Stock Option Committee ("iBaby SOC")
of: (i) options that are intended to qualify as incentive stock options, within
the meaning of the Code, to employees and (ii) options not intended to so
qualify to employees, officers, consultants and directors. The total number of
shares of iBaby common stock for which options may be granted under the iBaby
SOP is 294,118.
The exercise price of all stock options granted under the iBaby SOP is
determined by the iBaby SOC at the time of grant. The maximum term of each
option granted under the iBaby SOP is seven years from the date of grant.
Options shall become exercisable at such time and in such installments as the
iBaby SOC shall provide in the terms of each individual option.
Under the iBaby SOP, options to purchase 110,059 shares of iBaby common
stock were granted during the year ended December 31, 1998, with a weighted
average exercise price per share of $2.68 and a weighted average remaining
contractual life of 6.4 years. As of December 31, 1998, 184,059 shares remain
available for future grants.
7. COMMITMENTS AND CONTINGENCIES:
LEASES:
The Company leases office space, under non-cancelable operating leases
expiring at various dates through April 2001. The following is a schedule of
future minimum lease payments under non-cancelable operating leases as of
December 31, 1998:
<TABLE>
<CAPTION>
Year ending December 31: 1998
- --------------------------------------------------------------------------------- -----------
<S> <C>
1999............................................................................. $ 669,684
2000............................................................................. 279,540
2001............................................................................. 12,280
-----------
$ 961,504
-----------
-----------
</TABLE>
Rent expense was approximately $149,000, $486,000 and $714,000 for the
years ended December 31, 1996, 1997 and 1998, respectively.
At December 31, 1998, minimum future lease payments due under capital
leases for computer equipment are as follows:
<TABLE>
<CAPTION>
Year ending December 31: 1998
- --------------------------------------------------------------------------------- -----------
<S> <C>
1999............................................................................. $ 144,203
Less: amount representing interest............................................... 7,630
-----------
Net minimum lease payments....................................................... $ 136,573
-----------
-----------
</TABLE>
Accumulated amortization on assets accounted for as capital leases amounted
to approximately $301,000 and $553,000 as of December 31, 1997 and 1998,
respectively.
LITIGATION
The Company has been involved in litigation relating to claims arising out
of its operations in the normal course of business, including a claim by a
former employee. The Company does not believe that an adverse outcome of any of
these legal proceedings will have a material adverse effect on the Company's
results of operations.
F-17
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CONVERTIBLE NOTES
In August 1995, the Company entered into a promissory note agreement with
AOL whereby the Company received $500,000. This note was converted into shares
of Series A Convertible Preferred Stock ("Series A") in September 1995.
In September 1995, the Company entered into a promissory note agreement
with AOL whereby the Company received $650,000 in 1995 and an additional
$1,100,000 in 1996. In connection with this note, the Company issued warrants to
purchase 17,366 shares (on a post-split basis) of Series B Convertible Preferred
Stock ("Series B") at $7.50 a share which resulted in interest expense of $6,745
in 1995 and $30,101 in 1996.
In 1996, the Company entered into promissory note agreements with AOL and
certain other investors whereby the Company received $1,800,000 inclusive of the
$1,000,000 received from AOL as described above. These notes, as well as the
$650,000 discussed above that was received in 1995, were converted into 980,000
shares of Series B.
In 1997, the Company entered into promissory note agreements with AOL and
certain other investors whereby the Company received $3,775,000. In connection
with these notes, the Company issued warrants to purchase 111,771 shares of
common stock for $5.86 per share, which resulted in an interest charge of
$334,339 in 1997. The Company valued these options using the Black-Scholes
option pricing model at $3.00 per share. The following assumptions were used in
determing the value of the option: stock price of $5.86, exercise price of
$5.86, term of 5 years, risk free rate of interest 6%, 50% volatility and a
dividend yield of 0%. In 1997, these notes were converted into approximately
1.93 million shares of Series C Convertible Preferred Stock ("Series C").
9. CAPITAL STOCK
COMMON STOCK
At December 31, 1998, the authorized capital stock of the Company consists
of 65,000,000 shares of common stock, $0.01 par value per share and 25,000,000
shares of preferred stock, $0.0005 par value per share. The Board of Directors
(the "Board") of the Company has the authority to issue preferred stock in
series with rights and privileges determined by the Board. Upon formation of the
Company, 1,083,335 shares of $0.01 par value common stock were issued to the
founders.
In February 1998, the Company issued 284,317 shares of common stock in
exchange for net proceeds of approximately $1,700,000.
CONVERTIBLE PREFERRED STOCK
In September 1995, the Company issued 1,000,000 shares of Series A
Convertible Preferred Stock ("Series A"), through a private placement, in
consideration for net proceeds of approximately $1,000,000, inclusive of the
conversion of a $500,000 convertible note payable.
In May 1996, the Company issued 4,777,746 shares of Series B and Series B-1
Convertible Preferred Stock ("Series B-1") through a private placement in
exchange for net proceeds of approximately $11,944,000, inclusive of the
conversion of convertible notes payable in the amount of $2,450,000. The holder
of Series B-1 has the same rights as the Series B holders, however, the Series
B-1 holder does not have voting rights.
In May 1997, the Company issued 11,003,067 shares of Series C Convertible
Preferred Stock ("Series C") through a private placement in exchange for net
proceeds of approximately $20,550,000, inclusive of the conversion of
convertible notes payable in the amount of approximately $2,975,000. In
connection with the issuance of Series C, the Company will issue additional
shares of common stock to
F-18
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series B holders that had anti-dilution provisions, upon the conversion to
common stock. The Company also issued 30,194 warrants to purchase shares of
common stock at $.03 a share to the Company's placement agent in consideration
for services provided in connection with the private placement.
In December 1997, the Company issued an additional 2,190,378 shares of
Series C through a private placement in exchange for net proceeds of
approximately $4,280,000, inclusive of the conversion of an $800,000 convertible
note payable.
In February 1998, the Company issued 13,000,000 shares of Series D
Convertible Preferred Stock ("Series D") in exchange for net proceeds of
approximately $31,500,000.
In December 1998, the Company issued 11,730,948 shares of Series E
Convertible Preferred Stock ("Series E") through a private placement in exchange
for net proceeds of approximately $32,100,000. Holders of Series E have
participating preferred rights.
The holders of convertible preferred stock are entitled to receive
noncumulative dividends when and if declared by the Board. These dividends are
in preference to any declaration or payment of any dividend on the common stock
of the Company.
In the event of liquidation, the holders of convertible preferred stock
have a liquidation preference over the holders of common stock with holders of
Series C, D and E having preference to Series A and B holders. Such preference
is equal to the original cost of the respective class of convertible preferred
stock, plus any declared or unpaid dividends.
All classes of convertible preferred stock are convertible into common
stock at prices and at times, subject to the provisions set forth in the
Company's restated Certificate of Incorporation, on a one for one basis. In the
event of a public offering of the Company's shares with gross proceeds and an
offering price as defined, the convertible preferred stock will be automatically
converted into common stock on a one for one basis (on a pre-split basis). The
holders of Series B and B-1 shares will receive an additional 217,825 shares of
common stock as a result of the anti-dilution provisions contained in the Series
B and Series B-1 agreements. Convertible preferred stockholders maintain voting
rights equivalent to the number of shares of common stock on an as if converted
basis.
As discussed in Notes 4, 8 and above, as of December 31, 1998, the Company
has 425,998 warrants outstanding with a weighted average exercise price of $6.54
per share.
INITIAL PUBLIC OFFERING
In December 1998, the Board of Directors and stockholders of the Company,
authorized the Company's management to file a registration statement for an
initial public offering (the "IPO") of the Company's common stock.
10. ADVERTISING AND PROMOTIONAL AGREEMENTS:
NBC
On November 11, 1998, the Company entered into an agreement with NBC
pursuant to which NBC will promote the Company's Web site, iVillage.com, on
television primarily during prime time programs, as well as through its web
sites. The terms of the NBC agreement provide for the following:
i. NBC to provide the Company with the use of advertising spots having an
aggregate value of $3.5 million per annum over a three-year period. For
each $3.5 million of advertising spots, the Company will issue
1,228,070 shares of Series E (or 409,356 shares of the Company's common
stock after the IPO).
F-19
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ii. NBC will have the option, exercisable at its sole discretion, to
provide the Company with additional spots having an aggregate value of
$5 million for each of the three years. Upon exercise of NBC's option,
iVillage will issue shares of series E (or shares of iVillage's common
stock after the IPO), subject to anti-dilution protection, equal to
the aggregate value of additional spots divided by $4.15 in the first
year, $5.15 in the second year and $6.15 in the third year ($12.45,
$15.45 and $18.45 if converted to common stock).
iii. NBC may terminate the agreement in the event that a change of control
of iVillage, as defined in the agreement, occurs involving a
television broadcast network entity or its affiliate that directly
competes with NBC.
The Company will account for the NBC agreement in accordance with Emerging
Issues Task Force Abstract No. 96-18, "Accounting for Equity Instruments That
are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services."
In addition, iVillage has valued the option provided to NBC using the
Black-Scholes option pricing model. The $3,960,667 value has been recorded in
the equity section as deferred compensation, and will be adjusted at each
balance sheet date to market value. If and when NBC exercises their option by
delivering advertising, then any amounts previously deferred in the equity
section related to those shares will be reversed into the statement of
operations along with any additional amounts necessary to bring the total charge
up to the then current market value.
On February 22, 1999, the Company and NBC reached an agreement in principle
to amend, subject to execution of final documentation, the advertising and
promotional agreement with NBC. See Note 13--Subsequent Events.
SNAP
In November 1998, iVillage entered into a two-year agreement with Snap! LLC
("Snap") which provided for Snap assisting iVillage in promoting its network of
Web sites and related services. Under the agreement, Snap is to deliver
guaranteed impressions as well as certain exclusivity rights in connection with
limitations on the percentage of content that can be provided by iVillage's
competitors. In exchange for the impressions and exclusivity provided by Snap,
iVillage is required to make payments of: (i) $1 million in the first year and
$2.26 million in the second year, (ii) an amount equal to 20% of all gross
margin earned by iVillage from all sales made through the Company's iBaby Web
site arising from customers directed by Snap and (iii) a standard monthly fee
based on the daily average number of successful search results page on the Snap
Web site that is served by Snap in response to a search inquiry.
iVillage will record all of the payments required under the agreement as
sales and marketing expense and will be recognized ratably over the term of the
contract as services are provided.
AT&T
In October 1998, iVillage entered into a two-year agreement with AT&T under
which (subject to meeting certain quarterly performance measures) iVillage will
promote and market certain AT&T telecommunication services in exchange for
minimum payments, subject to adjustments based upon delivered impressions, as
defined in the agreement. In return, AT&T will display a text line for
iVillage.com on the AT&T WorldNet service and promote and market iVillage.com
through AT&T television, mass media marketing or other mass media.
F-20
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES:
The components of the net deferred tax asset as of December 31, 1997 and
1998 consists of the following:
<TABLE>
<CAPTION>
1997 1998
--------------- ---------------
<S> <C> <C>
Operating loss carryforward.......................................... $ 13,940,842 31,321,682
Depreciation and amortization........................................ (50,508) (166,554)
Bad debt allowance and reserves...................................... -- 674,864
Benefits related costs............................................... -- 230,701
--------------- ---------------
Net deferred tax asset................................... 13,890,334 32,060,693
Less, Valuation allowance............................................ (13,890,334) (32,060,693)
--------------- ---------------
Deferred tax asset....................................... $ -- --
--------------- ---------------
--------------- ---------------
</TABLE>
The difference between the Company's U.S. federal statutory rate of 35%, as
well as its state and local rate, net of a federal benefit, of 10%, when
compared to the effective rate is principally comprised of the valuation
allowance.
As of December 31, 1998, the Company has a net operating loss carryforward
for federal income tax purposes of approximately $69,990,000 which begin to
expire in 2010. The net deferred tax asset has been fully reserved due to the
uncertainty of the Company's ability to realize this asset in the future.
12. SEGMENT INFORMATION:
In June 1997, FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"), which established standards for reporting information about
operating segments in annual financial statements. The Company's business is
comprised of the development of programming material by iVillage for
distribution through online service providers and the Internet ("New Media") and
the sale of products by iBaby through its Web sites ("Commerce"). The Company's
management reviews corporate assets and overhead expenses combined with the New
Media segment. The summarized segment information, as of and for the year ended
December 31, 1998, is as follows:
<TABLE>
<CAPTION>
NEW MEDIA COMMERCE TOTAL
------------- ------------ -------------
<S> <C> <C> <C>
Revenues............................................ $ 12,450,620 $ 2,561,203 $ 15,011,823
Production, product and technology.................. 11,741,776 2,779,239 14,521,015
Sales and marketing................................. 28,176,407 346,467 28,522,874
General and administrative.......................... 9,546,082 1,066,352 10,612,434
Depreciation and amortization....................... 5,628,322 54,684 5,683,006
Loss from operations................................ (42,641,967) (1,685,539) (44,327,506)
Interest income, net................................ 570,704 20,482 591,186
Total assets........................................ 45,944,997 845,968 46,790,965
</TABLE>
Information for the years ended December 31, 1996 and 1997 has not been
provided since during those years the Company operated only in the New Media
segment.
13. SUBSEQUENT EVENTS (UNAUDITED):
Acquisition of Minority Interest of iBaby
On February 10, 1999, the Company entered into an agreement to purchase all
of the outstanding shares of iBaby held by the minority stockholders (the
"Minority Interest") for $10.8 million (the "Purchase Price") (the "iBaby
Purchase Agreement"). The Purchase Price is comprised of $8 million in
F-21
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
cash and common stock having an aggregate value of $2.8 million. The Company
paid $1.5 million on February 12, 1999, with the remaining $6.5 million being
payable within two business days of the closing of the IPO and receipt, by the
Company, of at least $6.5 million of IPO proceeds. The number of shares to be
issued will be dependent upon the IPO price per share, less the underwriters'
discount.
If an IPO does not occur, the iBaby Purchase Agreement also provides for
the right by the Company to purchase the Minority Interest for an aggregate
$9.3 million in cash until May 31, 1999 (the "Additional Purchase Period")
provided that (i) written notice is given by April 15, 1999 and a non-
refundable payment of $1 million is made to the minority stockholders (the
"Deposit") as a credit toward the remaining $9.3 million. In the event that the
Minority Interest is not purchased in accordance with the terms of the iBaby
Purchase Agreement, the Deposit will be forfeited by the Company and the terms
of the iBaby Agreement shall continue in full force except that the parties will
have 10 business days to agree to a fair value per share or select a mutually
acceptable investment bank to issue a valuation within 15 business days.
The iBaby Purchase Agreement also provides for certain other provisions,
the most significant of which include the extension of the management, and
inventory and services agreements until April 8, 2000 and certain piggyback
registration rights to the minority stockholders.
Acquisition of Astrology.Net
On February 18, 1999, the Company acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a/ Astrology.Net ("Astrology.Net"), an Internet content
provider, in exchange for 802,125 shares of iVillage's common stock and
$1 million in cash. The Astrology.Net Agreement also provides for employment,
non-compete and stock option agreements for the founding stockholders of
Astrology.Net.
The terms of the agreement are such that 326,331 of the shares of common
stock are issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be accelerated dependent on Astrology.Net
meeting revenue targets. In the event there is no acceleration of the release of
these shares by the end of the five-year term, all remaining shares in escrow
will be released to Astrology.Net's stockholders. In addition, all outstanding
options to purchase Astrology.Net common stock were converted into non-qualified
options to purchase an aggregate of 31,208 shares of iVillage common stock.
In addition to the shares issued, the Company has issued the founding
stockholders of Astrology.Net, who will continue as employees of Astrology.Net,
options to purchase 150,000 shares of iVillage common stock at an exercise price
equal to the IPO price. These options vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting certain revenue targets.
The Company also granted to the founding stockholders of Astrology.Net, subject
to its existing agreements with respect to registration rights, piggyback
registration rights in connection with the shares of the Company's common stock
to be issued pursuant to the agreement.
The acquisition will be accounted for as a purchase with an estimated
purchase price of approximately $11.8 million, based on a value of the Company's
common stock of $13.00 per share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net will be
recorded as goodwill and amortized over the period of expected benefit.
F-22
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reverse Stock Split
On February , 1999, the Board approved a one-for-three reverse common
stock split to be effective upon the completion of the IPO. The Board also
approved the adjustment of the common stock par value to $.01 per share. The
share information in the accompanying consolidated financial statements has been
retroactively restated to reflect the effect of this reverse stock split.
NBC
On February 22, 1999 the Company and NBC reached an agreement in principle
to amend, subject to execution of final documentation, the November 11, 1998
advertising and promotional agreement with NBC as follows:
i. The Company has agreed to purchase, for cash, $8.5 million of
advertising and promotional spots per annum, over the next three
years.
ii. Upon signing the amended agreement, the Company will issue, subject
to certain anti-dilution protection, 4,889,030 shares of Series E
Convertible Preferred Stock and grant an option to purchase 970,873
shares of Series E Convertible Preferred Stock at $5.15 per share
during 2000 and 813,008 shares of Series E Convertible Preferred
Stock at $6.15 per share during 2001 in exchange for a promissory
note in the approximate amount of $15.5 million at 5% interest per
annum. The principal amount of the note and interest is payable in
twelve equal installments of approximately $1.4 million, payable each
quarter beginning April 1, 1999.
iii. The Company has also agreed to pay $1,100,000 during 1999 for
prominent placement on the NBC.com Web site.
Under the revised agreement and in accordance with EITF D-60 "Accounting
for the Issuance of Convertible Preferred Stock and Debt Securities with a
Nondetachable Conversion Feature," the $5.7 million difference between the
purchase price of the Series E Convertible Preferred Stock and the fair market
value on the date of issuance will be accounted for as a deemed dividend and
amortized using the effective interest method from the date of issuance through
the date the securities are first convertible. The Company expects this to occur
in March 1999 with the effectiveness of its anticipated initial public offering.
In addition, the fair value of the option of approximately $3.3 million, will be
recorded in stockholders' equity as deferred advertising costs and amortized to
advertising expense - non cash over the three year advertising agreement. The
fair value of the option was determined using the Black-Scholes option pricing
model in accordance with SFAS No. 123.
F-23
<PAGE>
SCHEDULE II
IVILLAGE INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C
COLUMN B ---------------------- COLUMN E
---------- ADDITIONS ----------
BALANCE AT CHARGED TO CHARGED COLUMN D BALANCE AT
BEGINNING COSTS AND TO OTHER ---------- END
COLUMN A OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- --------------------------------------------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1996:
Provision for doubtful accounts............ $ -- $ -- $ -- $ -- $ --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the year ended December 31, 1997:
Provision for doubtful accounts............ $ -- $746,589 $100,000(1) $566,760(2) $279,829
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the year ended December 31, 1998:
Provision for doubtful accounts............ $279,829 $855,000 $125,000(2) $513,480 $746,349
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ------------------
(1) Doubtful accounts written off against revenue
(2) Doubtful accounts written off, net of cash recovered
F-24
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ACQUISITION OF MINORITY INTEREST OF IBABY, INC.
On February 10, 1999, iVillage Inc. entered into an agreement to purchase
all of the outstanding shares of iBaby, Inc. held by the minority stockholders
in exchange for $10.8 million. The purchase price is comprised of $8 million in
cash and common stock having an aggregate value of $2.8 million. iVillage paid
$1.5 million on February 12, 1999, with the remaining $6.5 million being payable
within two business days of the closing of iVillage's IPO and receipt by
iVillage, of at least $6.5 million of IPO proceeds. The number of shares to be
issued will be dependent upon the IPO price per share, less underwriters'
discount. If the IPO does not close, the iBaby purchase agreement also provides
for the right by iVillage to acquire the minority interest for an aggregate
$9.3 million cash until May 31, 1999 provided that certain conditions are met.
The acquisition of the minority interest of iBaby is to be accounted for as
purchase. As iVillage has held a majority interest and control of iBaby since
April 1998, the results of operations have already been reflected in iVillage's
consolidated financial statements.
ACQUISITION OF ASTROLOGY.NET
On February 18, 1999, the Company acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a/ Astrology.Net ("Astrology.Net"), an Internet content
provider, in exchange for 802,125 shares of the iVillage's common stock and
$1 million in cash. The Astrology.Net Agreement also provides for employment,
non-compete and stock option agreements for the founding stockholders of
Astrology.Net.
The terms of the agreement are such that 326,331 of the shares of common
stock are issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be accelerated dependent on Astrology.Net
meeting revenue targets. In the event there is no acceleration of the release of
these shares by the end of the five-year term, all remaining shares in escrow
will be released to Astrology.Net's stockholders. In addition, all outstanding
options to purchase Astrology.Net common stock were converted into non-qualified
options to purchase an aggregate of 31,208 shares of iVillage common stock.
In addition to the shares issued, the Company has issued the founding
stockholders of Astrology.Net who will continue as employees of Astrology.Net
options to purchase 150,000 shares of iVillage common stock at an exercise price
equal to the IPO price. These options vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting certain revenue targets,
however, they are contingent on continued employment with iVillage.
The acquisition will be accounted for as a purchase with an estimated
purchase price of approximately $11.8 million, based on a value of the Company's
common stock of $13.00 a share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net will be
recorded as goodwill and amortized over the period of expected benefit.
NBC AGREEMENT
On February 22, 1999, the Company and NBC reached an agreement in principle
to amend, subject to execution of final documentation, the November 11, 1998
advertising and promotion agreement with NBC which included, among other things,
the issuance of 4,889,030 shares of Series E Convertible Preferred Stock.
F-25
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of all of the events discussed above as if they
took place on December 31, 1998 for the unaudited pro forma condensed
consolidated balance sheet and January 1, 1998 for the unaudited pro forma
condensed consolidated statement of operations.
The unaudited pro forma condensed consolidated financial statements have
been included as required by the rules of the Securities and Exchange Commission
and are provided for informational purposes only. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
the results of operations or financial position that would have been obtained if
the transactions had been effected on the date indicated or which may be
obtained in the future.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in connection with the historical financial statements
of iVillage which are contained elsewhere in this prospectus.
F-26
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
IVILLAGE INC. PRO FORMA
AND SUBSIDIARIES ASTROLOGY.NET ADJUSTMENTS PRO FORMA
----------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 30,824,869 $ 103,852 $ (1,000,000) 1(a) $ 21,928,721
(8,000,000) 1(a)
Accounts receivable, net........... 3,147,561 113,855 -- 3,261,416
Prepaid expenses and other current
assets........................... 715,161 1,126 -- 716,287
------------- --------- ------------ -------------
Total current assets......... 34,687,591 218,833 (9,000,000) 25,906,424
Fixed assets, net.................... 7,380,366 65,057 -- 7,445,423
Other assets......................... 187,860 71,954 -- 259,814
Goodwill and intangible assets, net.. 4,535,148 5,429 11,778,676 1(b) 27,119,253
10,800,000 1(b)
------------- --------- ------------ -------------
Total assets................. $ 46,790,965 $ 361,273 $ 13,578,676 $ 60,730,914
------------- --------- ------------ -------------
------------- --------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued
expenses......................... $ 11,559,711 $ 150,173 $ -- $ 11,709,884
Capital leases payable............. 136,573 17,248 -- 153,821
Deferred revenue................... 2,909,740 -- -- 2,909,740
Due to stockholder................. -- 121,971 -- 121,971
Other current liabilities.......... 162,859 -- -- 162,859
------------- --------- ------------ -------------
Total current liabilities.... 14,768,883 289,392 -- 15,058,275
Capital leases payable, net of
current portion.................... -- 22,936 -- 22,936
------------- --------- ------------ -------------
Total liabilities............ 14,768,883 312,328 -- 15,081,211
------------- --------- ------------ -------------
------------- --------- ------------ -------------
Commitments and Contingencies
Stockholders' equity:
Series A Convertible Preferred
Stock............................ 500 177,700 (500) 1(e) --
(177,700) 1(c)
Series B and B-1 Convertible
Preferred Stock.................. 2,389 -- (2,389) 1(e) --
Series C Convertible Preferred
Stock............................ 6,597 -- (6,597) 1(e) --
Series D Convertible Preferred
Stock............................ 6,500 -- (6,500) 1(e) --
Series E Convertible Preferred
Stock............................ 5,865 -- (5,865) 1(e) --
Common Stock....................... 21,133 511 (511) 1(c) 195,458
8,021 1(d)
2,154 1(d)
147,853 1(e)
16,297 1(f)
Additional paid-in capital......... 112,848,505 103,626 (103,626) 1(c) 141,823,652
10,819,600 1(d)
2,797,846 1(d)
(126,002) 1(e)
15,483,703 1(f)
Accumulated deficit................ (76,274,895) (232,892) 232,892 1(c) (76,274,895)
Stockholders notes receivable...... (565,000) -- (15,500,000) 1(f) (16,065,000)
Unearned compensation and deferred
advertising...................... (4,029,512) -- -- (4,029,512)
------------- --------- ------------ -------------
Total stockholders' equity... 32,022,082 48,945 13,578,676 45,649,703
------------- --------- ------------ -------------
Total liabilities and
stockholders' equity...... $ 46,790,965 $ 361,273 $ 13,578,676 $ 60,730,914
------------- --------- ------------ -------------
------------- --------- ------------ -------------
</TABLE>
F-27
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
IVILLAGE INC. PRO FORMA
AND SUBSIDIARIES ASTROLOGY.NET ADJUSTMENTS PRO FORMA
---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues................................ $ 15,011,823 $ 847,517 $ -- $ 15,859,340
------------ --------- ----------- ------------
Operating expenses:
Production, product and technology.... 14,521,015 77,502 -- 14,598,517
Sales and marketing................... 28,522,874 126,502 -- 28,649,376
General and administrative............ 10,612,434 663,731 -- 11,276,165
Depreciation and amortization......... 5,683,006 91,061 3,600,000 2(a) 13,300,292
3,926,225 2(a)
------------ --------- ----------- ------------
Total operating expense....... 59,339,329 958,796 7,526,225 67,824,350
------------ --------- ----------- ------------
Loss from operations.......... (44,327,506) (111,279) (7,526,225) (51,965,010)
Interest income (expense), net.......... 591,186 (100) -- 591,086
Loss on sale of Web site................ (503,961) -- -- (503,961)
Minority interest....................... 586,599 -- (586,599)2(b) --
------------ --------- ----------- ------------
Net loss...................... $(43,653,682) $(111,379) $(8,112,824) $(51,877,885)
------------ --------- ----------- ------------
------------ --------- ----------- ------------
Pro forma basic and diluted net loss per
share ................................ $ (2.59) $ (2.66)
------------ ------------
------------ ------------
Shares of common stock used in computing 1,629,676 2(c)
pro forma basic and diluted net loss 215,385 2(c)
per share ............................ 16,853,678 802,125 2(c) 19,500,864
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
F-28
<PAGE>
IVILLAGE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
1. The pro forma adjustments to the unaudited pro forma condensed consolidated
balance sheet are as follows:
a) Adjustment to cash, for the cash portion of the acquisition prices,
of $1 million for Astrology.Net and $8 million for iBaby.
b) Adjustment to goodwill and intangible assets to reflect the excess
of the purchase price over the fair value of net assets acquired of
Astrology.Net and iBaby, calculated as follows:
<TABLE>
<CAPTION>
ASTROLOGY.NET* IBABY**
-------------- -----------
<S> <C> <C>
Cash portion of purchase price............................... $ 1,000,000 $ 8,000,000
Value of stock and option portion of purchase price.......... 10,827,621 2,800,000
------------ -----------
Purchase price............................................... 11,827,621 10,800,000
Less: fair value of net assets to be acquired................ 48,945 --
------------ -----------
Goodwill..................................................... $ 11,778,676 $10,800,000
------------ -----------
------------ -----------
</TABLE>
* The value of the common stock to be issued to Astrology.Net was
estimated as $13.00 a share.
** Net assets of iBaby are already included in the consolidated balance
sheet of iVillage as iVillage holds a majority interest and control.
c) Adjustment to reflect the elimination of all of the stockholder
equity balances of Astrology.Net.
d) Adjustment to reflect the issuance of 802,125 and an estimated
$400,000 value of options issued and 215,385 shares of common stock,
respectively, for the acquisitions of Astrology.Net and iBaby.
e) Adjustment to reflect the conversion of all of the outstanding
shares of convertible preferred stock into common stock, and the issuance
of 217,825 shares of common stock to holders of series B and B-1
convertible preferred stock resulting from anti-dilution protection.
f) Adjusted to reflect the issuance to NBC of 1,629,676 shares of
Series E Convertible Preferred Stock (on a post-split basis) in exchange
for a note of approximately $15.5 million. These pro forma adjustments do
not include a $5.7 million deemed non-cash dividend to NBC in connection
with the issuance of these shares.
2. The pro forma adjustments to the unaudited pro forma condensed consolidated
statement of operations are as follows:
a) Adjustment to depreciation and amortization to reflect the
amortization of goodwill of $3,926,225 and $3,600,000, resulting from the
acquisitions of Astrology.Net and iBaby, respectively, over a three year
period, the expected period of benefit.
b) Adjustment to minority interest of $586,599 to add back the net
loss previously attributed to the minority stockholders of iBaby.
c) Adjustment to weighted average shares of common stock outstanding
of 2,647,186 (as adjusted for the one-for-three reverse stock split) used
in computing basic and diluted net loss per share to reflect the issuance
of 802,125, 215,385 and 1,629,676 shares of common stock, in connection
with the acquisitions of Astrology. Net, iBaby and the issuance to NBC,
respectively, as of January 1, 1998.
F-29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of iVillage Inc. and Subsidiaries:
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholder's (deficit) equity and cash flows present fairly, in all
material respects, the financial position of Health ResponseAbility Systems,
Inc. (the "Company") at December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the two years in the period then
ended, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
December 23, 1998
F-30
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MAY 29,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 91,265 $ 188,696 $ 205,641
Certificates of deposit........................................... 100,000 108,621 --
Accounts receivable............................................... -- 119,854 9,299
Other current assets.............................................. -- 1,467 --
------------ ------------ ------------
Total current assets.......................................... 191,265 418,638 214,940
Fixed assets, net................................................. 35,092 22,806 48,044
Stockholder notes receivable...................................... 20,000 -- --
Other assets...................................................... 2,256 2,256 2,256
------------ ------------ ------------
Total assets.................................................. $ 248,613 $ 443,700 $ 265,240
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses............................. $ 50,626 $ 74,863 $ 61,269
Employee retirement plan payable.................................. -- 71,000 --
Deferred revenue.................................................. 33,333 -- --
Accrued interest.................................................. 15,146 35,396 43,662
Note payable, less unamortized discount of $67,902, $13,580 and $0
(unaudited) in 1995, 1996 and 1997, respectively................ 202,098 256,420 270,000
------------ ------------ ------------
Total current liabilities..................................... 301,203 437,679 374,931
------------ ------------ ------------
Commitments
Stockholder's (deficit) equity:
Common stock, par value $.01, 10,000 shares authorized, 1,000
shares issued and outstanding................................... 10 10 10
Additional paid-in capital........................................ 108,643 108,643 108,643
Accumulated deficit............................................... (89,243) (30,632) (146,344)
Stockholder notes receivable...................................... (72,000) (72,000) (72,000)
------------ ------------ ------------
Total stockholder's (deficit) equity.......................... (52,590) 6,021 (109,691)
------------ ------------ ------------
Total liabilities and stockholder's (deficit) equity.......... $ 248,613 $ 443,700 $ 265,240
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, PERIOD ENDED MAY 29,
---------------------- ----------------------------
1995 1996 1996 1997
--------- --------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.............................................. $ 439,756 $ 942,181 $ 362,769 $ 362,741
--------- --------- ---------- ----------
Operating expenses:
Production and content.............................. 93,700 457,449 148,116 220,574
Sales and marketing................................. 5,581 48,589 10,681 7,955
General and administrative.......................... 388,382 322,255 87,269 234,519
--------- --------- ---------- ----------
Total operating expenses....................... 487,663 828,293 246,066 463,048
--------- --------- ---------- ----------
(Loss) income from operations......................... (47,907) 113,888 116,703 (100,307)
Interest expense, net................................. (52,205) (55,277) (17,492) (15,405)
--------- --------- ---------- ----------
Net (loss) income.............................. $(100,112) $ 58,611 $ 99,211 $ (115,712)
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
STATEMENTS OF STOCKHOLDER'S (DEFICIT) EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCKHOLDER
---------------- PAID IN ACCUMULATED NOTES
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
------ ------ ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995........... 1,000 $ 10 $ -- $ 10,869 $ -- $ 10,879
Issuance of warrants to AOL in
connection with note............... 108,643 108,643
Stockholder notes receivable......... (72,000) (72,000)
Net loss............................. (100,112) (100,112)
------ ---- -------- --------- -------- ---------
Balance at December 31, 1995......... 1,000 10 108,643 (89,243) (72,000) (52,590)
Net income........................... 58,611 58,611
------ ---- -------- --------- -------- ---------
Balance at December 31, 1996......... 1,000 10 108,643 (30,632) (72,000) 6,021
Net loss (unaudited)................. (115,712) (115,712)
------ ---- -------- --------- -------- ---------
Balance at May 29, 1997
(unaudited)........................ 1,000 $ 10 $108,643 $(146,344) $(72,000) $(109,691)
------ ---- -------- --------- -------- ---------
------ ---- -------- --------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD ENDED MAY 29,
---------------------- ---------------------
1995 1996 1996 1997
--------- --------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income.......................................... $(100,112) $ 58,611 $ 99,211 $(115,712)
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation.......................................... 22,702 22,590 8,770 24,427
Non-cash interest on note payable..................... 55,887 74,572 30,900 21,846
Changes in operating assets and liabilities:
Accounts receivable................................. -- (119,854) (50,002) 110,555
Other assets........................................ (1,339) (1,467) (7,459) 1,467
Stockholder notes receivable........................ (20,000) 20,000 -- --
Deferred revenue.................................... 33,333 (33,333) (33,333) --
Accounts payable and accrued expenses............... 50,626 24,237 (35,234) (13,594)
Employee retirement plan payable.................... -- 71,000 -- (71,000)
--------- --------- -------- ---------
Net cash provided by (used in) operating
activities..................................... 41,097 116,356 12,853 (42,011)
--------- --------- -------- ---------
Cash flows from investing activities:
Certificates of deposit.................................... (100,000) (8,621) (5,586) 108,621
Purchase of fixed assets................................... (57,794) (10,304) (3,296) (49,665)
--------- --------- -------- ---------
Net cash (used in) provided by investing
activities..................................... (157,794) (18,925) (8,882) 58,956
--------- --------- -------- ---------
Cash flows from financing activities:
Proceeds from note payable................................. 270,000 -- -- --
Stockholder notes receivable............................... (72,000) -- -- --
--------- --------- -------- ---------
Net cash provided by financing activities......... 198,000 -- -- --
--------- --------- -------- ---------
Net increase in cash for the period.......................... 81,303 97,431 3,971 16,945
Cash, beginning of period.................................... 9,962 91,265 91,265 188,696
--------- --------- -------- ---------
Cash, end of period.......................................... $ 91,265 $ 188,696 $ 95,236 $ 205,641
--------- --------- -------- ---------
--------- --------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Health ResponseAbility Systems, Inc. (the "Company") was incorporated in
the State of Virginia on August 22, 1994 and commenced operations on January 1,
1995. The Company is engaged in the development of health-related programming
material for distribution through online service providers and the Internet.
As discussed in Note 8, all of the outstanding shares of the Company were
acquired by iVillage Inc. ("iVillage") on May 29, 1997. These financial
statements do not include any adjustments in connection with the sale.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company's revenues have been derived primarily from America Online,
Inc. ("AOL") customers visiting the Company's site on the AOL online service and
are recognized as they are earned (based upon visitations to the site) and
reported to the Company by AOL. Usage revenues received from AOL totaled
approximately $343,822 and $618,644 for the years ended December 31, 1995 and
1996, respectively. In addition, the Company has derived revenues from the
design of customer web sites. Revenues from such design work is recognized over
the term of service of each contract.
FIXED ASSETS
Depreciation of computer equipment and software and furniture and fixtures
is provided for by the straight-line method over their estimated useful lives
ranging from three to five years. The cost of additions and betterments is
capitalized, and repairs and maintenance costs are charged to operations in the
periods incurred. Depreciation expense has been included in general and
administrative expense.
INCOME TAXES
The Company has elected to be treated as an "S" corporation for both
Federal and State of Virginia tax purposes. Accordingly, corporate income or
loss is included in the stockholder's individual tax return based upon her
ownership interest.
CASH
Cash includes money market accounts and all highly liquid investments
purchased with original maturities of three months or less. Certificates of
deposit with maturities greater than three months are classified as such on the
balance sheet. The Company maintains its cash balances in a highly rated
financial institution.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and accounts receivable. Cash is
deposited with high-credit, quality financial institutions. The Company's
accounts receivable are derived from revenue earned from customers located in
the U.S. and are denominated in U.S. dollars.
AOL accounted for approximately 78% and 66% of revenue for the years ended
December 31, 1995 and 1996, respectively, and approximately 63% of accounts
receivable at December 31, 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including
cash, certificates of deposit, accounts receivable, accounts payable and accrued
liabilities and note payable, approximate fair value because of their short
maturities.
F-35
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Significant
estimates made by the Company include the valuation of the warrant issued and
the useful lives and recoverability of fixed assets.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of May 29, 1997 and for the periods ended
May 29, 1996 and 1997 are unaudited but have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
statements which do not include all disclosures required by GAAP for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the full year.
COMPREHENSIVE INCOME
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined, includes all changes in equity (net assets) during a period
from non-owner sources. To date, the Company has not had any transactions that
are required to be reported in comprehensive income.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current period presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
No. 131"). This statement establishes standards for the way companies report
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The disclosure prescribed by SFAS No. 131
is effective for the year ending December 31, 1998. The Company has determined
that it does not have any separately reportable business segments as of May 29,
1997.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company does
not expect that the adoption of SOP No. 98-1 will have a material impact on its
financial statements.
F-36
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MAY 29,
---------------------------- -------------
1995 1996 1997
------------ -------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software.......................... $ 45,195 $ 54,775 $ 70,992
Furniture and fixtures................................... 12,682 13,406 45,454
------------ -------------- -----------
57,877 68,181 116,446
Less, accumulated depreciation........................... (22,785) (45,375) (68,402)
------------ -------------- -----------
$ 35,092 $ 22,806 $ 48,044
------------ -------------- -----------
------------ -------------- -----------
</TABLE>
Depreciation of fixed assets was approximately $22,702 and $22,590 for the years
ended December 31, 1995 and 1996, respectively.
4. RELATED-PARTY TRANSACTIONS
In January 1995, the Company loaned $29,700 to its sole stockholder who
also serves as an officer to the Company (the "Stockholder"). Interest is
payable annually at the rate of 7.92% per annum. This note was not paid until
the sale of the Company and, therefore, is recorded as a reduction of
stockholder's equity.
In February 1995, the Company loaned $20,000 to the Stockholder. Interest
is payable annually at the rate of 7.96% per annum. This note was not paid until
the sale of the Company and, therefore, is recorded as a reduction of
stockholder's equity.
In May 1995, the Company loaned $10,000 to the Stockholder. Interest is
payable annually at the rate of 7.12% per annum. The principal balance and
interest due on this note was repaid in full in July 1996.
In June 1995, the Company loaned $10,000 to the Stockholder. Interest is
payable annually at the rate of 6.83% per annum. The principal balance and
interest due on this note was repaid in full in July 1996.
In December 1995, the Company loaned $22,300 to the Stockholder. Interest
is payable annually at the rate of 5.91% per annum. This note was not paid until
the sale of the Company and, therefore, is recorded as a reduction of
stockholder's equity.
In 1995, the Company entered into a consultant agreement with the spouse of
the Stockholder, in which the Company paid the consultant $80,000 during the
year. In 1996, this consultant became an officer of the Company.
5. AOL NOTE PAYABLE
In April 1995, the Company entered into a promissory note agreement with
AOL whereby the Company received cash of $270,000 ("AOL Note"). Interest, at a
rate of 7.5% per annum, and principal, are payable on the earlier of demand or
April 2005. If payment is demanded, then such payment will be payable in 24
equal monthly installments of principal and interest beginning on the fifth day
following such demand.
In connection with the AOL Note, the Company issued a warrant (the "AOL
Warrant") to purchase a certain amount of shares of the Company's preferred
stock at a certain exercise price, both of which are based on a formula in the
warrant agreement. The Company recorded an unamortized discount of $108,643
which has been amortized as interest expense using the interest method. The AOL
Warrant was valued using the Black-Scholes option pricing model. As discussed in
Note 8, the AOL Note and the AOL Warrant were cancelled as part of the sale of
the Company in May 1997.
F-37
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Interest expense, including amortized disount related to the issuance of
the AOL Warrant, charged to operations for the year ended December 31, 1995 and
1996 was $55,887 and $74,572, respectively.
6. COMMITMENTS
LEASES
The Company leases office space in Herndon, Virginia, under a
non-cancelable operating lease expiring in June 1998. The following is a
schedule of future minimum lease payments under the lease as of December 31,
1996:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------
<S> <C>
1997................................................. $53,920
1998................................................. 27,769
-------
$81,689
-------
-------
</TABLE>
Rent expense was approximately $9,898 and $16,073 for the years ended
December 31, 1995 and 1996, respectively.
7. CAPITAL STOCK
At December 31, 1996, the authorized capital stock of the Company consists
of 10,000 shares of common stock, $0.01 par value per share. Upon formation of
the Company, 1,000 shares of common stock were issued to the founder.
8. SUBSEQUENT EVENT
On May 29, 1997, all of the outstanding shares of the Company were acquired
by iVillage in exchange for $2,600,000 in cash, 1,300,200 shares of iVillage
common stock on a pre-split basis, and cash amounts contingent on future
performance levels of the Company and iVillage, which was determined to be
$1,560,000 in January 1998. In addition, iVillage issued 609,000 shares of
common stock on a pre-split basis, to AOL in exchange for the release of the AOL
Note and the cancellation of the AOL Warrant.
F-38
<PAGE>
IVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On May 29, 1997, Health ResponseAbility Systems, Inc. ("HRS"), a developer
of health-related programming material for distribution through online service
providers and the Internet, agreed to sell substantially all of its outstanding
shares of capital stock and any securities convertible into shares of HRS
capital stock ("Fully Diluted HRS shares") to iVillage Inc. ("iVillage" or the
"Company") in exchange for $2.6 million in cash, 1,300,200 shares (on a
pre-split basis) of iVillage common stock and cash amounts contingent on future
performance levels of HRS and iVillage. In addition, iVillage issued 609,000
shares (on a pre-split basis) of common stock to America Online, Inc. ("AOL") in
exchange for the release of all equity rights in HRS held by AOL.
The acquisition has been accounted for as a purchase, with the assets
acquired and liabilities assumed recorded at fair values, and the results of
HRS's operations included in the Company's consolidated financial statements
from the date of acquisition.
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of the acquisition on the Company's results of
operations assuming the acquisition took place on January 1, 1997. Since the
transaction has been reflected in the Company's consolidated balance sheet as of
December 31, 1997, contained elsewhere herein, no pro forma condensed
consolidated balance sheet has been provided.
The unaudited pro forma condensed consolidated financial statements have
been included as required by the rules of the Securities and Exchange Commission
and are provided for comparative purposes only. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
the results which would have been obtained if the acquisition had been effected
on the date indicated or which may be obtained in the future.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in connection with the historical financial statements
of the Company and HRS which are contained elsewhere in this Prospectus.
F-39
<PAGE>
IVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HEALTH RESPONSEABILITY
IVILLAGE INC. SYSTEMS, INC.
------------------ ----------------------
YEAR ENDED PERIOD ENDED PRO FORMA
DECEMBER 31, 1997 MAY 29, 1997 ADJUSTMENTS PRO FORMA
------------------ ---------------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................. $ 6,018,696 $ 362,741 $ -- $ 6,381,437
------------ ---------- ----------- ------------
Operating expenses:
Production, content and product....
7,606,355 220,574 -- 7,826,929
Sales and marketing................ 8,770,581 7,955 -- 8,778,536
General and administrative......... 10,726,844 234,519 974,273 (a) 12,455,636
520,000 (b)
------------ ---------- ----------- ------------
Total operating expenses....... 27,103,780 463,048 1,494,273 29,061,101
------------ ---------- ----------- ------------
Loss from operations................. (21,085,084) (100,307) (1,494,273) (22,679,664)
Interest expense, net................ (215,876) (15,405) -- (231,281)
------------ ---------- ----------- ------------
------------ ---------- ----------- ------------
Net loss............................. (21,300,960) (115,712) ($1,494,273) ($22,910,945)
------------ ---------- ----------- ------------
------------ ---------- ----------- ------------
Basic and diluted net loss per share (4.55) (4.20)
(on a pre-split basis)............. $ $
------------ ------------
------------ ------------
Weighted average shares of common
stock outstanding used in computing
basic and diluted net loss per
share (on a pre-split basis)....... 4,682,872 774,141 (c) 5,457,013
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
F-40
<PAGE>
IVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
1. The pro forma adjustments to the unaudited pro forma condensed
consolidated statement of operations are as follows:
<TABLE>
<S> <C>
(a) Adjustment to general and administrative expenses for the amortization of $5,955,331 of
goodwill, amortized over a three-year period............................................... $974,273
--------
--------
(b) Adjustment to general and administrative expenses for the amortization of $1,560,000 of
goodwill associated with contingent consideration paid on future performance levels........ $520,000
--------
--------
(c) Adjustment to weighted average shares of common stock outstanding used in computing basic
and diluted net loss per share to reflect the issuance of 1,909,200 shares (on a pre-split
basis) in connection with the acquisition of HRS as of January 1, 1997..................... 774,141
--------
--------
</TABLE>
F-41
<PAGE>
UNDERWRITING
iVillage and the underwriters named below (the "Underwriters") have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each Underwriter has severally
agreed to purchase the number of shares indicated in the following table.
Goldman, Sachs & Co., Credit Suisse First Boston Corporation and Hambrecht &
Quist LLC are the representatives of the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
- -------------------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co.......................................................
Credit Suisse First Boston Corporation....................................
Hambrecht & Quist LLC.....................................................
----------
Total...................................................... 3,650,000
----------
----------
</TABLE>
------------------------
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 547,500
shares from iVillage to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the Underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the Underwriters by iVillage. Such amounts are
shown assuming both no exercise and full exercise of the Underwriters' option to
purchase additional shares.
Paid by iVillage
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............... $ $
Total................... $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the Underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
iVillage, its directors, officers and stockholders have agreed with the
Underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee benefit
plans. Please see "Shares Available for Future Sale" for a discussion of certain
transfer restrictions.
At the request of iVillage, the Underwriters have reserved at the initial
public offering price up to 538,461 shares of common stock for sale to NBC,
Liberty Media Corporation and America Online, Inc. These purchasers have
expressed an interest in purchasing such shares of common stock in this
offering. Each purchaser has agreed that, if it does purchase any of such
reserved shares, it will enter into a lock-up agreement with the Underwriters,
under which each agrees not to sell shares for 180 days after the date of this
prospectus. There can be no assurance that any of the reserved shares will be
purchased. The number of shares available for sale to the general public in this
offering will be reduced by the number of reserved shares sold. Any reserved
U-1
<PAGE>
shares not so purchased will be offered to the general public on the same basis
as the other shares offered hereby.
In addition, at the request of iVillage, the Underwriters have reserved for
sale, at the initial public offering price, shares of common stock for certain
directors, employees and associates of iVillage. There can be no assurance that
any of the reserved shares will be so purchased. The number of shares available
for sale to the general public in the offering will be reduced by the number of
reserved shares sold. Any reserved shares not so purchased will be offered to
the general public on the same basis as the other shares offered hereby.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among iVillage and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be iVillage's historical performance, estimates of the business
potential and earnings prospects of iVillage, an assessment of iVillage's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital Corporation. Other than the prospectus in
electronic format, the information on such Web site and any information
contained on any other Web site maintained by Wit Capital Corporation is not
part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by iVillage or any
Underwriter in such capacity and should not be relied on by prospective
investors.
iVillage has applied to list the common stock on the Nasdaq National Market
under the symbol "IVIL".
In connection with this offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while this offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The Underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
iVillage estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$1,500,000.
iVillage has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
Credit Suisse First Boston Corporation acted as iVillage's exclusive
placement agent in connection with the private placement of iVillage's series E
convertible preferred stock in December 1998. iVillage incurred customary
placement fees to Credit Suisse First Boston Corporation for such services.
U-2
<PAGE>
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 7
Use of Proceeds............................... 16
Dividend Policy............................... 16
Capitalization................................ 17
Dilution...................................... 18
Selected Consolidated Financial
Data........................................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 20
Business...................................... 30
Management.................................... 44
Certain Transactions.......................... 51
Principal Stockholders........................ 55
Description of Capital Stock.................. 57
Shares Eligible for Future Sale............... 59
Legal Matters................................. 60
Experts....................................... 60
Available Information......................... 61
Index to Financial Statements................. F-1
Underwriting.................................. U-1
</TABLE>
------------------------------
Through and including , 1999 (25 days after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as underwriter and with respect to an unsold allotment or subscription.
================================================================================
================================================================================
3,650,000 Shares
IVILLAGE INC.
Common Stock
------------------------------
[LOGO]
-----------------------------
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
Representatives of the Underwriters
------------------------------
WIT CAPITAL CORPORATION
Facilitator of Internet distribution
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the Registrant in connection with the sale of
the securities being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq/NMS listing fee.
<TABLE>
<S> <C>
SEC Registration Fee................................................................ $ 16,337
NASD Filing Fee..................................................................... 6,377
Nasdaq National Market Listing Fee.................................................. 95,000
Printing Costs...................................................................... 350,000
Legal Fees and Expenses............................................................. 500,000
Accounting Fees and Expenses........................................................ 375,000
Blue Sky Fees and Expenses.......................................................... 10,000
Transfer Agent and Registrar Fees................................................... 7,500
Miscellaneous....................................................................... 139,786
----------
Total.......................................................................... $1,500,000
----------
----------
</TABLE>
- ------------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent to the Registrant. The
Delaware General Corporation Law provides that Section 145 is not exclusive of
other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Article VII of the Registrant's Bylaws provides for indemnification by the
Registrant of its directors, officers and employees to the fullest extent
permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. The Registrant's Amended and Restated Certificate
of Incorporation provides for such limitation of liability.
The Registrant intends to obtain directors, and officers, insurance
providing indemnification for certain of the Registrant's directors, officers
and employees for certain liabilities.
Reference is also made to the Underwriting Agreement to be filed as
Exhibit 1.1 to the Registration Statement for information concerning the
Underwriters' obligation to indemnify the Registrant and its officers and
directors in certain circumstances.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1995, the Registrant has issued and sold (without payment
of any selling commission to any person) the following unregistered securities:
(1) In September 1995, the Registrant issued and sold an aggregate of
666,668, 333,333, and 83,333 shares of Common Stock to Candice Carpenter,
Nancy Evans and Robert Levitan, respectively, at a price per share of
$.0015 (on a post-split basis).
(2) In September 1995, the Registrant issued a stock subscription
warrant to purchase 17,366 shares, on a post-split basis, of Series B
Convertible Preferred Stock at a price per share of $7.50 (the "September
1995 Warrant") and 1,000,000 shares of Series A Convertible Preferred Stock
to America Online, Inc. ("AOL") at a price per share of $1.00 in exchange
for the cancellation of a note and $496,494 in cash.
(3) In May 1996, the Registrant issued 797,130 shares of Series B
Convertible Preferred Stock to AOL at a price per share of $2.50 in
exchange for the cancellation of a note payable.
(4) In May 1996, the Registrant issued and sold an aggregate of
300,000 shares of Series B-1 Convertible Preferred Stock to AOL at a price
per share of $2.50 in exchange for the conversion of the principal amount
and accrued interest on two notes and $450,000 in cash.
(5) In May 1996, in connection with an information provider agreement,
the Registrant issued a stock subscription warrant to purchase 266,666
shares, (on a post-split basis), to AOL at a price per share of $7.50.
(6) In May 1996, the Registrant issued and sold an aggregate of
4,477,746 shares of Series B Convertible Preferred Stock at a price per
share of $2.50 to the following entities: Kleiner Perkins Caufield & Byers
VII ("Kleiner"), KPCB VII Founders Fund ("KPCB VII"), KPCB Information
Sciences Zaibatsu Fund II ("KPCB Information"), Ann R. Mathias, Edward J.
Mathias, TCI Online Village Holdings, Inc. ("TCI") and the Tribune Company
("Tribune").
(7) In December 1996, in connection with an Agreement and Plan of
Reorganization, the Registrant issued 33,333 shares of Common Stock (on a
post-split basis) each to Jacqueline B. Needelman and David L. Cohen in
consideration for 1,500 shares of jointly owned common stock of
ParentsPlace.com, Inc.
(8) In January 1997, Beth Polish exercised an option and received
8,333 shares of Common Stock at a price per share of $3.00 (on a post-split
basis).
(9) In January 1997, Elaine Rubin exercised an option and received
12,500 shares of Common Stock at a price per share of $3.00 (on a
post-split basis).
(10) In January 1997, Tina Neederlander exercised an option and
received 12,500 shares of Common Stock at a price per share of $3.00 (on a
post-split basis).
(11) In February 1997, the Registrant issued and sold stock
subscription warrants to purchase an aggregate of 111,771 shares of Common
Stock at a price per share of $5.86 (on a post-split basis) to AOL,
Tribune, Kleiner and KPCB Information in consideration for the cancellation
of a note and cash.
(12) In May 1997, the Registrant issued and sold an aggregate of
11,003,068 shares of Series C Preferred Stock at a price per share of
$1.954 to the following entities: AOL, Philip E Berney, CIBC Wood Gundy
Ventures, Inc. ("CIBC") Cox Interactive Media, Inc. ("Cox"), Convergence
Ventures I, L.P. ("Convergence"), Stephen Friedman, Charles A. Davis,
Growth Shares Ltd., Juergen Habermeier, Kleiner, KPCB Information, Ralph
Mack, Stephen M. Parish, Rho Management Trust I ("Rho"), Sonem Partners,
Tenet, Transatlantic Venture Partners C.V., Tribune, The Trustees of the
General Electric Pension Trust, Norman Tulchin, Stanley Tulchin and one
other corporate investor.
II-2
<PAGE>
(13) In May 1997, the Registrant issued warrants to Bear, Stearns &
Co. Inc. to purchase 30,194 shares of the Registrant's Common Stock at an
exercise price of $0.03 per share in consideration for services rendered
(on a post-split basis).
(14) In May 1997, in connection with a Plan of Reorganization and
Merger, among the Registrant, Health ResponseAbility Systems, Inc. and
other signatories thereto, the Registrant issued 433,400 shares of Common
Stock to Elin Silveous and 203,000 shares of Common Stock to AOL (on a
post-split basis).
(15) In December 1997, the Registrant issued and sold an aggregate of
2,190,377 shares of Series C Convertible Preferred Stock at a price per
share of $1.954 per share to the following entities: AOL, Convergence,
Convergence Entrepreneurs Fund I ("Convergence Entrepreneurs"), Rho, Sonem
Partners and O'Sullivan Graev & Karabell, L.L.P., Profit Sharing Plan F/B/O
Martin H. Levenglick.
(16) In February 1998, the Registrant issued and sold an aggregate of
284,317 shares of Common Stock to Tenet Healthcare Corporation ("Tenet") at
a price per share of $5.86 (on a post-split basis).
(17) In February 1998, the Registrant issued a certificate for an
aggregate of 76,800 shares of Series B Convertible Preferred Stock to
Kleiner in exchange for a certificate representing 76,800 shares of Series
B Convertible Preferred Stock issued to KPCB VII.
(18) In February 1998, the Registrant issued and sold an aggregate of
1,333,334 shares of Series D Convertible Preferred Stock to Tenet at a
price per share of $2.50.
(19) In March 1998, the Registrant issued and sold an aggregate of
4,480,000 shares of Series D Convertible Preferred Stock at a price per
share of $2.50 to the following entities: Convergence, Nexus Capital
Partners I, L.P., NIG-Village Ltd., Porcelain Partners L.P., Rho, TCV II
V.O.F., Technology Crossover Ventures II, L.P., TCV Strategic Partners,
L.P., Technology Crossover Partners II, C.V. and TCV II (Q), L.P.
(20) In April 1998, the Registrant issued and sold an aggregate of
6,434,000 shares of Series D Convertible Preferred Stock at a price per
share of $2.50 to the following entities: AOL, CIBC, Transatlantic Venture
Partners, C.V., Leavitt Family Trust, Boston Millennia Partners Limited,
Boston Millennia Associates I Partnership, FIMA Finance Management, Inc.,
Josef H. von Rickenbach, David Mahoney, Chestnut Investment Associates
1998, Chestnut Partners, Inc., Allyn C. Woodward, Moore Global Investments,
Ltd., Remington Investment Strategies, L.P., Ralph Mack, Cox and one other
corporate investor.
(21) In May 1998, the Registrant issued and sold an aggregate of
352,666 shares of Series D Convertible Preferred Stock at a price per share
of $2.50 to the following entities: Merrill Roth, Gannett International
Communications, Inc. and Pasquale Lavecchia.
(22) In June 1998, the Registrant issued and sold an aggregate of
400,000 shares of Series D Convertible Preferred Stock to a corporate
investor at a price per share of $2.50.
(23) In June 1998, Stephen Chao, Inc. exercised an option and received
8,333 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(24) In December 1998, the Registrant issued and sold an aggregate of
11,730,948 shares of Series E Convertible Preferred Stock at a price of
$2.85 to the following entities: AOL, Boston Millennia Associates, Boston
Millennia Partners Limited, Lawrence Berk, CIBC, Convergence, Convergence
Entrepreneurs, Cox, Gannett, Leavitt, Steven Parish, Merrill Roth, Moore,
Nexus, NIG, O'Sullivan Graev & Karabell, L.L.P., Profit Sharing Plan F/B/O
Martin H. Levenglick, Ralph Mack, Remington, Rho, Sonem, TCI, TCI Ventures
Group, LLC, TCV II (Q), L.P., TCV II V.O.F., TCV Strategic Partners, L.P.,
Technology Crossover Ventures II, C.V., Technology Crossover Ventures II,
L.P., Tenet, Transatlantic, Tribune, William James Bell 1993 Trust,
Seligman Communications & Information Fund, Vantage Point Communications
Partners, LP, Vantage Point
II-3
<PAGE>
Venture Partners 1996, LP, Applewood Associates, Fred F. Nazem, Admirals,
L.P., Fred Tanzer, Van Wagoner Capital Management.
(25) In December 1998, John Kiefer exercised an option and received
833 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(26) In December 1998, Eileen O'Reilly exercised an option and
received 83 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(27) In December 1998, Laurie Peterson Wardell exercised an option and
received 83 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(28) In January 1999, Warren Cook exercised an option and received
1,000 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(29) In January 1999, Maura Curtin exercised an option and received 83
shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(30) In January 1999, Lisa Gansky exercised an option and received
4,000 shares of Common Stock at a price per share of $7.50 (on a post-split
basis).
(31) In January 1999, Dermott McCormack exercised an option and
received 83 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(32) In January 1999, Christine Ohly exercised options and received
250 and 2,416 shares of Common Stock at a price per share of $3.00 and
$5.10, respectively (on a post-split basis).
(33) In January 1999, Sarah Cabot Rockwell exercised options and
received 833 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(34) In January 1999, Deanna Vincent exercised options and received
6,250 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(35) In January 1999, Philip Vo exercised options and received 83
shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(36) In February 1999, in connection with the acquisition of
KnowledgeWeb, Inc. d/b/a Astrology.Net, the Registrant issued 802,125
shares of Common Stock to Astrology.Net (on a post-split basis).
(37) In February 1999, the Registrant issued to NBC, pursuant to an
amendment to an advertising and promotional agreement, 3,684,210 shares of
Series E Convertible Preferred Stock at $2.85 per share, 1,204,819 shares
of Series E Convertible Preferred Stock at $4.15 per share and an option to
purchase 970,873 shares of Series E Convertible Preferred Stock at $5.15
per share during 2000 and 813,008 shares at $6.15 per share during 2001 in
exchange for a promissory note in the approximate amount of $15.5 million
at 5% interest per annum.
Exemption from registration for the transactions described above was
claimed pursuant to Section 4(2) of the Securities Act of 1933, as amended,
regarding transactions by the issuer not involving a public offering, in that
these transactions were made, without general solicitation or advertising, to
sophisticated investors with access to all relevant information necessary to
evaluate these investments and who represented to the Registrant that the shares
were being acquired for investment.
II-4
<PAGE>
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.**
2.1 Agreement and Plan of Reorganization and Merger dated as of January 31, 1997, as amended on
March 31, 1997, as further amended as of May 15, 1997, as further amended as of May 16, 1997 and as
further amended as of May 23, 1997 among the Registrant, Health ResponseAbility Systems, Inc., and
other signatories thereto.**
2.2 Letter of Intent dated January 4, 1999 between the Registrant and KnowledgeWeb, Inc. d/b/a
Astrology.Net.**
2.3 Agreement and Plan of Reorganization dated as of December 10, 1996 among the Registrant, PP
Acquisition Corporation, ParentsPlace.com, Inc. and the stockholders of ParentsPlace.com, Inc.**
2.4 Letter Agreement dated February 10, 1999 by and among the Registrant and Kid's Warehouse, Inc.,
iBaby, Inc., Our Baby, LLC, JBM Ventures, Inc. and Gavin Mandelbaum.
2.5 Agreement and Plan of Reorganization dated as of February 12, 1999 among the Registrant and
KnowledgeWeb Acquisition Corporation and KnowledgeWeb, Inc. and the Shareholders of KnowledgeWeb,
Inc.
3.1 Certificate of Incorporation of the Registrant, as currently in effect.**
3.2 Form of Amended and Restated Certificate of Incorporation of the Registrant, to be filed prior to
completion of this offering.
3.3 Form of Amended and Restated Certificate of Incorporation of the Registrant, to be filed and
effective upon completion of this offering.
3.4 Bylaws of the Registrant, as currently in effect.**
3.5 Form of Amended and Restated Bylaws of the Registrant, to be effective upon completion of this
offering.
4.1 Form of Registrant's Common Stock Certificate.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP.*
9.1 Voting Trust Agreement dated as of September 19, 1995 between Candice Carpenter, Nancy Evans and
certain owners of Common Stock of the Registrant.**
10.1 Form of Indemnification Agreement between the Registrant and each of its directors and officers.
10.2 1995 Amended and Restated Employee Stock Option Plan of the Registrant.**
10.3 1997 Amended and Restated Acquisition Stock Option Plan of the Registrant.**
10.4 Form of 1999 Employee Stock Option Plan of the Registrant.
10.5 Form of 1999 Director Stock Option Plan of the Registrant.
10.6 Form of 1999 Employee Stock Purchase Plan of the Registrant.
10.7 Form of 1999 Acquisition Stock Option Plan of the Registrant.
10.8 Interactive Services Agreement dated December 31, 1998, between the Registrant and America Online,
Inc. ("AOL").*
10.9 Confidential Bankcard Marketing Agreement dated June 4, 1998, between the Registrant and First
Credit Card Services USA L.L.C.+**
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------
10.10 Promotion Distribution and License Agreement dated October 21, 1998 between AT&T Corp. and the
Registrant.+
<C> <S>
10.11 Exclusive Sponsorship Agreement dated February 28, 1998 between Amazon.com, Inc. and the
Registrant.+**
10.12 Promotion Agreement dated November 6, 1998 between Snap! LLC and the Registrant.+**
10.13 Online Services Agreement dated December 19, 1997 between Charles Schwab & Co., Inc. and the
Registrant.+**
10.14 Letter Agreement dated November 11, 1998 between the National Broadcasting Company, Inc. and the
Registrant.**
10.15 Joint Activities Agreement dated September 1997 between Intuit Inc. and the Registrant.+**
10.16 Sponsorship Agreement dated as of December 18, 1998 by and between Ford Motor Media, a division of
J. Walter Thompson and the Registrant.+
10.17 Sponsorship Agreement dated as of October 30, 1998 between Ralston Purina Company and the
Registrant.+
10.18 Form of Non-Competition, Non-Disclosure and Assignment of Inventions Agreement dated September 9,
1995, and Amendment dated May 6, 1996, between the Registrant and each of Candice Carpenter and
Nancy Evans.**
10.19 Employment Letter dated June 4, 1998 to Craig Monaghan.
10.20 Employment Letter dated December , 1998 to Allison Abraham.*
10.21 Lease dated August 21, 1995, commencing on September 1, 1995, as amended on September 20, 1995, as
amended and supplemented April 5, 1996, as further amended and supplemented on April 15, 1996, as
further amended and supplemented January 20, 1997, and as amended and supplemented on May 8, 1997,
between 170 Fifth Associates (the "Landlord") and the Registrant.**
10.22 Lease dated March 19, 1998, commencing March 15, 1998 between 149 Fifth Avenue Corporation and the
Registrant, as supplemented on June 30, 1998.**
10.23 Note and Warrant Purchase Agreement dated as of February 27, 1997, as amended April 29, 1997, among
the Registrant, AOL, Tribune, KPCB VII and KPCB Zaibatsu II, including Form of Warrant.**
10.24 Promissory Note dated June 5, 1998 in the amount of $500,000 between Candice Carpenter and the
Registrant.**
10.25 Fourth Amended and Restated Stockholders' Agreement dated as of December 4, 1998, among the
Registrant, the Founders and each of the Investors identified therein.**
10.26 Fourth Amended and Restated Registration Rights Agreement dated as of December 4, 1998, among the
Registrant, the Founders and each of the Investors identified therein.**
10.27 Amended Stock Purchase Agreement dated as of February 22, 1999 between the Registrant and the
National Broadcasting Company, Inc.*
10.28 Amended Letter Agreement dated as of February 22, 1999 between the Registrant and the National
Broadcasting Company, Inc.*
10.29 Promissory Note dated February 23, 1999 in the amount of $15,497,558.48 between the Registrant and
the National Broadcasting Company, Inc.*
21 List of subsidiaries.**
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1).*
23.2 Consents of PricewaterhouseCoopers LLP.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------
24 Power of Attorney (included on page II-8).
<C> <S>
27 Financial Data Schedule.
</TABLE>
- ------------------------------
* To be filed by amendment.
** Previously filed
+ Confidential treatment has been requested for certain portions of this
agreement.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
II-7
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "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
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 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 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 of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus 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.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 23rd day of February, 1999.
iVILLAGE INC.
By: _______/s/ Candice Carpenter______
Candice Carpenter
Co-Chairperson of the Board and
Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that the persons whose signatures appear
below each severally constitutes and appoints Candice Carpenter and Caterina A.
Conti, and each of them, as true and lawful attorneys-in-fact and agents, with
full powers of substitution and resubstitution, for them in their name, place
and stead, in any and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement and
to sign any registration statement (and any post-effective amendments thereto)
relating to the same offering as this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ Candice Carpenter Co-Chairperson of the Board and Chief February 23, 1999
- ------------------------------------------ Executive Officer (Principal Executive
Candice Carpenter Officer)
/s/ Nancy Evans Co-Chairperson of the Board and February 23, 1999
- ------------------------------------------ Editor-in-Chief
Nancy Evans
/s/ Craig T. Monaghan Chief Financial Officer (Principal Financial February 23, 1999
- ------------------------------------------ Officer)
Craig T. Monaghan
/s/ Sanjay Muralidhar Vice President, Finance (Principal Accounting February 23, 1999
- ------------------------------------------ Officer)
Sanjay Muralidhar
/s/ Alan Colner Director February 23, 1999
- ------------------------------------------
Alan Colner
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ---------------------------------------------- -----------------
<S> <C> <C>
/s/ Jay Hoag Director February 23, 1999
- ------------------------------------------
Jay Hoag
/s/ Lennert J. Leader Director February 23, 1999
- ------------------------------------------
Lennert J. Leader
/s/ Habib Kairouz Director February 23, 1999
- ------------------------------------------
Habib Kairouz
/s/ Michael Levy Director February 23, 1999
- ------------------------------------------
Michael Levy
/s/ Douglas McCormick Director February 23, 1999
- ------------------------------------------
Douglas McCormick
/s/ Martin Yudkovitz Director February 23, 1999
- ------------------------------------------
Martin Yudkovitz
/s/ Daniel Schulman Director February 23, 1999
- ------------------------------------------
Daniel Schulman
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ---------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement.**
2.1 -- Agreement and Plan of Reorganization and Merger dated as of January 31, 1997, as
amended on March 31, 1997, as further amended as of May 15, 1997, as further amended
as of May 16, 1997 and as further amended as of May 23, 1997 among the Registrant,
Health ResponseAbility Systems, Inc., and other signatories thereto.**
2.2 -- Letter of Intent dated January 4, 1999 between the Registrant and Knowledgeweb, Inc.
d/b/a Astrology.Net.**
2.3 -- Agreement and Plan of Reorganization dated as of December 10, 1996 among the
Registrant, PP Acquisition Corporation, ParentsPlace.com, Inc. and the stockholders
of ParentsPlace.com, Inc.**
2.4 -- Letter Agreement dated February 10, 1999 by and among the Registrant and Kid's
Warehouse, Inc., iBaby, Inc., Our Baby, LLC, JBM Ventures, Inc. and Gavin Mandelbaum.
2.5 -- Agreement and Plan of Reorganization dated as of February 12, 1999 among the
Registrant and KnowledgeWeb Acquisition Corporation and KnowledgeWeb, Inc. and the
shareholders of KnowledgeWeb, Inc.
3.1 -- Certificate of Incorporation of the Registrant, as currently in effect.**
3.2 -- Form of Amended and Restated Certificate of Incorporation of the Registrant, to be
filed prior to completion of this offering.
3.3 -- Form of Amended and Restated Certificate of Incorporation of the Registrant, to be
filed and effective upon completion of this offering.
3.4 -- Bylaws of the Registrant, as currently in effect.**
3.5 -- Form of Amended and Restated Bylaws of the Registrant, to be effective upon
completion of this offering.
4.1 -- Form of Registrant's Common Stock Certificate.*
5.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP.*
9.1 -- Voting Trust Agreement dated as of September 19, 1995 between Candice Carpenter,
Nancy Evans and certain owners of Common Stock of the Registrant.**
10.1 -- Form of Indemnification Agreement between the Registrant and each of its directors
and officers.
10.2 -- 1995 Amended and Restated Employee Stock Option Plan of the Registrant.**
10.3 -- 1997 Amended and Restated Acquisition Stock Option Plan of the Registrant.**
10.4 -- Form of 1999 Employee Stock Option Plan of the Registrant.
10.5 -- Form of 1999 Director Stock Option Plan of the Registrant.
10.6 -- Form of 1999 Employee Stock Purchase Plan of the Registrant.
10.7 -- Form of 1999 Acquisition Stock Option Plan of the Registrant.
10.8 -- Interactive Services Agreement dated December 31, 1998, between the Registrant and
America Online, Inc. ("AOL").*
10.9 -- Confidential Bankcard Marketing Agreement dated June 4, 1998, between the Registrant
and First Credit Card Services USA L.L.C.+**
10.10 -- Promotion Distribution and License Agreement dated October 21, 1998 between AT&T
Corp. and the Registrant.+
10.11 -- Exclusive Sponsorship Agreement dated February 28, 1998 between Amazon.com, Inc. and
the Registrant.+**
10.12 -- Promotion Agreement dated November 6, 1998 between Snap! LLC and the Registrant.+**
10.13 -- Online Services Agreement dated December 19, 1997 between Charles Schwab & Co., Inc.
and the Registrant.+**
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ---------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
10.14 -- Letter Agreement dated November 11, 1998 between the National Broadcasting Company,
Inc. and the Registrant.**
10.15 -- Joint Activities Agreement dated September 1997 between Intuit Inc. and the
Registrant.+**
10.16 -- Sponsorship Agreement dated as of December 18, 1998 by and between Ford Motor Media,
advisor of J. Walter Thompson and the Registrant.+
10.17 -- Sponsorship Agreement dated as of October 30, 1998 between Ralston Purina Company and
the Registrant.+
10.18 -- Form of Non-Competition, Non-Disclosure and Assignment of Inventions Agreement dated
September 9, 1995, and Amendment dated May 6, 1996, between the Registrant and each
of Candice Carpenter and Nancy Evans.**
10.19 -- Employment Letter dated June 4, 1998 to Craig Monaghan.
10.20 -- Employment Letter dated December , 1998 to Allison Abraham.*
10.21 -- Lease dated August 21, 1995, commencing on September 1, 1995, as amended on
September 20, 1995, as amended and supplemented April 5, 1996, as further amended and
supplemented on April 15, 1996, as further amended and supplemented January 20, 1997,
and as amended and supplemented on May 8, 1997, between 170 Fifth Associates (the
"Landlord") and the Registrant.**
10.22 -- Lease dated March 19, 1998, commencing March 15, 1998 between 149 Fifth Avenue
Corporation and the Registrant, as supplemented on June 30, 1998.**
10.23 -- Note and Warrant Purchase Agreement dated as of February 27, 1997, as amended
April 29, 1997, among the Registrant, AOL, Tribune, KPCB VII and KPCB Zaibatsu II,
including Form of Warrant.**
10.24 -- Promissory Note dated June 5, 1998 in the amount of $500,000 between Candice
Carpenter and the Registrant.**
10.25 -- Fourth Amended and Restated Stockholders' Agreement dated as of December 4, 1998,
among the Registrant, the Founders and each of the Investors identified therein.**
10.26 -- Fourth Amended and Restated Registration Rights Agreement dated as of December 4,
1998, among the Registrant, the Founders and each of the Investors identified
therein.**
10.27 -- Amended Stock Purchase Agreement dated as of February 22, 1999 between the Registrant
and the National Broadcasting Company, Inc.*
10.28 -- Amended Letter Agreement dated as of February 22, 1999 between the Registrant and the
National Broadcasting Company, Inc.*
10.29 -- Promissory Note dated February 23, 1999 in the amount of $15,497,558.48 between the
Registrant and the National Broadcasting Company, Inc.*
21 -- List of subsidiaries.
23.1 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1).*
23.2 -- Consents of PricewaterhouseCoopers LLP.
24 -- Power of Attorney (included on page II-7).**
27 -- Financial Data Schedule.
</TABLE>
- ------------------
* To be filed by amendment.
** Previously filed.
+ Confidental treatment has been requested for certain portions of this
agreement.
<PAGE>
February 10, 1999
Kids Warehouse, Inc.
8400 Miramar Road
San Diego, California 92126
Attention: David Mandelbaum
Dear Mr. Mandelbaum:
This will confirm our agreement in accordance with the Rights
Agreement dated as of April 8, 1998, by and among iVillage Inc. ("iVillage"),
OurBaby, LLC ("OurBaby"), JBM Ventures, Inc. ("JBM") and iBaby, Inc. ("iBaby")
(the "Agreement"), and the other agreements described herein with regard to our
exercise of our call option pursuant to Section 6(a) of the Agreement to
purchase all Equity Securities of iBaby not held by iVillage. All terms not
defined herein shall have the meanings assigned to them in the Agreements. The
provisions of this agreement are contingent upon the First Closing (as defined
below).
It is hereby agreed that the purchase price for the Equity Securities
payable by iVillage (the "Purchase Price") shall be $10.8 million dollars
payable as follows (the "Consideration"): (a) an aggregate $1.5 million payable
by iVillage within three (3) business days of the execution of this agreement
(the "First Closing") in exchange for all right, title and interest to an
aggregate 92,592 Equity Securities (b) an aggregate $6.5 million (the "Second
Amount") payable at the Second Closing (hereinafter defined) in exchange for all
right, title and interest to the remaining number of Equity Securities not
purchased pursuant to clause (a) (the "Remaining Equity Securities"); and (c) an
aggregate number of shares of Common Stock of iVillage to be issued at the
Second Closing as shall equal an aggregate value of $2.8 million (assuming each
share has a value equal to the initial public offering price per share (less the
underwriter's discount) in the initial public offering of iVillage (the "IPO")).
The Second Closing shall occur two business days after the earlier of (x)
closing of the IPO (as contemplated by the applicable Underwriting Agreement)
and (y) receipt by iVillage of at least $6.5 million pursuant to an IPO. The
Consideration shall be payable at the First Closing and the Second Closing, as
applicable, in such amounts to the persons or entities listed on Schedule A in
accordance with the wiring instructions attached as Schedule B hereto. It is
agreed that the beneficial owners of the Equity Securities shall be subject to
the lockup agreement (attached hereto as Exhibit A), which shall be for a term
not to exceed the shortest term applicable to any shares of any other
shareholder, director or executive officer of iVillage and, in any event, not to
exceed a period of 180 days after the date of the Prospectus (as that term is
defined in the Underwriting Agreement). It is understood and agreed by the
parties hereby that the provisions of clause (b) and (c) of this paragraph shall
apply in the event that the IPO occurs on or before April 15, 1999 or during the
Additional Purchase Period (as hereinafter defined).
Notwithstanding anything to the contrary contained herein, iVillage
shall have the right (the "Additional Cash Purchase Right") to purchase the
Remaining Equity Securities for an aggregate $9.3 million in cash until May 31,
1999 (the "Additional Purchase Period") provided (a) it gives written notice of
its intention to exercise the Additional Cash Purchase Right by 5:00
<PAGE>
PM (California time) on April 15, 1999 and pays non-refundable $1 million
dollars (the "Deposit") as a credit toward the remaining $9.3 million purchase
price and (b) the IPO does not occur during the Additional Purchase Period.
In the event the Remaining Equity Securities are not purchased in
accordance with this Agreement, the (i) the Deposit is forfeited by iVillage and
(ii) the terms of the Agreement shall continue in full force and effect except
that the parties hereto agree that upon a Put or Call Event (as defined in the
Agreement) iVillage and ME Group (as defined in the Agreement) shall have 10
business days to agree to a Fair Value Per Share (as defined in Section 6(c) of
the Agreement) or select a "mutually acceptable investment bank" (as described
therein) and such investment bank shall have 15 business days to complete its
valuation in accordance with such Section 6(c). It is hereby agreed that the
costs of such valuation shall be borne by iBaby.
Notwithstanding anything to the contrary contained in any of the
agreements referred to herein, the undersigned waive any restrictions with
respect to the transfer of the Equity Shares to iVillage in accordance with the
terms of this agreement and the Stock Purchase Agreement.
In addition, the parties agree as follows:
(a) The Management Agreement (the "Management Agreement") dated
as of April 8, 1998 between Kid's Warehouse, Inc. ("Kid's
Warehouse") and iBaby shall be extended until April 8, 2000.
Section 12 of the Management Agreement shall be further
amended to include a 90-day termination provision (for any
or no reason) in favor of iVillage and, except as otherwise
provided herein, the terms thereof shall continue in full
force and effect. Additionally, David Mandelbaum shall be
retained by Kid's Warehouse pursuant to the Management
Agreement at $80,000 per year for the term, which payment
shall be paid by iBaby or its successor. iVillage hereby
agrees that Kid's Warehouse may terminate Felicia Mandelbaum
under the Management Agreement, in which case she shall give
10 days notice to iVillage and she shall be subject to the
provisions of Section 5, 6, 7, 8, 9 and 10 of the Management
Agreement. It is understood that David Mandelbaum and
Felicia Mandelbaum shall continue to be subject to the
non-compete restrictions contained in Section 7 of the
Management Agreement. It is further agreed that if Gavin
Mandelbaum's employment pursuant to his Employment Agreement
dated as of April 8, 1998 is terminated (for any reason), he
shall be subject to the form of Separation Agreement
(attached as A hereto) and the provisions of Section 9 of
his Employment Agreement for a period of one (1) year
following termination except that such restrictions (in his
case only) shall be limited to the areas of the internet or
commercial online services or media related to baby, children,
toys, any related products being offered or targeted by iBaby
to iBaby's client base as of the date of such termination.
(b) The Inventory and Services Agreement (the "Inventory
Agreement") dated as of April 8, 1998 between iBaby and
Kid's Warehouse shall be extended until April 8, 2000. The
Inventory Agreement shall be further amended (x) in Section
5(b) to replace the existing reference of "$300,000" to
"$150,000"; (y) in Section 5(c)(ii) to replace the existing
reference of "$3,600,000" to "$1,800,000"; and (z) in
Section 8 to include a 120-day termination provision (for
any or no reason) in
2
<PAGE>
favor of iVillage; (z) and, except as otherwise provided
herein, the terms thereof shall continue in full force and
effect, including, without limitation, the provisions of
Section 5(d) thereof .
(c) Each of the parties hereto shall bear its own expenses in
connection with the preparation for and consummation of the
transactions contemplated by this agreement.
(d) Each of the parties agree that unless otherwise amended
hereby, all of the terms of the terms of the Agreement, the
Management Agreement, the Inventory Agreement and the
Promotional Agreement shall continue in full force and effect
in accordance with their respective terms except that the
Agreement and the Promotional Agreement shall terminate upon
the Second Closing.
(e) Subject to its existing agreements with respect to
registration rights, iVillage agrees to grant piggy-back
registration rights (as set forth in the form of Registration
Rights Agreement set forth as Exhibit B hereto) to the shares
of iVillage common stock issued pursuant to clause (c) of the
first paragraph of this Agreement. The parties hereto agree to
execute a Registration Rights Agreement substantially in the
form of Exhibit B hereto on the Second Closing, with respect
to the shares of iVillage common stock issued on such date(s).
The parties hereby agree to execute such additional documents
specifically referred to herein (including the exhibits attached hereto, the
stock purchase agreement (and exhibits attached thereto), stock powers) and take
such additional actions as are reasonably necessary or appropriate to effectuate
the terms of this agreement. iVillage agrees to pay upon consummation of the
First Closing to the law firm of Procopio, Cory, Hargreaves & Savitch LLP
$12,500.00 assuming they have delivered their legal opinions at the First
Closing in accordance with the Stock Purchase Agreements provided, however such
sum shall be returned upon written request of iVillage if the Second Closing
occurs, no such opinion is delivered and the failure to deliver such opinion
constitute a breach of the Stock Purchase Agreement.
This agreement (and the other agreements referred to herein, as herein
amended) embodies the entire agreement and understanding between among iVillage,
Kid's Warehouse, JBM, iBaby and OurBaby and supersedes any and all negotiations,
prior discussions and preliminary and prior agreements and understandings
related to the subject matter thereof. If any term or provision hereof is deemed
unlawful or invalid for any reason whatsoever, such unlawfulness or invalidity
shall not affect the validity of the remainder of this agreement.
This Agreement is entered into in San Diego, California and shall be
governed by and construed in accordance with the internal laws of the State of
California (without giving effect to the conflict of law provisions thereunder).
Any controversy between or among the parties hereto involving any claim
arising out of or relating to this Agreement, will be submitted to and be
settled by final and binding arbitration in San Diego county in the State of
California, in accordance with the then current Commercial Arbitration Rules of
the American Arbitration Association (the "AAA"), and judgment upon the
3
<PAGE>
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Such arbitration shall be conducted by one (1)
arbitrator experienced with internet companies appointed by the AAA. The
arbitrator shall be required to provide in writing to the parties the basis
for the award or order or such arbitrator.
In any claim, case or controversy arising under or relating to
this letter agreement, the unsuccessful party, as determined by the applicable
arbitrator or court, shall pay the successful party all costs, expenses and
reasonable attorneys' fees incurred by the successful party.
This agreement and the rights hereunder may not be assigned by either
party (except by operation of law) and shall be binding upon and inure to the
benefit of the parties and their respective successors, assigns and legal
representatives. This agreement may be executed in any number of counterparts by
original or facsimile signature, and each such counterpart shall be deemed to be
an original instrument, but all such counterparts together shall constitute but
one agreement.
Prior to the Second Closing, the Mandelbaum Entity, JBM, iVillage and
iBaby agree to work together with a view to effecting, at iBaby's reasonable
expense, the transfer of shares of iBaby from JBM and the Mandelbaum Entity to
each such investor's employees (or designees), subject to and consistent with
the terms and provisions of the Investment Agreement and the Agreement;
provided, however such shares shall be subject to the provisions of this
Agreement.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, NONE OF THE PARTIES SHALL BE
LIABLE TO ANY OTHER PARTY FOR ANY DAMAGES, FEES, COSTS OR EXPENSES SUFFERED OR
INCURRED BY IT IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED
BY THIS AGREEMENT OR RESULTING FROM THE TERMINATION OF THIS AGREEMENT. UNDER NO
CIRCUMSTANCES SHALL ANY PARTY BE LIABLE TO ANOTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM THE TERMINATION
OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED
PROFITS OR LOST BUSINESS.
4
<PAGE>
Please affix your signature in the place designated and by doing so, the
undersigned shall confirm our understanding and agreements in connection with
the purchase referred to herein.
Very truly yours,
iVILLAGE INC.
By: /s/ Steve Elkes
---------------------------------
Steve Elkes
Authorized Representative
The arrangements in the foregoing
letter are satisfactory to us:
KID'S WAREHOUSE, INC.
By: /s/ David Mandelbaum
----------------------------------
David Mandelbaum
President
and authorized representative
iBABY, INC.
By: /s/ Steve Elkes
----------------------------------
Steve Elkes
Title:
OURBABY, LLC
By: /s/ David Mandelbaum
----------------------------------
David Mandelbaum
Manager
and authorized representative
JBM VENTURES, INC.
By: /s/ James Morris
----------------------------------
James Morris
President
and authorized representative
GAVIN MANDELBAUM
/s/ Gavin Mandelbaum
- -------------------------------------
Gavin Mandelbaum
cc: William Eigner, Esq.
5
<PAGE>
LISA TUDOR
/s/ Lisa Tudor
- ------------------------------
Lisa Tudor
BARBARA ROBINSON
/s/ Barabara Robinson
- ------------------------------
Barabara Robinson
6
<PAGE>
SCHEDULE A
FIRST CLOSING
<TABLE>
<CAPTION>
Investor # iB Shrs Shares Sold Prct Consideration
-------- --------- ----------- ---- -------------
<S> <C> <C> <C> <C>
OurBaby 622,222 86,420 93.33% 1,400,001
JBM 27,778 3,858 4.17% 62,501
Lisa Tudor 8,333 1,157 1.25% 18,749
Barbara Robinson 8,333 1,157 1.25% 18,749
Total 666,666 92,593 1 1,500,000
Total Value 10,800,000
First Closing 1,500,000
Percent 13.9%
SECOND
CLOSING
<CAPTION>
Consideration
Investor # iB Shrs Shares Sold Prct Share Value@ Cash
-------- --------- ----------- ---- ------------ ----
<S> <C> <C> <C> <C> <C>
OurBaby 622,222 535,802 93.33% 2,613,335 6,066,671
JBM 27,778 23,920 4.17% 116,668 270,836
Lisa Tudor 8,333 7,176 1.25% 34,999 81,247
Barbara Robinson 8,333 7,176 1.25% 34,999 81,247
Total 666,666 574,074 1 2,800,000 6,500,000
@Numbers of shares
to be determined
upon IPO price in
accordance with
agreement.
Total Value 10,800,000
Second Closing 9,300,000
Percent 86.1%
Cash/Stock Split
Cash 6,500,000 70%
Stock 2,800,000 30%
9,300,000
</TABLE>
7
<PAGE>
SCHEDULE B
Wiring Instructions
<PAGE>
EXHIBIT A
Form of Lockup Agreement
[Date]
Goldman, Sachs & Co.
Credit Suisse First Boston Corporation
Hambrecht & Quist LLC
As Representatives of the several Underwriters
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Dear Sirs and Mesdames:
This agreement (the "Lock-up Agreement") relates to the
proposed initial public offering (the "Offering") of the Common Stock, $0.0005
par value per share (the "Common Stock"), of iVillage Inc., a Delaware
corporation (the "Company").
In connection with the Offering, the Company will enter into
an underwriting agreement (the "Underwriting Agreement") with the several
underwriters listed on Schedule I to the Underwriting Agreement (the
"Underwriters") for whom you are acting as representatives (the
"Representatives").
In consideration of your entering into the Underwriting
Agreement, the undersigned hereby confirms, covenants and agrees that the
undersigned will not (and will not permit any other person, to the extent
allowable by law, who holds of record any of the undersigned's shares of Common
Stock, or substantially similar securities of the Company, to, with respect to
the shares so held), directly or indirectly, sell, offer to sell, contract to
sell, grant any option or warrant for the sale or purchase of, or otherwise
dispose of, any shares of Common Stock, or securities of the Company
substantially similar to the Common Stock, or any security convertible or
exchangeable into or exercisable for Common Stock, or any such substantially
similar securities, whether now owned or hereinafter acquired, owned by the
undersigned or with respect to which the undersigned has the power of
disposition or beneficial ownership (collectively, the "Shares") for a period
not to exceed the shortest term applicable to any shares of any other
shareholder, director or executive officer of iVillage and, in any event, not to
exceed a period of 180 days after the date of the Prospectus (as that term is
defined in the Underwriting Agreement).
The foregoing restriction is expressly agreed to preclude the
undersigned from engaging in any hedging or other transaction which is designed
to or reasonably expected to lead to or result in a sale or disposition of the
Shares even if such Shares would be disposed of by someone other than the
undersigned. Such prohibited hedging or other transactions would include without
limitation any short sale or any purchase, sale or grant of any right (including
without limitation any put or call option) with respect to any of the Shares or
with respect to any security that includes, relates to, or derives any
significant part of its value from such Shares.
9
<PAGE>
Notwithstanding the foregoing, the undersigned may transfer
the Shares (i) as a bona fide gift or gifts, provided that the donee or donees
thereof agree to be bound by the restrictions set forth herein, (ii) to any
trust for the direct or indirect benefit of the undersigned or the immediate
family of the undersigned, provided that the trustee of the trust agrees to be
bound by the restrictions set forth herein, and provided further that any such
transfer shall not involve a disposition for value, (iii) to any affiliate of
the undersigned, provided that such affiliate continues during such restricted
period to be an affiliate and agrees to be bound by the restrictions set forth
herein, and provided further that any such transfer shall not involve a
disposition for value or (iv) with the prior written consent of Goldman, Sachs &
Co. on behalf of the Underwriters. For purposes of this Lock-up Agreement,
"immediate family" shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin. For purposes of this Lock-up Agreement, an
"affiliate" of the undersigned shall mean a limited partner, stockholder or a
wholly-owned subsidiary of the undersigned. The undersigned now has, and, except
as contemplated by clause (i), (ii), (iii) or (iv) above, for the duration of
this Lock-up Agreement will have, good and marketable title to the Shares, free
and clear of all liens, encumbrances and claims whatsoever. The undersigned also
agrees and consents to the entry of stop transfer instructions with the
Company's transfer agent and registrar against the transfer of the Shares except
in compliance with the foregoing restrictions.
The undersigned acknowledges (i) the sufficiency of the
consideration for this Lock-up Agreement and (ii) that the decision, if any, of
the Underwriters to enter into the Underwriting Agreement will be made in part
in reliance upon the undersigned entering into, and abiding by the terms of,
this Lock-up Agreement. The undersigned further acknowledges that this Lock-up
Agreement is irrevocable and shall be binding upon the undersigned's heirs,
legal representatives, successors and assigns.
The undersigned further represents and agrees that he, she or
it has not taken and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares (as such term is
defined in the Underwriting Agreement), or which has otherwise constituted or
will constitute any prohibited bid for or purchase of the Shares or any related
securities.
----------------------------------------
Signature
----------------------------------------
Print Name of Stockholder
10
<PAGE>
Exhibit B
Form of Registration Rights Agreement
================================================================================
iBABY REGISTRATION RIGHTS AGREEMENT
DATED AS OF FEBRUARY 1, 1999
AMONG
i VILLAGE INC.
AND
EACH OF THE
SIGNATORIES HERETO
================================================================================
11
<PAGE>
iBABY REGISTRATION
RIGHTS AGREEMENT dated as of
February o, 1999 (the "Agreement"),
among iVILLAGE INC., a Delaware
corporation (the "Company"), and
each of the signatories hereto
identified as an iBaby Investor on
the signature page of such signatory
(the "iBaby Investors").
RECITALS
WHEREAS, in connection with the acquisition of the minority
interest of iBaby, Inc., a [California] corporation, by the Company, the iBaby
Investors are acquiring on the date hereof __________ shares of Common Stock,
$.0005 par value, of the Company (the "Common Stock");
WHEREAS, the Company has agreed to grant certain registration
rights to the iBaby Investors subject to the Company's existing Fourth Amended
and Restated Registration Rights Agreement dated as of December 4, 1998 and
attached hereto as Exhibit A (the "Fourth Amended and Restated Registration
Rights Agreement"), among the Company, the Investors and Founders identified
therein, and the Astrology Registration Rights Agreement dated as of February o,
1999 and attached hereto as Exhibit B (the "Astrology Registration Rights
Agreement" and together with the Fourth Amended and Restated Rights Agreement,
the Existing Registration Rights Agreements"), among the Company and the
Astrology Investors identified therein;
WHEREAS, this Agreement shall in no way impair or amend the
existing rights of the parties to the Existing Registration Rights Agreements;
and
WHEREAS, the parties deem it to be in their best interests to
set forth herein their rights and obligations in connection with public
offerings and sales of shares of Common Stock. Accordingly, the parties agree as
follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
(a) "AOL Warrants" shall mean stock subscription
warrants dated September 19, 1995 and May 6, 1996 issued by the Company to
America Online, Inc. ("AOL") to purchase shares of Series B Preferred Stock of
the Company.
(b) "Astrology Investor" means those investors who
are identified as an "Astrology Investor" in the Astrology Registration Rights
Agreement.
<PAGE>
(c) "Bear Stearns Warrants" shall mean stock
subscription warrants dated May __, 1997 issued by the Company to Bear Stearns
& Co. Inc. ("Bear Stearns") to purchase shares of Common Stock.
(d) "Commission" means the Securities and Exchange
Commission or any other Federal agency at the time administering the
Securities Act.
(e) "Exchange Act" means the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
(f) "Investor" means those investors who are
identified as an "Investor" in the Fourth Amended and Restated Registration
Rights Agreement.
(g) "IPO" means an underwritten public offering of
Common Stock of the Company registered pursuant to the Securities Act.
(h) "1997 Warrants" means the stock subscription
warrants dated February 27, 1997, issued by the Company to AOL, Tribune
Company ("Tribune"), Kleiner Perkins Caufield & Byers VII and KPCB Information
Sciences Zaibatsu Fund II and the stock subscription warrants dated April 30,
1997, issued by the Company to AOL and Tribune to purchase shares of Series C
Preferred Stock of the Company.
(i) "Other Shares" means at any time those shares of
Common Stock which do not constitute Primary Shares, Registrable Shares or
Registrable Astrology Shares.
(j) "Preferred Stock" means shares of Series A
Preferred Stock, $.0005 par value, Series B Preferred Stock, $.0005 par value,
Series B-1 Preferred Stock, $.0005 par value, Series C Preferred Stock, $.0005
par value, Series D Preferred Stock, $.0005 par value and Series E Preferred
Stock, $.0005 par value of the Company.
(k) "Primary Shares" means at any time the
authorized but unissued shares of Common Stock or shares of Common Stock held
by the Company in its treasury.
(l) "Registrable Astrology Shares" means at any
time, with respect to any Astrology Investor, the shares of Common Stock held
(or to be held upon conversion of any Restricted Shares) by such Astrology
Investor that constitute Restricted Shares.
(m) "Registrable Bear Stearns Shares" means at any
time with respect to Bear Stearns, the shares of Common Stock issued or
issuable upon exercise of the Bear Stearns Warrants and any shares or other
securities received in respect thereof, which are held by Bear Stearns and
which have not previously been sold to the public pursuant to a registration
statement under the Securities Act or pursuant to Rule 144.
(n) "Registrable iBaby Shares" means at any time,
with respect to any iBaby Investor, the shares of Common Stock held (or to be
held upon conversion of any Restricted Shares) by such iBaby Investor that
constitute Restricted Shares.
2
<PAGE>
(o) "Registrable Shares" means at any time, with
respect to any Investor, the shares of Common Stock held (or to be held upon
conversion of any Restricted Shares) by such Investor that constitute
Restricted Shares.
(p) "Registrable Founder Shares" means at any time,
with respect to any Founder (as defined in the Existing Registration Rights
Agreement), the shares of Common Stock held by such Founder that constitute
Restricted Founder Shares.
(q) "Registration Date" means the date upon which
the registration statement pursuant to which the Company shall have initially
registered shares of Common Stock under the Securities Act for sale to the
public shall have been declared effective.
(r) "Restricted Founder Shares" means at any time,
with respect to any Founder, the shares of Common Stock held by him or her on
the date hereof, and any shares or other securities received in respect
thereof, which are held by such Founder and which have not previously been
sold to the public pursuant to a registration statement under the Securities
Act or pursuant to Rule 144.
(s) "Restricted Shares" means at any time, with
respect to any iBaby Investor, any shares of Common Stock issued or issuable
upon conversion thereof, and any shares or other securities received in
respect thereof, which are held by such iBaby Investor and which have not
previously been sold to the public pursuant to a registration statement under
the Securities Act or pursuant to Rule 144.
(t) "Rule 144" means Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary rule thereto.
(u) "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations of the Commission thereunder,
all as the same shall be in effect from time to time.
(v) "Stockholder" means any Investor, Astrology
Investor, iBaby Investor or Founder and any person or entity that acquires
Restricted Shares from such Investor or Astrology Investor or iBaby Investor
or Restricted Founder Shares from such Founder in accordance with Section 14.
(w) "Tenet Common Stock" means shares of Common
Stock sold to Tenet Healthcare Corporation pursuant to the terms of the Common
Stock Purchase Agreement dated as of February 24, 1998 among the Company and
the Investors identified therein and any Additional Shares (as such term is
defined therein) issued thereunder.
(x) "Transfer" means any disposition of any
Restricted Shares or Restricted Founder Shares or Registrable Bear Stearns
Shares or of any interest therein which constitutes a sale within the meaning
of the Securities Act, other than any disposition pursuant to an effective
registration statement under the Securities Act and complying with all
applicable state securities and "blue sky" laws.
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SECTION 2. Piggyback Registration.
(a) If the Company at any time proposes for any
reason to register Primary Shares, Registrable Shares (other than pursuant to
Section 2 of the Fourth Amended and Restated Registration Rights Agreement),
Registrable Astrology Shares, Registrable iBaby Shares or Other Shares under
the Securities Act (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto or other than in connection with
an exchange offer or offering solely to the Company's stockholders), it shall
promptly give written notice to each Stockholder and to Bear Stearns of its
intention so to register the Primary Shares, Registrable Shares, Registrable
Astrology Shares, Registrable iBaby Shares or Other Shares and, upon the
written request, given within 30 days after delivery of any such notice by the
Company, of any Stockholder and/or of Bear Stearns to include in such
registration Registrable Shares, Registrable Founder Shares, Registrable
Astrology Shares, Registrable iBaby Shares or Registrable Bear Stearns Shares,
as the case may be (which request shall specify the number of Registrable
Shares, Registrable Founder Shares, Registrable Astrology Shares, Registrable
iBaby Shares or Registrable Bear Stearns Shares, as the case may be, proposed
to be included in such registration), the Company shall use its best efforts
to cause all such Registrable Shares, Registrable Founder Shares, Registrable
Astrology Shares, Registrable iBaby Shares or Registrable Bear Stearns Shares,
as the case may be, to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration;
provided, however, that if the managing underwriter advises the Company that
the inclusion of all Registrable Shares, Registrable Founder Shares,
Registrable Astrology Shares, Registrable iBaby Shares, Registrable Bear
Stearns Shares and/or Other Shares proposed to be included in such
registration would interfere with the successful marketing (including pricing)
of the Primary Shares proposed to be registered by the Company, then the
number of Primary Shares, Registrable Shares, Registrable Founder Shares,
Registrable Astrology Shares, Registrable iBaby Shares, Registrable Bear
Stearns Shares and Other Shares, proposed to be included in such registration
shall be included in the following order:
(i) first, the Primary Shares;
(ii) second, the Registrable Shares held by
Investors and the Registrable Bear Stearns Shares, pro rata based upon the
number of Restricted Shares (based upon Common Stock equivalents) owned by
each Investor and the number of Registrable Bear Stearns Shares then held by
or issuable to Bear Stearns at the time of such registration;
(iii) third, Registrable Founder Shares pro
rata based upon the number of shares of Common Stock then owned by each Founder
at the time of such registration;
(iv) fourth, Registrable Astrology Shares
and Registrable iBaby Shares pro rata based upon the number of Restricted Shares
(based upon Common Stock equivalents) owned by each Astrology Investor and
iBaby Investor at the time of such registration; and
(v) fifth, the Other Shares (other than
Registrable Founder Shares).
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(b) Each iBaby Investor who has requested that
Registrable iBaby Shares be included in a registration pursuant to Section
2(a) hereof shall be bound by the Company's choice of managing underwriter
stated in the Company's notice.
SECTION 3. Holdback Agreement.
(a) In connection with the initial public offering
of shares of Common Stock of the Company registered pursuant to the Securities
Act, if the managing underwriter for such registration shall so request, the
iBaby Investors shall not (and will not permit any other person, to the extent
allowable by law, who or which holds of record any of the Common Stock held by
any iBaby Investor to directly or indirectly, sell, offer to sell, contract to
sell, grant any option or warrant for the sale or purchase of, or otherwise
dispose of, any Common Stock (other than those included in such registration),
or any security convertible or exchangeable into or exercisable therefor,
whether now owned or hereafter acquired, owned by the iBaby Investors or with
respect to which the iBaby Investors have the power of disposition or
beneficial ownership (as used in this Section 3, collectively, the "Subject
Shares") for a period of 180 days after the effective date of the registration
statement pursuant to which such public offering shall be made.
Notwithstanding anything to the contrary contained elsewhere herein, the
transfer restrictions contained in this Section 3 shall not apply to shares of
Common Stock purchased by the iBaby Investors in the initial public offering
or in market transactions after the initial public offering. Any subsequent
resale of such shares of Common Stock so acquired shall not constitute a
breach of this Section 3.
(b) The foregoing restriction is expressly agreed
by the parties hereto to preclude the iBaby Investors from engaging in any
hedging or other transaction which is designed to or reasonably expected to
lead to or result in a sale or disposition of the Subject Shares even if such
Subject Shares would be disposed of by someone other than the iBaby Investors.
Such prohibited hedging or other transactions would include, without
limitation, any short sale or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any of
the Subject Shares or with respect to any security that includes, relates to,
or derives any significant part of its value from the Subject Shares.
(c) Notwithstanding the foregoing, the provisions
of this Section 3 shall not prohibit the iBaby Investors from transferring the
Subject Shares (i) as a bona fide gift or gifts, provided that the donee or
donees thereof agree to be bound by the restrictions set forth herein, (ii) to
any trust for the direct or indirect benefit of any iBaby Investor or the
immediate family of such iBaby Investor or (iii) any affiliate of any iBaby
Investor, provided that the trustee of the trust or any such affiliate
transferee agrees to be bound by the restrictions set forth herein, and
provided further (x) that any such transfer shall not involve a disposition
for value and (y) in the case of an affiliate, such affiliate continues during
such restricted period to be an affiliate, or (iv) with the prior written
consent of the managing underwriter of such public offering on behalf of the
underwriters for such public offering. For purposes of this Section 3,
"immediate family" shall mean any relationship by blood, marriage or adoption,
not more remote than first cousin.
(d) The iBaby Investors also agree and consent to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of the Subject Shares except in compliance with
the foregoing restrictions.
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(e) The foregoing restrictions in this Section 3
shall be binding on the iBaby Investors only if, and to the extent, the
executive officers of the Company owning Common Stock shall be bound by such
restrictions.
SECTION 4. Preparation and Filing.
If and whenever the Company is under an obligation pursuant to
the provisions of this Agreement to use its best efforts to effect the
registration of any Registrable iBaby Shares, the Company shall, as
expeditiously as practicable:
(a) use its best efforts to cause a registration
statement that registers such Registrable iBaby Shares to become and remain
effective for a period of 180 days or until all of such Registrable iBaby
Shares have been disposed of (if earlier);
(b) furnish, at least five business days before
filing a registration statement that registers such Registrable iBaby Shares,
a prospectus relating thereto or any amendments or supplements relating to
such a registration statement or prospectus, to one counsel selected by the
holders of a majority of the Registrable Shares (the "Selling Stockholders'
Counsel"), copies of all such documents proposed to be filed (it being
understood that such five-business-day period need not apply to successive
drafts of the same document proposed to be filed so long as such successive
drafts are supplied to such counsel in advance of the proposed filing by a
period of time that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective for at least a period of 180 days or until all of such
Registrable iBaby Shares have been disposed of (if earlier) and to comply with
the provisions of the Securities Act with respect to the sale or other
disposition of such Registrable iBaby Shares;
(d) notify in writing the Selling Stockholders'
Counsel promptly (i) of the receipt by the Company of any notification with
respect to any comments by the Commission with respect to such registration
statement or prospectus or any amendment or supplement thereto or any request
by the Commission for the amending or supplementing thereof or for additional
information with respect thereto, (ii) of the receipt by the Company of any
notification with respect to the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or prospectus or
any amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification of such
Registrable iBaby Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify
such Registrable iBaby Shares under such other securities or blue sky laws of
such jurisdictions as any seller of Registrable iBaby Shares reasonably
requests and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller of Registrable iBaby Shares to
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consummate the disposition in such jurisdictions of the Registrable iBaby
Shares owned by such seller; provided, however, that the Company will not be
required to qualify generally to do business, subject itself to general
taxation or consent to general service of process in any jurisdiction where it
would not otherwise be required so to do but for this paragraph (e);
(f) furnish to each seller of such Registrable iBaby
Shares such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such seller of Registrable iBaby
Shares may reasonably request in order to facilitate the public sale or other
disposition of such Registrable iBaby Shares;
(g) use its best efforts to cause such Registrable
iBaby Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company to enable the seller or sellers thereof to
consummate the disposition of such Registrable iBaby Shares;
(h) notify on a timely basis each seller of such
Registrable iBaby Shares at any time when a prospectus relating to such
Registrable iBaby Shares is required to be delivered under the Securities Act
within the appropriate period mentioned in paragraph (a) of this Section, of
the happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing and, at the request of such seller, prepare
and furnish to such seller a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the offerees of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(i) make available for inspection by any seller of
such Registrable iBaby Shares, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter
(collectively, the "Inspectors"), all pertinent financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, directors and
employees to supply all information (together with the Records, the
"Information") reasonably requested by any such Inspector in connection with
such registration statement. Any of the Information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be disclosed by the Inspectors unless
(i) the disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of
such Information is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) such Information has been made generally
available to the public. The seller of Registrable iBaby Shares agrees that it
will, upon learning that disclosure of such Information is sought in a court
of competent jurisdiction, give notice to the Company and allow the Company,
at the Company's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential;
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(j) use its best efforts to obtain from its
independent certified public accountants "comfort" letters in customary form
and at customary times and covering matters of the type customarily covered by
comfort letters;
(k) use its best efforts to obtain from its counsel
an opinion or opinions in customary form;
(l) provide a transfer agent and registrar (which
may be the same entity and which may be the Company) for such Registrable
iBaby Shares;
(m) issue to any underwriter to which any seller of
Registrable iBaby Shares may sell shares in such offering certificates
evidencing such Registrable iBaby Shares;
(n) list such Registrable iBaby Shares on any
national securities exchange on which any shares of the Common Stock are
listed or, if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Registrable iBaby Shares for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc. (the "NASD") or such national securities exchange as
the holders of a majority of the Registrable Shares, Registrable Founder
Shares, Registrable Astrology Shares, Registrable iBaby Shares and/or
Registrable Bear Stearns Shares (as the case may be) shall request;
(o) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission and make available to
its securityholders, as soon as reasonably practicable, earnings statements
(which need not be audited) covering a period of 12 months beginning within
three months after the effective date of the registration statement, which
earnings statements shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(p) use its best efforts to take all other steps
necessary to effect the registration of such Registrable iBaby Shares
contemplated hereby.
SECTION 5. Expenses.
All expenses incurred by the Company in complying with Section
4, including, without limitation, all registration and filing fees (including
all expenses incident to filing with the NASD), fees and expenses of complying
with securities and blue sky laws, printing expenses, and fees and expenses of
the Company's counsel and accountants, and the fees and expenses of the Selling
Stockholders' Counsel shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
iBaby Shares shall be borne by the seller or sellers thereof, in proportion to
the number of Registrable Shares, Registrable Founder Shares, Registrable
Astrology Shares, Registrable iBaby Shares and/or Registrable Bear Stearns
Shares (as the case may be) sold by such seller or sellers.
SECTION 6. Indemnification.
In connection with any registration of any Registrable iBaby
Shares under the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless the seller of such Registrable iBaby Shares, its
partners, members in the case of a limited liability company, beneficiaries in
the case of a trust, officers and directors, each underwriter, broker or
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any other person acting on behalf of such seller and each other person, if
any, who controls any of the foregoing persons within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, (or actions in respect thereof) to which any of the foregoing persons
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the registration statement under which such
Registrable iBaby Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein or otherwise
filed with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable iBaby Shares, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made not misleading, or any violation by the Company of the
Securities Act or state securities or blue sky laws applicable to the Company
and relating to action or inaction required of the Company in connection with
such registration or qualification under such state securities or blue sky
laws; and shall reimburse such seller, such officer or director, such
underwriter, such broker or such other person acting on behalf of such seller
and each such controlling person for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in said
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document incident to registration or qualification of any
Registrable iBaby Shares in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller or underwriter that states that it is specifically for use in the
preparation thereof.
In connection with any registration of Registrable iBaby
Shares under the Securities Act pursuant to this Agreement, each seller of
Registrable iBaby Shares shall indemnify and hold harmless (in the same manner
and to the same extent as set forth in the preceding paragraph of this Section)
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement, each underwriter, broker or other person
acting on behalf of such seller, each person who controls any of the foregoing
persons within the meaning of the Securities Act and each other seller of
Registrable Shares, Registrable Founder Shares, Registrable Astrology Shares,
Registrable iBaby Shares and/or Registrable Bear Stearns Shares (as the case may
be) under such registration statement with respect to any statement or omission
from such registration statement, any preliminary prospectus or final prospectus
contained therein or otherwise filed with the Commission, any amendment or
supplement thereto or any document incident to registration or qualification of
any Registrable Shares, Registrable Founder Shares, Registrable Astrology
Shares, Registrable iBaby Shares and/or Registrable Bear Stearns Shares (as the
case may be), if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company or such underwriter
through an instrument duly executed by such seller or underwriter that states
that it is specifically for use in connection with the preparation of such
registration statement, preliminary prospectus, final prospectus, amendment,
supplement or document; provided, however, that the obligation to indemnify will
be several, not joint and several, among such
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sellers of Registrable iBaby Shares, and the maximum amount of liability in
respect of such indemnification shall be in proportion to and limited to, in
the case of each seller of Registrable iBaby Shares, an amount equal to the
net proceeds actually received by such seller from the sale of Registrable
iBaby Shares effected pursuant to such registration.
The indemnification required by this Section 6 will be made by
periodic payments during the course of the investigation or defense, as and when
bills are received or expenses incurred, subject to prompt refund in the event
any such payments are determined not to have been due and owing hereunder.
Promptly after receipt by an indemnified party of notice of
the commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section.
The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling person
of such indemnified party and will survive the transfer of securities.
If the indemnification provided for in this Section is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge,
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access to information and opportunity to correct or prevent such statement or
omission. The Company and the sellers of Registrable iBaby Shares agree that
it would not be just and equitable if contributions pursuant to this paragraph
were determined by pro rata allocation or by any other method of allocation
which did not take into account the equitable considerations referred to
herein. The amount paid or payable to an indemnified party as a result of the
losses, claims, damages, liabilities or expenses referred to above shall be
deemed to include, subject to the limitation set forth in the fourth paragraph
of this Section 6, any legal or other expenses reasonably incurred in
connection with investigating or defending the same. Notwithstanding the
foregoing, in no event shall the amount contributed by a seller of Registrable
iBaby Shares exceed the aggregate net offering proceeds received by such
seller from the sale of such seller's Registrable iBaby Shares.
SECTION 7. Underwriting Agreement.
Notwithstanding the provisions of Sections 3, 4, 5 and 6, to
the extent that the Company and the Stockholders selling Registrable iBaby
Shares in a proposed registration shall enter into an underwriting or similar
agreement, which agreement contains provisions covering one or more issues
addressed in such Sections, the provisions contained in such Sections addressing
such issue or issues shall be superseded with respect to such registration by
such other agreement.
SECTION 8. Information by Holder.
Each Stockholder selling Registrable iBaby Shares in a
proposed registration shall furnish to the Company such written information
regarding such holder and the distribution proposed by such Stockholder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
SECTION 9. Exchange Act Compliance.
From and after the Registration Date or such earlier date as a
registration statement filed by the Company pursuant to the Exchange Act
relating to any class of the Company's securities shall have become effective,
the Company shall comply with all of the reporting requirements of the Exchange
Act and with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Company shall cooperate with each iBaby Investor in
supplying such information as may be necessary for such iBaby Investor to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of Rule 144.
SECTION 10. No Conflict of Rights.
The Company represents and warrants to the iBaby Investors
that the registration rights granted to the iBaby Investors hereby do not
conflict with any other registration rights granted by the Company. The Company
shall not, after the date hereof, grant any registration rights which conflict
with or impair the registration rights granted hereby.
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SECTION 11. Restriction on Transfer.
(a) The Restricted Shares shall not be transferable
except upon the conditions specified in this Section, which conditions are
intended to insure compliance with the provisions of the Securities Act.
(b) Each certificate representing Restricted Shares
held by an iBaby Investor shall (unless otherwise permitted by the provisions
of paragraph (c) and (d) below) be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT. ADDITIONALLY, THE TRANSFER OF THESE
SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 11
OF THE REGISTRATION RIGHTS AGREEMENT DATED AS OF FEBRUARY __,
1999, AMONG i VILLAGE INC. AND THE OTHER PARTIES THERETO, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF
CERTAIN OF SUCH CONDITIONS, i VILLAGE INC., HAS AGREED TO DELIVER
TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND,
FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF
SUCH HOLDER. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF i VILLAGE INC."
(c) The holder of any Restricted Shares by
acceptance thereof agrees, prior to any Transfer of any Restricted Shares, to
give written notice to the Company of such holder's intention to effect such
Transfer and to comply in all other respects with the provisions of this
Section. Each such notice shall describe the manner and circumstances of the
proposed Transfer. Upon request by the Company, the holder delivering such
notice shall deliver a written opinion, addressed to the Company, of counsel
for the holder of such Restricted Shares stating that in the opinion of such
counsel (which opinion and counsel shall be reasonably satisfactory to the
Company) such proposed Transfer does not involve a transaction requiring
registration or qualification of such Restricted Shares under the Securities
Act or the securities or "blue sky" laws of any state of the United States
provided, however, that no such opinion of counsel shall be necessary for a
Transfer by an iBaby Investor which is a partnership to a partner of such
iBaby Investor, or a retired partner of such holder who retires after the date
hereof, or the estate of any such partner or retired partner, if in each case
the transferee agrees in writing to be subject to the terms of this Section 11
to the same extent as if such transferee were originally a signatory to this
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Agreement. Such holder of Restricted Shares shall be entitled to Transfer such
Restricted Shares in accordance with the terms of the notice delivered to the
Company, if the Company does not reasonably object to such Transfer and
request such opinion within three business days after delivery of such notice,
or, if it requests such opinion, does not reasonably object to such Transfer
within five days after delivery of such opinion. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any
Restricted Shares (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Shares) shall bear the legend set
forth in paragraph (b) above unless (i) in such opinion of counsel
registration of any future Transfer is not required by the applicable
provisions of the Securities Act or (ii) the Company shall have waived the
requirement of such legends.
(d) Notwithstanding the foregoing provisions of this
Section, the restrictions imposed by this Section upon the transferability of
any Restricted Shares shall cease and terminate when (i) any such Restricted
Shares are sold or otherwise disposed of (A) pursuant to an effective
registration statement under the Securities Act or (B) in a transaction
contemplated by paragraph (c) above which does not require that the Restricted
Shares so transferred bear the legend set forth in paragraph (b) hereof, or
(ii) the holder of such Restricted Shares has met the requirements for
Transfer of such Restricted Shares under Rule 144(k) under the Securities Act.
Whenever the restrictions imposed by this Section shall terminate, the holder
of any Restricted Shares as to which such restrictions have terminated shall
be entitled to receive from the Company, without expense, a new certificate
not bearing the restrictive legend set forth in paragraph (b) above and not
containing any other reference to the restrictions imposed by this Section.
SECTION 12. Termination.
This Agreement shall terminate and be of no further force or
effect when there shall not be any Restricted Shares held by an iBaby Investor,
provided that the rights of the iBaby Investors and obligations of the Company
under Sections 2 hereof shall earlier terminate and be of no further force or
effect at such earlier time as to any iBaby Investors as the provisions of Rule
144(k) are applicable to the Restricted Shares then held by such iBaby
Investors.
SECTION 13. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the
Company, the iBaby Investors and, subject to Section 14, their respective
successors, permitted assigns, heirs and legal representatives (as the case may
be).
SECTION 14. Assignment.
This Agreement and the rights and obligations of the parties
hereunder shall not be assignable by the parties hereto and their respective
successors and assigns, except that any iBaby Investor may assign its rights and
obligations hereunder only in connection with a sale or transfer of Restricted
Shares (a) if such Stockholder is a partnership, to any partner thereof (in the
case of a pro rata distribution by a Stockholder that is a partnership to its
partners), (b) if such Stockholder is a corporation, to any majority-owned
subsidiary of such Stockholder (provided
13
<PAGE>
that such rights may be exercised by such subsidiary only for so long as such
subsidiary continues to be majority-owned by such Stockholder), (c) if such
Stockholder is a natural person, to the spouse or descendants of such person
or any trust for the benefit of any thereof, or (d) otherwise to any other
person or entity to whom at least 250,000 Restricted Shares or Restricted
Founder Shares (in each case as constituted on the date hereof) (or lesser
number of such shares if representing all of the shares then held by such
Stockholder), have been sold or otherwise transferred in accordance with the
terms of the Fourth Amended and Restated Stockholders' Agreement dated as of
the date hereof, among the Company and the other parties thereto, provided,
however, that the Company is given written notice at the time of such
assignment stating the name and address of the assignee and identifying the
securities with respect to which the rights and benefits hereunder are being
assigned and such assignee expressly agrees in writing with the Company and
the other Stockholders to be bound by and to comply with all applicable
provisions of this Agreement, whereupon such person or entity shall have the
benefits of, and shall be subject to the restrictions contained in, this
Agreement with respect to such securities. Any assignment pursuant to this
Section 14 shall not relieve, release or otherwise discharge the Stockholder
effecting such assignment from its obligations under this Agreement. This
Agreement shall bind and inure to the benefit of the Company, each
Stockholder, and its or his respective successors, permitted assigns, heirs
and legal representatives. For purposes of this Section 14, "Control" or
"Controlled" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management or policies of an entity,
whether through the ownership of voting securities, by contract or otherwise.
SECTION 15. Entire Agreement.
This Agreement contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior arrangements
or understandings with respect hereto.
SECTION 16. Notices.
All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered in
person, by telecopy, by nationally-recognized overnight courier, or by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor:
(i) if to the Company, to:
i Village, Inc.
170 Fifth Avenue
3rd Floor
New York, New York 10010
Fax: (212) 604-9133
Telephone: (212) 604-0963
Attention: Candice Carpenter;
14
<PAGE>
with a copy to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Fax: (212) 506-5151
Telephone: (212) 506-5325
Attention: Martin H. Levenglick, Esq.; and
(ii) if to an iBaby Investor to the address
specified on such iBaby Investor's
signature page hereto.
All such notices, requests, consents and other communications
shall be deemed to have been delivered (a) in the case of personal delivery or
delivery by telecopy, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day and (c) in the
case of mailing, on the third business day following such mailing if sent by
certified mail, return receipt requested.
SECTION 17. Modifications; Amendments; Waivers.
The terms and provisions of this Agreement may not be modified
or amended, except pursuant to a writing signed by the Company and the iBaby
Investors holding at least sixty (60%) percent of the Restricted Shares (based
upon Common Stock equivalents) held by all iBaby Investors.
SECTION 18. Counterparts.
This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
SECTION 19. Headings.
The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 20. Severability.
It is the desire and intent of the parties that the provisions
of this Agreement be enforced to the fullest extent permissible under the law
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
15
<PAGE>
SECTION 21. Governing Law.
This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any law or rule that would cause the laws of any jurisdiction other
than the State of New York to be applied.
16
<PAGE>
[COUNTERPART SIGNATURE PAGE TO THE REGISTRATION
RIGHTS AGREEMENT DATED AS OF FEBRUARY __, 1999]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
i VILLAGE INC.
By:
-----------------------------------
Name
Title
THE IBABY INVESTORS:
OURBABY, LLC
By:
-----------------------------------
Name: David Mandelbaum
Title: Manager and Authorized
Representative
JBM VENTURES, INC.
By:
----------------------------------
Name: James Morris
Title: President and Authorized
Representative
LISA TUDOR
-------------------------------------
BARBARA ROBINSON
-------------------------------------
<PAGE>
ADDRESS OF IBABY INVESTORS:
-------------------------------------
-------------------------------------
-------------------------------------
18
<PAGE>
EXHIBIT C
Form of Separation Agreement
FORM SEPARATION AGREEMENT LETTER WITH OWBPA PROVISIONS -
SUBJECT TO MODIFICATION BASED UPON CIRCUMSTANCES OF
TERMINATION AND TERMS OF EMPLOYMENT AGREEMENT
[date]
[name of employee]
[address]
Re:______Separation Agreement
Dear [Employee] :
-------------------
This letter, upon your signature, will constitute the
agreement between you and [Company Name] (the "Company") on the terms of your
separation from employment with the Company.
1. You voluntarily resigned your employment with the Company
effective ____________. You therefore will no longer represent to anyone
that you are still an employee of the Company and will not say or do anything
purporting to bind the Company or any of its affiliates. You also will not apply
for reemployment with the Company or any of its affiliates in the future.
2. You have already been paid your earned salary and accrued
vacation pay through the effective date of your resignation.
3. You have already returned to the Company any building key,
security pass, or other access or identification cards (including any business
cards) and any Company property that is currently in your possession,
including any documents, credit cards, computer equipment and mobile phones.
By no later than ____________, you will clear all expense accounts and pay all
amounts owed on any corporate credit card(s) that the Company previously
issued to you. The Company will reimburse you in accordance with its existing
policies for any legitimate expenses you incurred on company business prior to
the effective date of your resignation.
4. [If applicable] Although you are not otherwise entitled to
it, in consideration of your acceptance of this Separation Agreement, after
the effective date set forth below, the Company will pay you a lump sum
post-termination severance of $____________ (the "Severance Amount"), less
customary payroll deductions.
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<PAGE>
5. As of the effective date of your resignation, you will no
longer be eligible to participate in any of the Company's benefit or
compensation plans, except as provided by law or the terms of the applicable
plans. Information regarding your rights to continuation of your health
insurance coverage under the terms of COBRA will be sent to you under separate
cover. To the extent that you have such rights, nothing in this Agreement will
impair them.
6. On behalf of yourself and your representatives, agents,
heirs and assigns, you waive, release, discharge and promise never to assert
any and all claims, liabilities or obligations relating to your employment of
every kind and nature, whether known or unknown, suspected or unsuspected that
you ever had relating to your employment, now have or might have as of the
effective date of this Separation Agreement against the Company, its
predecessors, subsidiaries, related entities, officers, directors,
shareholders, owners, agents, attorneys, employees, successors, or assigns,
including without limitation, [name of specific subsidiaries or officers,
etc.] relating to your employment.
The released claims include any and all claims arising from or
related to your employment with the Company, the separation of your employment
with the Company, and/or the execution of this Separation Agreement. The claims
also specifically include, without limitation, any employment claims arising
under any federal, state and local statutory or common law, such as Title VII of
the Civil Rights Act, the federal Age Discrimination in Employment Act, the
California Fair Employment and Housing Act, the Americans With Disabilities Act,
the Employee Retirement Income Security Act, the Fair Labor Standards Act, the
California Labor Code (all as amended), the law of contract and tort related to
employment issues, and any claim for attorneys' fees related to employment
issues.
You also waive and release and promise never to assert any
such claims related to employement issues, even if you do not now know or
believe that you have such claims. You therefore waive your rights related to
employment issues under section 1542 of the Civil Code of California, which
states:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known to him must have
materially affected his settlement with the debtor.
In short, you agree that you will not bring any lawsuits or
claims of any kind against the Company or any of its affiliates or related
entities related in any way to your employment and will not accept the benefits
of any lawsuits or claims of any kind related to employment issues brought on
your behalf against the Company or any of its affiliates or related entities.
7. iVillage releases you from employment related claims and
liabilities to the same extent as you release iVillage as set forth in Section 6
above.
8. Unless required by court order or law, you and iVillage
will not disclose to anyone any information regarding the terms of this
Separation Agreement, the benefits being paid to you under it or the fact that
a payment was made to you, except that you may disclose this information to
your spouse, attorney, accountant or other professional advisor to whom you
20
<PAGE>
must make the disclosure in order for them to render professional services to
you and iVillage may disclose this information to its advisors, underwriters,
attorney, accountant or other professional advisor to whom it must make the
disclosure in order for them to render professional services to iVillage. In
any of the foregoing circumstances, however, you and iVillage will instruct
any such party to maintain the confidentiality of this information just as you
and iVillage must.
9. You will not disclose to anyone any confidential or other
information regarding the Company's practices, procedures, business, trade
secrets, customer lists or marketing strategies, without prior written
permission from the President of the Company or unless required by court
order.
10. You agree that you will not make, or cause to be made,
any statements, observations or opinions, or communicate any information
(whether oral or written) that disparages or is likely in any way to harm the
reputation of the Company, any of its related entities, affiliates or any of
its respective former, present or future directors, officer, stockholders or
employees. You also agree that you will not say anything that damages the
reputation of the Company or any of its affiliates or related entities.
Likewise, the Company will not make or cause to be made any statements,
observations or opinions, or communicate any information (whether oral or
written) that disparages you or is likely in any way to harm your reputation.
11. Upon the reasonable request by the Company, you agree
for a period of one year following your termination at the Company's expense (at
a rate of $100 per hour of documented time) to cooperate to the extent necessary
to protect the interests of the Company or any of its affiliates or related
entities, including without limitation, in providing any information that you
have about the Company's business and its operations and/or in providing
truthful testimony as a witness or declarant in connection with any potential
future litigation which may arise as to which you have any relevant information;
provided, however, the Company shall be permitted to recover such expenses in
the event it is found by a finder of fact or an arbitrator that you were
directly responsible for such litigation.
12. You acknowledge the highly confidential nature of
information regarding the Company's customers, affiliates and employees. You
therefore agree that, for a period of one year following the effective date of
your termination, you will abide by the confidentiality and other provisions of
your Employment Agreement, as subsequently amended by the Letter Agreement dated
as of February 10, 1999.
13. [Intentionally Omitted.]
14. This Agreement is entered into in San Diego, California
and shall be governed by and construed in accordance with the internal laws of
the State of California (without giving effect to the conflict of law
provisions thereunder).
Any controversy between or among the parties hereto involving any claim
arising out of or relating to this Agreement, will be submitted to and be
settled by final and binding arbitration
21
<PAGE>
in San Diego county in the State of California, in accordance with the then
current Commercial Arbitration Rules of the American Arbitration Association
(the "AAA"), and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. Such arbitration shall be
conducted by one (1) arbitrator experienced with internet companies appointed
by the AAA. The arbitrator shall be required to provide in writing to the
parties the basis for the award or order or such arbitrator.
In any claim, case or controversy arising under or relating to
this letter agreement, the unsuccessful party, as determined by the applicable
arbitrator or court, shall pay the successful party all costs, expenses and
reasonable attorneys' fees incurred by the successful party.
15. Pursuant to the Older Workers Benefit Protection Act, you
acknowledge that you were provided up to 21 days to consider and accept the
terms of this Separation Agreement (although you may accept it at any time
within those 21 days) and that you were advised to consult (and did consult)
with an attorney about the Separation Agreement before signing it.
To accept the agreement, please date and sign this letter and
return it to me. Once you do so, you will still have an additional seven days in
which to revoke your acceptance. To revoke, you must send me a written statement
of revocation by registered mail. If you do not revoke, the eighth day after the
date of your acceptance will be the "effective date" of the agreement.
16. Except as set forth in this Separation Agreement, there
are no representations, promises, agreements or understandings between you and
the Company about or pertaining to the separation of your employment with the
Company, or the Company's obligations to you with respect to your employment
or any other matter mentioned above. This Separation Agreement therefore
supercedes any prior written or oral representations, promises, agreements and
understandings regarding any of the matters discussed above.
[Employee Name] , I am pleased that you were able to part
ways with the Company on these amicable terms. The Company and I wish you
every success in your future endeavors.
Sincerely,
-----------------------------------
[name of company official]
[title]
22
<PAGE>
By signing this letter, I acknowledge that I have carefully
reviewed and considered this Separation Agreement; that I fully understand all
of its terms; and that I voluntarily agree to them.
Date: _____________
------------------------------------
[name of employee]
23
<PAGE>
==============================================================================
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
FEBRUARY 18, 1999
AMONG
iVILLAGE INC.
AND
KNOWLEDGEWEB ACQUISITION CORPORATION
AND
KNOWLEDGEWEB, INC.
AND
THE SHAREHOLDERS OF KNOWLEDGEWEB, INC.
==============================================================================
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 18, 1999,
among iVillage Inc., a Delaware corporation ("Parent"), Knowledgeweb, Inc., a
California corporation (the "Company"), the shareholders of the Company listed
in Exhibit I hereto (each a "Shareholder" and, together, the "Shareholders"),
and Knowledgeweb Acquisition Corporation, a Delaware corporation and a direct,
wholly-owned subsidiary of Parent ("Acquisition Sub").
RECITALS
A. The Shareholders own all of the outstanding shares of capital
stock of the Company.
B. The Shareholders wish to sell, and the Parent wishes to purchase,
such shares upon the terms and conditions hereinafter set forth.
C. The Boards of Directors of Parent, Acquisition Sub and the Company
have each duly approved and adopted this Agreement and Plan of Reorganization
(this "Agreement"), the Agreement of Merger in substantially the form of
Exhibit II attached hereto (the "Agreement of Merger") and the proposed merger
of the Company with and into Acquisition Sub in accordance with this
Agreement, the Agreement of Merger, the California Corporations Code (the
"California Statute") and the Delaware General Corporation Law (the "Delaware
Code"), whereby, among other things, the issued and outstanding shares of
common stock, $.0001 par value per share, of the Company (the "Company Common
Stock") and of preferred stock, $.0001 par value per share, of the Company
(the "Company Preferred Stock" and together with the Company Common Stock, the
"Shares"), will be exchanged and converted into shares of common stock, $.0005
par value per share, of Parent (the "Parent Common Stock") and cash in the
manner set forth in Article II hereof and in the Agreement of Merger, upon the
terms and subject to the conditions set forth in this Agreement and the
Agreement of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and the Agreement of Merger and the representations,
warranties, covenants, agreements, conditions and promises contained herein
and therein, the parties hereby agree as follows:
ARTICLE I
GENERAL
1.1 The Merger. In accordance with the provisions of this Agreement, the
Agreement of Merger, the California Statute and the Delaware Code, Acquisition
Sub shall be merged with and into the Company (the "Merger"), which at and
after the Effective Date shall be, and is sometimes hereinafter referred to
as, the "Surviving Corporation." For convenience of reference, Acquisition Sub
and the Company are sometimes collectively hereinafter referred to as the
"Constituent Corporations."
<PAGE>
1.2 The Effective Date of the Merger. Subject to the provisions of this
Agreement, the Agreement of Merger shall be executed and delivered to and
filed with the Corporate Division of the Secretary of State of the State of
California (the "California Secretary of State") by each of the Constituent
Corporations on the Closing Date in the manner provided under Sections 1101
and 1103 of the California Statute and a Certificate of Merger shall be
executed and delivered to and filed with the Secretary of State of the State
of Delaware (the "Delaware Secretary of State") by each of the Constituent
Corporations on the Closing Date in the manner provided under Section 252 of
the Delaware Code. The Merger shall become effective (the "Effective Date")
upon the filing with the Secretaries of State of the States of California and
Delaware of the Agreement of Merger and a Certificate of Merger, respectively.
1.3 Effect of Merger. At the Effective Date, the separate existence of
the Acquisition Sub shall cease and the Acquisition Sub shall be merged with
and into the Surviving Corporation, and the Surviving Corporation shall
possess all of the rights, privileges, powers and franchises, and be subject
to all the restrictions, disabilities and duties of each of the Constituent
Corporations.
1.4 Charter and By-Laws of Surviving Corporation. From and after the
Effective Date and pursuant to the Agreement of Merger: (i) the Charter of the
Company shall be amended and restated as of the Effective Date to read as set
forth in Exhibit A to the Agreement of Merger, (ii) the By-Laws of the Company
shall be the By-Laws of the Surviving Corporation, unless and until altered,
amended or repealed as provided in the California Statute, the Charter or such
By-Laws, (iii) the directors of Acquisition Sub shall be the directors of the
Surviving Corporation, unless and until removed, or until their respective
terms of office shall have expired, in accordance with the California Statute,
the Charter and the By-Laws of the Surviving Corporation, as applicable, and
(iv) the officers of Acquisition Sub shall be the officers of the Surviving
Corporation, unless and until removed, or until their terms of office shall
have expired, in accordance with the California Statute, the Charter and the
By-Laws of the Surviving Corporation, as applicable.
1.5 Taking of Necessary Action. Prior to the Effective Date, the parties
hereto shall do or cause to be done all such acts and things as may be
necessary or appropriate in order to effectuate the Merger as expeditiously as
reasonably practicable, in accordance with this Agreement, the Agreement of
Merger, the California Statute and the Delaware Code.
1.6 Tax-Free Reorganization. For Federal income tax purposes, the parties
intend that the Merger be treated as a tax-free reorganization within the
meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), by reason of Section 368(a)(2)(E) of the Code, and that
this Agreement shall be, and is hereby, adopted as a plan of reorganization
for purposes of Section 368 of the Code. No party shall take a position on any
tax return or reports inconsistent with this Section 1.6, and each party shall
use its reasonable efforts to maintain such reporting in the context of an
audit. Each party shall give the other parties prompt notice of any challenges
or investigations undertaken by any taxing agency in connection with such
reporting, and shall keep such other parties fully informed of all aspects of
such ongoing challenge or investigation. Neither Parent nor the Company shall
take any action, except as expressly provided in this Agreement, that would be
inconsistent with the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
2
<PAGE>
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
2.1 Total Consideration.
(a) Payment of Consideration. The entire consideration payable by Parent
with respect to all outstanding shares of capital stock of the Company and for
all options, warrants, rights, calls, commitments or agreements of any
character to which the Company is a party or by which it is bound calling for
the issuance of shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for, or representing the right
to purchase or otherwise receive, directly or indirectly, any such capital
stock, or other arrangement to acquire, at any time or under any circumstance,
capital stock of the Company or any such other securities (such options,
warrants, rights, calls, commitments, agreements or arrangements being
sometimes hereinafter collectively referred to as "Equity Rights"; and the
Equity Rights, together with all such outstanding shares of capital stock of
the Company, being sometimes collectively hereinafter referred to as the
"Fully Diluted Company Shares") shall be payable as follows:
(i) an aggregate amount of up to $1,000,000 in cash; and
(ii) up to 2,500,000 shares of Parent Common Stock, payable or
issuable as the case may be, as provided in Sections 2.1(b) and 2.2.
(b) Effect on Capital Stock. At the Effective Date, subject and pursuant
to the terms and conditions of this Agreement and the Agreement of Merger, by
virtue of the Merger and without any action on the part of the Constituent
Corporations or the holders of the capital stock of the Constituent
Corporations:
(i) subject to Sections 2.2 and 2.4, the shares of Company Common
Stock and Company Preferred Stock issued and outstanding and the
outstanding options to purchase Company Common Stock (the "Company
Options") as of the Effective Date shall be exchanged for and converted
into the right to receive shares of Parent Common Stock and cash as
follows:
(A) all shares of Company Common Stock and Company Preferred
Stock shall be exchanged and converted into the right to receive in
the aggregate: (1) $964,072 in cash (less any Transaction Expenses
pursuant to Sections 4.32 and 6.2), and (2) 2,406,374 shares of
Parent Common Stock as set forth on Exhibit 2.1; and
(B) The Company Options shall convert into options to acquire
in the aggregate: (1) $35,928 in cash (less any Transaction Expenses
pursuant to Sections 4.32 and 6.2), and (2) 93,626 shares of Parent
Common Stock (the "Parent Options") as set forth on Exhibit 2.1. The
Parent Options shall have the same general terms as the Company
Options
3
<PAGE>
including, without limitation, the same vesting schedules and
acceleration provisions to which such options are subject.
(ii) If at any time subsequent to the date of this Agreement and
prior to the Effective Date (the "Executory Period"), the Company shall
issue any capital stock or Equity Rights, the foregoing allocations of
consideration shall be proportionately and equitably adjusted and
reallocated among all holders of Company Common Stock, Company Preferred
Stock and Company Options.
(iii) Each share of Company Common Stock and Company Preferred Stock
that is authorized but unissued shall cease to exist and no Parent Common
Stock or other consideration shall be delivered in exchange therefor.
(iv) For convenience of reference, the shares of Parent Common Stock
to be issued upon the exchange and conversion of Company Common Stock,
Company Preferred Stock and upon exercise of Parent Options in accordance
with this Section 2.1 are sometimes hereinafter collectively referred to
as the "Merger Shares." Notwithstanding anything to the contrary, in no
event shall the number of Merger Shares exceed 2,500,000 shares of Parent
Common Stock (subject to stock splits, reorganizations and the like).
(c) No Liability. Neither Parent, Acquisition Sub nor the Company shall
be liable to any holder of shares and/or rights to acquire Company Common
Stock or Parent Common Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) and/or rights to such shares of Parent
Common Stock to be issued in exchange for Company Common Stock and/or rights
thereto pursuant to this Section 2.1, if, on or after the expiration of six
months following the Effective Date, such shares and/or rights thereto are
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
2.2 Earnout Shares.
(a) Of the Merger Shares issued at Closing to the Shareholders, 1,202,382
Merger Shares will be held in escrow by Parent and will not be transferable
for a period of five years from the date of Closing unless released pursuant
to this Section 2.2. On or before the due dates set forth on Exhibit 2.2 (the
"Due Dates"), Parent shall release to the Shareholders on a pro rata basis
Shares ("Earnout Shares") based on the Company's gross revenues for the
periods specified in Exhibit 2.2 until three years from the date of Closing
(the "Earnout Period"). The Earnout Shares to be released shall be calculated
as set forth on Exhibit 2.2. If an aggregate of 1,202,382 Earnout Shares have
not been released at the end of the Earnout Period, then Parent shall release
the remaining Earnout Shares to the Shareholders on the date which is five
years from the Closing Date. For purposes of this Section 2.2 and Exhibit 2.2,
gross revenues shall be computed in a manner consistent with generally
accepted accounting principles and shall exclude in-house ads and internal
promotions among the Parent and its subsidiaries.
4
<PAGE>
(b) On or before each Due Date, Parent will deliver to the Shareholders a
statement setting forth in reasonable detail its calculation of gross revenues
for the applicable portion of the Earnout Period and the amount of Earnout
Shares to be released to the Shareholders, which statement shall be
accompanied with each Shareholder's pro rata portion of the Earnout Shares for
such period.
(c) To the extent that Parent or any subsidiary of Parent other than the
Company generate revenues from the sale of astrology related products or
services during the Earnout Period, then such revenues shall be included in
the calculation of gross revenues for purposes of determining the amount of
Earnout Shares. The Company shall establish an ad hoc astrology task force to
address issues relating to astrology. The task force will consist of three
members. The initial members of the task force shall be Allison Abraham,
Michael Rose and David Fox or Kelli Fox.
(d) In the event that the Parent is acquired by another entity during the
Earnout Period and the Company is no longer operated as a distinct line of
business for internal reporting purposes such that it is not possible to
calculate the Company's gross revenues, then the Parent shall release any
remaining Earnout Shares held in escrow pursuant to this Section 2.2.
(e) Parent shall provide the Company with an operating budget equal to or
greater than $2 million during the first year after Closing. The operating
budget in the second and third year after the Closing shall equal or exceed
the initial year operating budget.
2.3 Approval of Transaction; Exchange of Securities. Prior to the
Effective Date and subject to and contingent upon the effectiveness of the
Merger, the Shareholders shall vote all of their shares of Company Common
Stock and Company Preferred Stock, as applicable, or execute and deliver a
written consent, in favor of the approval of this Agreement, the Agreement of
Merger and the Merger and any matter that could reasonably be expected to
facilitate the Merger.
2.4 Escrow Deposits.
(a) Escrow Agreement. Reference is made to the escrow agreement
which shall be dated as of the Effective Date among the Shareholders, the
Parent and the escrow agent named therein (the "Escrow Agent") in a form
mutually acceptable to the parties hereto (the "Escrow Agreement"). The
Escrow Agreement is being entered into for the purpose of securing the
indemnification obligations of the Shareholders under ARTICLE VIII.
(b) Escrow Deposit. At the Effective Date, Parent shall cause to be
deposited with the Escrow Agent to be held by the Escrow Agent and
distributed subject to the terms of the Escrow Agreement certificates
representing 225,000 Merger Shares (of which all of the Parent Common
Stock shall be deposited on behalf of the Shareholders as set forth on
Exhibit 2.1), together with stock powers duly endorsed in blank for
transfer on behalf of the Shareholders, who by their execution and
delivery of this
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Agreement, hereby authorize and direct the Parent to make such deposit on
their behalf. In addition, the Parent shall cause to be deposited with
the Escrow Agent and distributed subject to the terms of the Escrow
Agreement certificates representing the first 225,000 Earnout Shares to
be released pursuant to Section 2.2, together with stock powers duly
endorsed in blank for transfer on behalf of the Shareholders, who by
their execution and delivery of this Agreement, hereby authorize and
direct the Parent to make such deposit on their behalf. The 225,000
Merger Shares and the 225,000 Earnout Shares subject to the Escrow
Agreement are collectively referred to as the "Escrow Shares".
ARTICLE III
CLOSING
3.1 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated by this Agreement abandoned pursuant to the
provisions of ARTICLE IX, and subject to the provisions of ARTICLE VII, the
closing of the Merger (the "Closing") will take place at 10:00 a.m.
(California time) on a date (the "Closing Date") to be mutually agreed upon by
the parties, which date shall be not later than the third Business Day after
all the conditions set forth in ARTICLE VII shall have been satisfied (or
waived in accordance with Section 9.3, to the extent the same may be waived),
unless another date is agreed to in writing by the parties. The Closing shall
take place at the offices of Orrick, Herrington & Sutcliffe LLP, 400 Sansome
Street, San Francisco, CA 94111, unless another place is agreed to in writing
by the parties. As used herein, the term "Business Day" shall mean any day
other than a Saturday, Sunday or day on which banks are permitted to close in
the City of San Francisco and State of California.
3.2 Company's and Shareholders' Obligations at the Closing. At the
Closing, the Company and the Shareholders shall deliver or cause to be
delivered:
(a) Stock certificates representing all of the Shares, free and
clear of all claims, liens, security interests, pledges, charges or
encumbrances of any kind, which certificates shall be duly endorsed to
the Parent or accompanied by duly executed stock powers in form
satisfactory to the Parent;
(b) Consents from any third parties whose consent to the
transactions contemplated hereby is required under the terms of the
Company's contracts, licenses or rights;
(c) A certificate of the Shareholders, dated the Closing Date,
certifying as to the matters requested by the Parent pursuant to Section
7.2(b);
(d) Resignations effective as of the Closing of all the directors of
the Company;
(e) The Articles of Incorporation and Bylaws, as amended as of the
Closing, minute books, stock transfer books and corporate seal of the
Company;
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(f) The opinion of Britton, Silberman and Cervantez, counsel to
the Company and the Shareholders, substantially in the form of Exhibit
3.2(f);
(g) The employment agreements duly executed by David Fox and Kelli
Fox, substantially in the form of Exhibit 3.2(g) (the "Employment
Agreements");
(h) The Escrow Agreement executed by the Shareholders, substantially
in the form of Exhibit 3.2(h);
(i) The escrow agreement executed by the Founders, substantially in
the form of Exhibit 3.2(i) (the "Cash Escrow Agreement");
(j) The Agreement of Merger executed by the Company, substantially
in the form of Exhibit III;
(k) The option agreements executed by the Founders, substantially in
the form of Exhibit 3.2(k) (the "Founders' Option Agreements");
(l) The registration rights agreement executed by the Shareholders,
substantially in the form of Exhibit 3.2(l) (the "Registration Rights
Agreement");
(m) The Service Mark Assignment Agreement in the form of Exhibit
3.2(m) executed by the Founders;
(n) The consent of Kelli Fox in the form of Exhibit 3.2(n) executed
by Kelli Fox;
(o) The servicemark applications in the form of Exhibit 3.2(o)
executed by David Fox;
(p) The servicemark assignment in the form of Exhibit 3.2(p)
executed by David Fox and Kelli Fox;
(q) The assignment of all of the Company's URLs executed by David
Fox;
(r) The marketing rights agreement in the form of Exhibit 3.2(r)
(the "Marketing Rights Agreement") executed by David Fox, Kelli Fox,
Parent and the Company;
(s) Parent's employee non-disclosure, non-competition and
proprietary rights agreement in the form of Exhibit 3.2(s) executed by
all of the Company's employees;
(t) An agreement executed by the Shareholders and the Equity Rights
holders, substantially in the form of Exhibit 3.2(m), pursuant to which
the Shareholders and Equity Rights holders agree not to sell, transfer or
otherwise dispose of the Parent Common Stock acquired by them pursuant to
Section 2.1(a) for a period of 180 days after the date of the Parent's
initial public offering of Parent Common Stock (the "Lock-Up Agreement",
and, together with the Employment Agreements, the Escrow Agreement,
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the Cash Escrow Agreement, the Founders' Option Agreements, the Parent
Option Agreements, the Registration Rights Agreement and the Marketing
Rights Agreement, the "Related Agreements"); and
(u) Such other resolutions, certificates, consents or other
documents of authority as provided for herein, or as may be otherwise
necessary to convey and transfer the Shares, and all other instruments or
documents that counsel for the Parent may reasonably request in order to
assure compliance with the terms and conditions of this Agreement.
3.3 Optionholders' Obligations at the Closing. At the Closing, the
optionholders of the Company listed in Exhibit III hereto (each an
"Optionholder" and, together, the "Optionholders") shall deliver or cause to
be delivered:
(a) The cancelled option agreements representing the Company
Options;
(b) The Option Representation Letter executed by each Optionholder;
(c) The option agreements representing the Parent Options executed
by the Optionholders, substantially in the form of Exhibit 3.3(c) (the
"Parent Option Agreements");
(d) Lockup Agreement executed by the Optionholders, substantially in
the form of Exhibit 3.2(m); and
(e) Such other resolutions, certificates, consents or other
documents of authority as provided for herein, or as may be otherwise
necessary to convey and transfer the Options, and all other instruments
or documents that counsel for the Parent may reasonably request in order
to assure compliance with the terms and conditions of this Agreement.
3.4 Parent's and Acquisition Sub's Obligations at the Closing. At the
Closing, the Parent shall deliver or cause to be delivered:
(a) To the Shareholders, stock certificates representing the Merger
Shares required to be delivered to the Shareholders pursuant to Section
2.1(b);
(b) To the Shareholders, the cash portion of the Purchase Price
required to be paid to the Shareholders pursuant to Section 2.1(b);
(c) A certificate of a duly authorized officer of the Parent and
Acquisition Sub certifying as to the matters requested by the Shareholders
pursuant to Section 7.3(b);
(d) The opinion of Orrick, Herrington & Sutcliffe LLP, outside counsel
to the Parent, substantially in the form of Exhibit 3.4(d);
(e) The Employment Agreements executed by the Parent or the
Acquisition Sub, substantially in the form of Exhibit 3.2(g);
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(f) The Escrow Agreement executed by the Parent or the Acquisition
Sub, substantially in the form of Exhibit 3.2(h);
(g) The Cash Escrow Agreement executed by the Parent or the
Acquisition Sub, substantially in the form of Exhibit 3.2(i);
(h) The Agreement of Merger executed by the Acquisition Sub,
substantially in the form of Exhibit 3.2(j);
(i) To the Founders, the Founders' Option Agreements executed by the
Parent, substantially in the form of Exhibit 3.2(k);
(j) To the Optionholders, the Parent Option Agreements executed by the
Parent, substantially in the form of Exhibit 3.3(c);
(k) The Registration Rights Agreement executed by the Parent,
substantially in the form of Exhibit 3.2(l);
(l) The Marketing Rights Agreement in the form of Exhibit 3.2(r); and
(m) Such instruments or documents that counsel for the Shareholders
may reasonably request in order to assure compliance with the terms and
conditions of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE FOUNDERS
The Company and each Founder jointly and severally represent and
warrant to the Parent and Acquisition Sub, subject to the exceptions disclosed
in the disclosure schedule supplied by the Company and the Founders and attached
hereto (the "Disclosure Schedule"), as follows:
4.1 Organization and Standing. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
The Company has all requisite power and authority to own and operate its
properties and assets and to conduct its business as presently conducted, to
enter into this Agreement and the Agreement of Merger, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The Company is qualified or licensed and in
good standing as a foreign corporation in all jurisdictions where the failure to
be so qualified or licensed could reasonably be expected to materially adversely
affect the business, earnings, prospects, properties or condition (financial or
other) of the Company (hereinafter referred to as a "Material Adverse Effect").
True, complete and accurate copies of the Company's Articles of Incorporation,
Bylaws and all amendments to each to date have been delivered to counsel for the
Parent and the Company has provided such counsel with true, complete and
accurate copies of the minutes of all meetings, and all consents in lieu of
meetings, of the Board of Directors and shareholders of the Company.
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4.2 Capitalization.
(a) The authorized capital stock of the Company at the Closing will
consist of 25,000,000 shares of Company Common Stock and 5,000,000 shares
of Company Preferred Stock. Of such authorized shares of capital stock of
the Company, 5,111,111 shares of Company Common Stock and 421,880 shares of
Company Preferred Stock (constituting the Shares) will be issued and
outstanding at the Closing.
(b) The Shares have been, and as of the Closing Date will be, duly
authorized, validly issued, fully paid and nonassessable and are and were,
and as of the Closing Date will have been, offered, issued, sold and
delivered by the Company in compliance with all applicable state and
federal laws concerning the issuance of securities.
(c) Except as set forth in Schedule 4.2(c), there are no outstanding
rights, subscriptions, calls, options, warrants, preemptive rights,
conversion rights or agreements granted or issued by or binding upon the
Company for the purchase or acquisition (contingent or otherwise) from the
Company of any shares of its capital stock or any other securities, except
in accordance with the terms of this Agreement. Copies of each outstanding
Company Option have been provided to the Parent. The Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of its capital stock or any security
convertible into or exchangeable for any shares of its capital stock. No
holder of Company Common Stock or Company Preferred Stock or any other
security of the Company or any other person or entity is entitled to any
preemptive right, right of first refusal or similar right as a result of
the sale of the Shares pursuant to this Agreement. There is no voting
trust, agreement or arrangement among any of the beneficial holders of
Company Common Stock or Company Preferred Stock of the Company affecting
the exercise of the voting rights of such stock.
(d) All shares of Company capital stock and all other securities
previously issued by the Company have been issued in compliance with or
pursuant to an exemption from all applicable Federal and State securities
or "blue sky" laws.
(e) The Shareholders have good and marketable title to all of the
Shares, in each case free and clear of all claims, liens, security
interests, pledges, charges or encumbrances of any kind, and the transfer
of the Shares to the Parent pursuant to this Agreement will pass good and
marketable title to the Shares, free and clear of all claims, liens,
security interests, pledges, charges and encumbrances.
4.3 Binding Obligation. This Agreement, the Agreement of Merger and the
Related Agreements have been duly executed and delivered by the Company, the
Shareholders and the Optionholders and, assuming due authorization, execution
and delivery of the other parties thereto, constitute valid and binding
obligations of the Company, the Shareholders and the Optionholders enforceable
in accordance with their terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and to rules of law
governing specific performance, injunctive relief or other equitable remedies.
The execution, delivery and
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performance by the Company and the Shareholders of this Agreement, the Agreement
of Merger and the Related Agreements does not and will not conflict with, or
result in any violation of or default under, any provision of the Articles of
Incorporation or Bylaws of the Company or any material ordinance, rule,
regulation, judgment, order, decree, agreement, instrument or license applicable
to the Company, the Shareholders or to any of their properties or assets. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, is required by
or with respect to the Shareholders, the Company or the Optionholders in
connection with the execution, delivery or performance of this Agreement by the
Shareholders, the Company and the Optionholders, except for the filing of the
Agreement of Merger with the Secretary of State of the State of California and a
Certificate of Merger with the Secretary of State of the State of Delaware.
4.4 Subsidiaries. The Company does not currently own and has never owned,
of record or beneficially, or control, directly or indirectly, any capital stock
or equity interest in any corporation, association or business entity. The
Company is not, directly or indirectly, a participant in any joint venture or
partnership.
4.5 Governmental Consents.
(a) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, or notice to, any
federal, state or local governmental or public authority or agency on the
part of the Shareholders, the Optionholders or the Company is or was
required for the Company's or the Shareholders' or the Optionholders' valid
execution, delivery and performance of this Agreement or the offer and sale
of the Shares or the consummation of any other transaction contemplated
hereby.
(b) The Company has obtained all consents, approvals or authorizations
of, made all declarations or filings with, and given all notices to, all
federal, state and local governmental or public authorities or agencies
which are necessary for the continued conduct by the Company of its
business as now conducted or as proposed to be conducted in which the
failure to so obtain, make or give could reasonably be expected to
materially adversely affect the business, earnings, prospects, properties
or condition (financial or other) of the Company.
4.6 Compliance with Other Instruments and Laws.
(a) The Company is not (i) in violation of or in default under any
provision of its Articles of Incorporation or Bylaws, each as amended and
in effect on the date hereof and on and as of the Closing Date; or (ii)
except as to defaults which, in the aggregate, would result in liability or
loss to the Company of $10,000 or less, in default in the performance,
observance or fulfillment of any of the obligations, covenants or
conditions contained in, and is not otherwise in default under, (A) any
evidence of indebtedness for any money borrowed or any other evidence of
indebtedness or any instrument or agreement under or pursuant to which any
evidence of indebtedness for money borrowed or other evidence of
indebtedness has been issued, or (B) any other instrument, mortgage,
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deed of trust, loan, contract, commitment or obligation to which it is a
party or by which it is bound or any of its properties is affected. The
Company has not defaulted on, nor has it failed to make at the time
contemplated, payment of any principal of, or premium or interest on, any
indebtedness of $10,000 or more. Neither the execution, delivery and
performance of and compliance with this Agreement by the Shareholders nor
the offer and sale of the Shares pursuant to this Agreement does or will:
(i) conflict with or violate the Articles of Incorporation or Bylaws of the
Company; (ii) conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in
the creation of any lien on any of the properties or assets of the Company
pursuant to the terms of any instrument or agreement referred to in this
Section 4.6 to which the Company is a party or by which it is bound; or
(iii) require the consent of, or other action by, any shareholder (other
than the Shareholders), trustee or any creditor of, any lessor to or any
investor in, the Company or any other person.
(b) The Company is in full compliance with all laws and ordinances and
all governmental rules and regulations to which it is subject, the
violation of which, in the aggregate, would result in a Material Adverse
Effect to the Company.
(c) The Company is not a party to or bound by (nor are any of its
properties affected by) any contract or agreement, or subject to any order,
writ, injunction or decree or any action of any court or any governmental
department, commission, bureau, board or other administrative agency or
official, or any charter or other corporate or contractual restriction
which materially adversely affects, or in the future could reasonably be
expected to materially adversely affect, the business, earnings, prospects,
properties or condition (financial or other) of the Company.
4.7 Litigation. Except as set forth in Schedule 4.7, there is no action,
suit, proceeding, claim or investigation in any court or by or before any other
governmental or public authority or agency or any arbitrator or arbitration
panel, pending or, to the knowledge of the Company or the Shareholders,
threatened against or affecting the Company or any of its properties that,
either individually or in the aggregate, (a) could question the validity or
enforceability of this Agreement and the other agreements and documents
contemplated hereby or the right of the Company, the Shareholders or the
Optionholders to enter into any of them, or to consummate the transactions
contemplated hereby or thereby, or (b) could reasonably be expected to adversely
affect the business, earnings, prospects, properties or condition (financial or
other) of the Company, nor are the Company or the Shareholders aware that there
is any basis for the foregoing. The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company or the
Shareholders) involving the prior employment of any of the Company's employees,
the use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers.
4.8 Intellectual Property.
(a) Schedule 4.8(a) contains a true and complete list of all of (A)
the Company's Material Intellectual Property Rights (as defined below) and
applications therefor; (B) other filings and formal actions made or taken
pursuant to Federal, state,
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local and foreign laws by the Company to perfect or protect its interest
therein; and (C) the Material Intellectual Property licensed by the Company
from any third party or constituting "off-the-shelf" software (the
"Licensed Software"), in each case that is manufactured or used by the
Company in the operation of its business or marketed, licensed or sold by
the Company to third parties and, in the case of Licensed Software,
Schedule 4.8(a) identifies each Material license agreement with respect
thereto. "Material" in the context of Intellectual Property shall include
any intellectual property that is either: (A) employed by the Company and
reasonably significant in the operation of its business and web sites or
marketed, licensed, or sold by the Company, or (B) the subject of an
application to preserve or register such rights including, without
limitation, any domain name registrations, any patent applications or
issued patents, trademark applications or registrations, and copyright
applications or registrations, or (C) that is the subject of any written or
oral agreements with third parties including, without limitation, any
licenses, non-disclosure or confidentiality agreements, and which is
reasonably significant to the operation of the Company's business and its
web sites or (D) has a value of at least $1000.
(b) As used herein, the term "Intellectual Property Rights" shall mean
all industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, inventions,
trademarks, trademark applications, trade names, service marks, service
mark applications, copyrights, copyright applications, works of authorship,
mask works, franchises, licenses, databases, "URL's" and Internet domain
names and applications therefor (and all interest therein), computer
programs and other computer software, user interfaces, know-how, trade
secrets, customer lists, proprietary technology, processes and formulae,
source code, object code, algorithms, architecture, structure, display
screens, layouts, development tools, instructions, templates, marketing
materials, inventions, trade dress, logos and designs and all documentation
and media constituting, describing or relating to the foregoing.
"Invention" includes, without limitation, all inventions, developments and
discoveries which during the period of an employee's, consultant's or
contractor's service to the Company he, she or it makes or conceives of,
either solely or jointly with others, that relate to any subject matter
with which his, her or its work for the Company may be concerned, or relate
to or are connected with the business, products, services or projects of
the Company, or relate to the actual or demonstrably anticipated research
or development of the Company or involve the use of the Company's funds,
time, material, facilities or trade secret information.
(c) Except as set forth in Schedule 4.8(c), the Company has good and
valid title to, owns and has the exclusive right to use, sell, license (or
sublicense), transmit, broadcast, deliver (electronically or otherwise) and
dispose of, and has the right to bring actions for the infringement of, all
Intellectual Property Rights necessary or required for the conduct of its
business as currently conducted and as proposed to be conducted
(collectively, the "Company Rights"), free and clear of all Encumbrances
and any right, lien or claim of others with the exception of rights of
owners of Licensed Software, including without limitation former employers
of its employees, consultants and contractors, and current employers of
employees, consultants and contractors, where such
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employees, consultants or contractors are also employed or under contract
with another person.
(d) The execution, delivery and performance of this Agreement and the
other documents contemplated hereby, the sale of the Shares, the
consummation of the other transactions contemplated hereby and the carrying
on of the business of the Company as currently conducted will not breach,
violate or conflict with any instrument or agreement governing any Company
Rights, will not cause the default under, forfeiture or termination or give
rise to a default or a right of forfeiture or termination of any Company
Right or in any way impair the right of the Company or its successors to
use, sell, license (or sublicense), transmit, broadcast, deliver
(electronically or otherwise) or dispose of or to bring any action for the
infringement of, any Company Right or portion thereof.
(e) Except as set forth on Schedule 4.8(e), the Company is not
infringing upon or otherwise acting adversely to the right or claimed right
of any person or entity under or with respect to any patent, trademark,
service mark, trade name, invention, trade secret, copyright, license or
other Intellectual Property Right with respect thereto. There are no
royalties, honoraria, fees or other payments payable by the Company to any
person by reason of the ownership, use, license (or sublicense),
transmission, broadcast, delivery (electronically or otherwise), sale, or
disposition of the Company Rights, other than sales commissions paid in the
ordinary course of business. In particular, there is no obligation or
liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, invention, trade secret, or copyright
with respect to the use thereof on or in connection with the conduct of the
Company's business.
(f) Neither the manufacture, marketing, license (or sublicense), sale,
transmission, delivery (electronically or otherwise), or use of any product
or service currently licensed, sold, marketed, transmitted, broadcast,
delivered (electronically or otherwise) or used by the Company or currently
under development by the Company, violates any license (or sublicense) or
agreement of the Company with any third party or, to the knowledge of the
Company, infringes any common law or statutory rights of any other party,
including, without limitation, rights relating to defamation, contractual
rights, Intellectual Property Rights and rights of privacy or publicity;
nor, to the best knowledge of the Company or the Shareholders, is any third
party infringing upon, or violating any license (or sublicense),
transmission, broadcast, delivery (electronically or otherwise) or
agreement with the Company relating to, any Company Right; and there is no
pending or threatened claim or litigation contesting the validity,
ownership or right to use, manufacture, sell, license (or sublicense),
transmit, broadcast, delivery (electronically or otherwise) or dispose of
any Company Right, nor is there any basis for any such claim, nor has the
Company received any notice asserting that any Company Right or the
proposed use, manufacture, sale, license (or sublicense), transmission,
broadcast, delivery (electronically or otherwise) or disposition thereof
conflicts or will conflict with the rights of any other party, nor, is
there any basis for any such assertion.
(g) Since its organization, the Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all
Intellectual Property
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Rights and all Inventions. Except as set forth in Schedule 4.8(g), and
since its organization, each of the Company's officers, directors,
employees, consultants and contractors, who, either alone or in concert
with others, developed, invented, discovered, derived, programmed or
designed Intellectual Property Rights or Inventions, or who has knowledge
of or access to information about Intellectual Property Rights or
Inventions, has entered into a written agreement ("Proprietary Information
Agreement") with the Company which provides that (i) the Intellectual
Property Rights, other information and Inventions are proprietary to the
Company and are not to be divulged (except as authorized by the Company),
misused or misappropriated, and (ii) the Intellectual Property Rights,
other information and Inventions are to be disclosed by such employees,
consultants and contractors to the Company and transferred by them to the
Company, without any further consideration being given therefor by the
Company, together with all of such employees', consultants' or contractors'
right, title and interest in and to such Intellectual Property Rights,
other information and Inventions and all patents, trademarks, service
marks, trade names, copyrights, licenses and rights with respect to such
Intellectual Property Rights, other information and Inventions; in cases
where the Intellectual Property Rights and Inventions may be subject to
rights of a third person, the Company has secured from said third person
unrestricted, perpetual, irrevocable, royalty-free and exclusive license
rights thereto.
(h) Except as set forth in Schedule 4.8(h), all works that were
created, prepared or delivered by consultants, independent contractors or
other third parties for or on behalf of the Company (including any
materials and elements created, prepared or delivered by such parties in
connection therewith) (A) constitute "works made for hire" specially
ordered or commissioned by the Company within the meaning of United States
copyright law, or (B) all right, title and interest therein (including any
materials and elements created, prepared or delivered by such parties in
connection therewith) have been assigned to the Company.
(i) Except as set forth in Schedule 4.8(i), the Company has not sold,
transferred, assigned, licensed or subjected to any lien, security interest
or other encumbrance, any Intellectual Property Right, trade secret,
know-how, invention, design, process, computer program or technical data,
or any interest therein, necessary or useful for the development,
manufacture, use, operation or sale of any product or service presently
under development or manufactured, sold or rendered by the Company and the
Company is not bound by any agreement that affects the Company's exclusive
right to develop, license, market or sell its products and services.
(j) Except as set forth in Schedule 4.8(j), no director, officer,
employee, agent or shareholder of the Company owns or has any right in the
Intellectual Property Rights of the Company or any Inventions used in or
necessary for the conduct of the Company's business as now conducted or as
proposed to be conducted.
(k) Except as set forth on Schedule 4.8(k), the Company and the
Shareholders have no knowledge of any facts and neither the Company nor the
Shareholders have received any communication alleging or stating that the
Company or any employee, consultant or contractor has violated or
infringed, or by conducting business as proposed,
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would violate or infringe, any patent, trademark, service mark, trade name,
copyright, trade secret, proprietary right, process or other Intellectual
Property Rights of any other person or entity; the Company and the
Shareholders have no knowledge of any impediment whereby any employee,
consultant or contractor who performs or is to perform services of any kind
for the Company that would interfere with such person's ability to promote
the business of the Company or would conflict with the business or proposed
business of the Company.
(l) Except as set forth on Schedule 4.8(l), the software employed by
the Company in carrying on its business is free from any significant
software defect or programming or documentation error, operates and runs in
a reasonable and efficient business manner, conforms to the specifications
thereof, and, with respect to the software owned by the Company, the
applications can be recreated from their associated source code without
undue burden.
(m) The Company has not knowingly altered its data, or any software or
supporting software that may in turn damage the integrity of the data,
whether stored in electronic, optical or magnetic or other form. The
software proprietary to the Company does not contain any bugs or viruses.
The Company has furnished the Parent with all available documentation
relating to the use, maintenance and operation of the software, all of
which is true and accurate.
(n) Since the inception of the Company, the Company has not, to any
material extent, (A) defaulted under any software or multimedia development
contract, (B) failed to meet any product specifications or characteristics
or software or multimedia development milestones and standards thereunder,
or (C) failed to properly interface any computer software or multimedia
program with the intended operating system software or related hardware
designs applicable thereto.
(o) To the Company's knowledge, all content used on the Company's web
sites is original material. 4.9 Financial Statements.
Schedule 4.9 contains complete and accurate copies of the Company's audited
balance sheets as at December 31, 1997 and December 31, 1998 (the "Balance
Sheets") and its audited statements of operations and of changes in cash flows
for the twelve month periods therein (all such financial statements and balance
sheets being referred to herein collectively as the "Financial Statements"),
certified by PricewaterhouseCoopers LLP. The Financial Statements are true,
complete and correct and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated. The Financial Statements present fairly, completely and
accurately the financial condition of the Company as of the respective dates and
for the periods indicated. The Company does not have any obligation or
liability, individually or in the aggregate, required to be disclosed on the
Financial Statements prepared in accordance with generally accepted accounting
principles that is not disclosed by the Financial Statements.
4.10 Accounts and Notes Receivable. All the accounts receivable and notes
receivable owing to the Company as of the date hereof constitute, and as of the
Effective Date
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will constitute, valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and there are no known or
asserted claims, refusals to pay or other rights of set off against any thereof.
Except as set forth in Schedule 4.10, there is (a) no account debtor or note
debtor delinquent in its payment by more than 90 days, (b) no account debtor or
note debtor that has refused (or, to the best knowledge of the Company,
threatened to refuse) to pay its obligations for any reason, (c) to the best
knowledge of the Company, no account debtor or note debtor that is insolvent or
bankrupt and (d) no account receivable or note receivable which is pledged to
any third party by the Company. Except to the extent of a reserve which the
Company has established specifically for doubtful accounts receivable and notes
receivable (which reserve is set forth on the Balance Sheet, is reasonable under
the circumstances and is consistent with past practice), to the knowledge of the
Company, all of the accounts receivable of the Company existing at the Closing
shall be paid in full by not later than the ninetieth (90th) day after the
Closing and, to the knowledge of the Company, all of the notes receivable shall
be paid in accordance with the terms thereof.
4.11 Accounts and Notes Payable. All accounts payable and notes payable by
the Company to third parties as of the date hereof arose in the ordinary course
of business, and, except as set forth in Schedule 4.11, there is no such account
payable or note payable delinquent in its payment.
4.12 Internal Accounting Controls. The Company maintains a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general and specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorizations; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
4.13 Outstanding Indebtedness; Liabilities. Except as set forth in Schedule
4.13, the Company has no indebtedness for borrowed money which the Company has
directly or indirectly created, incurred, assumed or guaranteed, or with respect
to which the Company has otherwise become directly or indirectly liable, except
as shown on the Balance Sheet as of December 31, 1998. Except as set forth in
Schedule 4.13, the Company has no liabilities or obligations, absolute or
contingent, which are not shown or provided for in the Balance Sheet, except (1)
liabilities or obligations which are less than $10,000 in the aggregate, (2)
those incurred after the date of the Balance Sheet as of December 31, 1998 in
the ordinary course of business, or (3) normal contractual obligations under the
Contracts set forth in Schedule 4.16(a).
4.14 Tax Matters. The Company has timely filed all federal, state, local
and foreign tax returns required to be filed, and all such Tax Returns were
true, complete and correct at the time of filing in all material respects. The
Company is not currently a beneficiary of any extension of time within which to
file any Tax Return. All taxes owed by the Company (whether or not shown on any
Tax Return) have been paid, or, to the extent not required to have been
previously paid, have been adequately reserved for on the latest Balance Sheet
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax treatment) in accordance with generally
accepted accounting principles. The Company has not
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incurred a Tax liability from the date of the latest Balance Sheet other than a
Tax liability in the ordinary course of business. No additional Taxes have been
proposed, asserted or assessed either orally or in writing by any taxing
authority against the Company, and the Company has not been notified in writing
by any taxing authority regarding a potential tax liability. The Company has not
made an election to be treated as a "consenting corporation" under Section
341(f) of the Code. The Company has not agreed to, nor is required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise. The Company is not now, nor has it ever been, a member of a
consolidated or combined group for Federal, state, local or foreign tax purposes
nor has it ever been included in a consolidated or combined tax return for
Federal, state, local or foreign tax purposes. The Company is not liable for
Taxes of any other party, as a transferee or successor. The Company has not made
any payments, is not obligated to make any payments, and is not a party to any
agreements that under any circumstances could obligate it to make any payments
that will not be deductible under Section 280G of the Code. The Company has
complied with all applicable laws relating to the payment and withholding of
Taxes (including, without limitation, withholding of Taxes pursuant to Sections
1441, 1442 and 3406 of the Code), and has within the time and in the manner
required by law withheld and paid over all amounts required to be withheld and
paid from the wages and salaries of employees, and the Company is not liable for
any Taxes for failure to comply with such laws. The Company has never been a
United States real property holding corporation within the meaning of Section
897(c) of the Code. As used in this Agreement, (i) "Tax" means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), custom duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, ad valorem, transfer,
registration, value added, alternative or add-on minimum taxes, estimated, and
other tax, fees, assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other additional amounts, in
each case, imposed by any taxing authority (domestic or foreign); and (ii) "Tax
Return" means any return, declaration, report, claim for refund, information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
4.15 Absence of Certain Changes. Except as set forth in Schedule 4.15,
since December 31, 1998 (a) the Company has not entered into any transaction
which was not in the ordinary course of its business; (b) there has been no
material adverse change in the business, earnings, prospects, properties or
condition (financial or other) of the Company; (c) there has been no damage to,
destruction of or loss of any of the properties or assets of the Company
(whether or not covered by insurance) materially adversely affecting the
business, earnings, prospects, properties or condition (financial or other) of
the Company; (d) the Company has not declared or paid any dividend or made any
distribution on its capital stock, redeemed, purchased or otherwise acquired any
of its capital stock, granted any options to purchase shares of its capital
stock, or issued any shares of its capital stock; (e) the Company has not
received notice that there has been a cancellation of an order for its services
or a loss of a customer of the Company, the cancellation or loss of which could
materially adversely affect the business, earnings, prospects, properties or
condition (financial or other) of the Company; (f) there has been no resignation
or termination of employment of any key officer or key employee of the Company,
with the exception of the departure of Jennifer Hughes, and the Shareholders do
not
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know of the impending resignation or termination of employment of any key
officer or key employee of the Company in either case; (g) there has been no
labor dispute involving the Company or any of its employees; (h) there has been
no material change in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or otherwise; (i) there have been no
loans made by the Company to its employees, officers or directors, other than
travel advances and other advances made in the ordinary course of business; (j)
there has been no waiver or compromise by the Company of a valuable right or of
a debt owed to it or amendment or change to any material contract or arrangement
of the Company; (k) there has been no sale, assignment, or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets; (l)
there has been no extraordinary increase in the compensation of any of the
Company's employees, officers or directors and there has been no increase in the
compensation of any such employees, officers or directors who earn compensation
at an annual rate of more than $45,000; (m) there has been no agreement or
commitment by the Company to do or perform any of the acts described in this
Section 4.15 and (n) there has been no other event or condition of any character
which might reasonably be expected either to materially adversely affect the
business, earnings, prospects, properties or condition (financial or other) of
the Company or liabilities of the Company or to impair the ability of the
Company to conduct the business now being or proposed to be conducted by it.
4.16 Material Contracts and Commitments.
(a) Except as set forth in Schedule 4.16(a), the Company has no
currently existing contract, obligation, agreement, plan, arrangement,
commitment or the like (written or oral) of any material nature (the
"Contracts"), including, without limitation, the following:
(i) agreements for the development, modification or enhancement
of computer software or multimedia products;
(ii) any material distributorship, dealer, sales, advertising,
agency, affiliate, manufacturer's representative, franchise or similar
contract or relationship or any other contract relating to the payment
of a commission or other fee calculated as or by reference to a
percentage of the profits or revenues of the Company or of any
business segment of the Company;
(iii) any license (whether as licensor or licensee), or
sublicense, royalty, permit, or franchise agreement, including,
without limitation, any agreement pursuant to which the Company
licenses any Company Rights to any third party (other than ordinary
course licenses to end-users);
(iv) the content or delivery of its computer software or
multimedia products and services (including the transmission or other
performance (electronically or otherwise));
(v) loans, notes, indentures, or instruments relating to or
evidencing indebtedness for borrowed money, or mortgages, pledges,
liens, security interests or other encumbrances on any of the
Company's property or any agreement or
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instrument evidencing any guaranty by the Company of payment or
performance by any other person;
(vi) the employment of any officer, employee, consultant or agent
or any other type of contract, commitment or understanding with any
officer, employee, consultant or agent which (except as otherwise
generally provided by applicable law) is not immediately terminable
without cost or other liability at or at any time after the Effective
Date;
(vii) profit-sharing, bonus, stock option, stock appreciation
right, pension, retirement, disability, stock purchase,
hospitalization, insurance or similar plan or agreement, formal or
informal, providing benefits to any current or former director,
officer, employee, agent or consultant;
(viii) agreements with any labor union or collective bargaining
organization or other similar labor agreements;
(ix) any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services
in excess of $10,000;
(x) (v) the future purchase, sale or license of products,
material, supplies, equipment or services requiring payments to or
from the Company in an amount in excess of $10,000 per annum, which
agreement, arrangement or understanding is not terminable on 30 days'
notice without cost or other liability at or at any time after the
Effective Date, or in which the Company has granted or received
manufacturing rights, most favored nations pricing provisions or
exclusive marketing or other rights relating to any product, group of
products, services, technology, assets or territory;
(xi) any indenture, agreement or other document (including
private placement brochures) relating to the sale or repurchase of
securities;
(xii) any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses to which the
Company is a party;
(xiii) agreements and purchase orders with customers;
(xiv) agreements limiting the freedom of the Company to compete
in any line of business or in any geographic area or with any person;
(xv) agreements providing for disposition of the business, assets
or shares of the Company, agreements of merger or consolidation to
which the Company is a party or letters of intent with respect to the
foregoing;
(xvi) agreements involving or letters of intent with respect to
the acquisition of the business, assets or shares of any other
business;
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(xvii) insurance policies;
(xviii) powers of attorney; and
(xix) any other agreement, contract or commitment which is
material to the Company.
(b) The Company and the Shareholders have provided the Parent with
either copies of or access to all of the Contracts. Except as set forth in
Schedule 4.16(b), each of the Contracts is valid, binding and in full force
and effect in all material respects and enforceable by the Company in
accordance with its terms. The Company is not in default under, or
otherwise in violation of the terms of, any of the Contracts in any
material respect. To the knowledge of the Company and the Shareholders, no
other party to any of the Contracts is in default thereunder or otherwise
in violation of the material terms thereof. No consent of any party to any
of the Contracts is required in connection with the execution, delivery or
performance of this Agreement and the consummation of the transactions
contemplated hereby.
4.17 Registration Rights. Except as set forth in Schedule 4.17, the Company
has not granted or agreed to grant any rights relating to the registration of
its securities under applicable federal and state securities laws, including but
not limited to demand or piggy-back registration rights.
4.18 Title to Property and Assets. The Company has good and marketable
title to its properties and assets (including but not limited to its
intellectual property (excluding Licensed Software) and other intangible assets
listed in Schedule 4.8(a)) free and clear of all mortgages, security interests,
claims, liens and encumbrances, except liens for current taxes and assessments
not yet due. The Company owns, leases, licenses or otherwise has sufficient
rights to use all properties and assets necessary for the operation of its
business as now conducted. With respect to the property and assets it leases,
the Company has the right to, and does, enjoy peaceful and undisturbed
possession under all leases under which it is leasing property. All such leases
are in full force and effect, and the Company is in compliance with such leases
and holds a valid leasehold interest free of all security interests, liens,
claims or encumbrances. Schedule 4.18 contains a list and brief description of
(i) all real property leased by the Company, together with all buildings and
other structures and material improvements located on such real property (the
"Leased Real Property"), and (ii) with respect to each lease covering the Leased
Real Property (collectively, the "Leases"), (A) the name of the lessor, (B) any
requirement of consent of the lessor to assignment (including assignment by way
of merger or change of control) and (C) the termination date of the Lease. The
Company's tangible properties and assets are in good condition and repair,
except for hidden defects where the defects, in the aggregate, cause $10,000 or
less of damage and except for ordinary wear and tear.
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4.19 Employee Compensation and Benefit Plans.
(a) Except for the Employment Agreements and the Knowledgeweb Stock
Option Agreement, the Company is not a party to or bound by any currently
effective employment contract, deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation agreement. Except as set forth on Schedule 4.19, the Company
does not maintain any "employee benefit plan" (as such term is defined by
the Employee Retirement Income Security Act of 1974 ("ERISA")). The
Purchaser has been provided with copies of such plans, if any, and any
agreements arising therefrom to which the Company currently is a party.
(b) Each employee benefit plan has been operated and administered in
compliance with ERISA, the Code and in accordance with the provisions of
all other applicable federal and state laws; (B) all reporting and
disclosure obligations imposed under ERISA and the Code have been satisfied
with respect to each employee benefit plan; (C) each employee benefit plan
which is a "group health plan" within the meaning of Section 5000 of the
Code has been maintained in compliance with Section 4980B of the Code and
Title I, Subtitle B, Part 6 of ERISA and no tax payable on account of
Section 4908B of the Code has been or is expected to be incurred; (D) all
contributions due and payable on or before the Closing Date in respect of
any employee benefit plan have been made in full and proper form, or
adequate accruals have been provided for in the financial statements for
all other contributions or amounts in respect of the employee benefit plans
for periods ending prior to or on the Closing Date; (E) neither the Company
not any of its ERISA Affiliates, nor to the knowledge of the Company and
its ERISA Affiliates, any other "disqualified person" or "party in
interest" (as defined in Section 4975 of the Code and Section 3(14) of
ERISA, respectively) with respect to any employee benefit plan has breached
the fiduciary rules of the ERISA or engaged in a prohibited transaction
which could subject the Company or its ERISA Affiliates to any tax or
penalty imposed under Sections 4975 of the Code or Section 502(i), (j) or
(l) of ERISA; and (F) neither the Company nor any of its ERISA Affiliates
currently is or has ever maintained or been obligated to contribute to (1)
a "multiple employer plan" (within the meaning of Section 413 of the Code);
(2) a "multiemployer plan" (as defined in Section 3(37) of ERISA); (3) a
"defined benefit plan" (as defined in Section 3(35) of ERISA) or (4) any
employee benefit plan that provides post-retirement health of life
insurance benefits.
4.20 Labor Union Activities. The Company is not engaged in any unfair labor
practice which could reasonably be expected to adversely affect the business,
earnings, prospects, properties or condition (financial or other) of the
Company. There are (a) no unfair labor practice complaints pending or, to the
knowledge of the Company or the Shareholders, threatened against the Company or
before the National Labor Relations Board which could reasonably be expected to
adversely affect the business, earnings, prospects, properties or condition
(financial or other) of the Company and no grievance or arbitration proceeding
arising out of or under a collective bargaining agreement is so pending or
threatened; (b) no strike, labor dispute, slow down or stoppage pending or, to
the knowledge of the Company or the Shareholders, threatened against the
Company; and (c) no union representation questions
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existing with respect to the employees of the Company and no union organizing
activities taking place with respect to the Company.
4.21 Employee Relations. The Company's believes relations with its
employees are good. The name, position and salary of all employees are set forth
in Schedule 4.21.
4.22 No Discrimination. The Company has not and does not in any manner or
form discriminate, foster discrimination or permit discrimination against any
person, whether as to race, sex, religion, or other legally protected classes of
persons.
4.23 Certain Transactions. Except as set forth in Schedule 4.23, the
Company is not indebted, either directly or indirectly, to any of its officers,
directors or holders of Company Common Stock, Company Preferred Stock or Company
Options or to their respective spouses, children or other family members; none
of such officers, directors and holders of capital stock or options or any
members of their families are indebted to the Company or, to the knowledge of
the Company and the Shareholders, have any direct or indirect ownership interest
in any firm or corporation with which the Company is affiliated or with which
the Company has a business relationship, or any firm or corporation which
competes with the Company. No officer, director or holder of any of the
Company's capital stock or options or, to the knowledge of the Company and the
Shareholders, any member of their families, has, directly or indirectly, any
interest in any contract with the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
4.24 Environmental Laws and Regulations. The Company is in compliance with
all federal, state, local and foreign laws, common law, rules, codes,
administrative orders and regulations relating to pollution or protection of
human health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including without limitation, laws, common law, rules, codes, administrative
orders and regulations relating to the release or threatened release of
chemicals, pollutants, contaminants, wastes, toxic substances, hazardous
substances, petroleum or petroleum products (collectively, "Hazardous
Materials") or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws") and there are no events or circumstances that could form
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company relating to any Hazardous Materials or the violation of
any Environmental Laws.
4.25 Other Names. Except as set forth on Schedule 4.25, the business
conducted by the Company prior to the date hereof has not been conducted under
any corporate, trade or fictitious name.
4.26 Minute Books. The minute books of the Company provided to the Parent
contain all resolutions adopted by directors and shareholders of the Company
since the incorporation of the Company and fairly and accurately reflect, in all
material respects, all matters and transactions referred to in such minutes or
written consents.
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4.27 Insurance Coverage. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility insuring
the Company and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of corporations engaged in the
same or similar business and similarly situated. The Company has not been
refused any insurance coverage sought or applied for, and the Company and the
Shareholders have no reason to believe that the Company will be unable to renew
its existing insurance coverage as and when the same shall expire upon terms at
least as favorable as those presently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company. Such
insurance is summarized in Schedule 4.27.
4.28 Business Metrics. For the period beginning December 1, 1998 and ending
December 31, 1998, the Astrology.net and related Web sites owned by the Company
received approximately (a) eight million (8,000,000) advertising views as
evidenced by the information set forth in Schedule 4.28, and (b) five hundred
fifty thousand (550,000) unique email addresses as evidenced by the information
set forth in Schedule 4.28. As of December 31, 1998, the Company owned accurate
lists of approximately the following: (w) one hundred ten thousand (110,000)
email addresses on the daily horoscope list as evidenced by the information set
forth in Schedule 4.28, (x) five hundred thousand (500,000) names in the general
email file as evidenced by the information set forth in Schedule 4.28, (y)
information regarding thirty thousand (30,000) unique buyers in the chart shop
buyers list as evidenced by the information set forth in Schedule 4.28, and (z)
true and accurate copies of duly executed and enforceable agreements between
Company and two hundred fifty (250) affiliates representing one thousand two
hundred fifty (1,250) Web sites set forth in Schedule 4.28, including expiration
dates of said agreements. Except as set forth in Schedule 4.28, to the knowledge
of the Company, none of the Company's customers or affiliates listed on Schedule
4.28 intends to cease dealing with the Company or materially reduce its business
with the Company or that the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement would be likely
to adversely affect the relationship of the Company with any such customer after
the date of this Agreement.
4.29 Year 2000 Compliant Systems. Except as set forth on Schedule 4.29, all
of the Company's computer-based systems are able to operate and effectively
process data including dates on or after January 1, 2000, and none of the
products and services sold, licensed, rendered, or otherwise provided by the
Company will malfunction or will cease to function as a result of the Year 2000.
4.30 Bank Accounts; Powers of Attorney. Schedule 4.30 sets forth a true and
complete list of (i) all bank accounts and safe deposit boxes of the Company and
all persons who are signatories thereunder or who have access thereto and (ii)
the names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from the Company and
a summary of the terms thereof.
4.31 Vote Required. The affirmative vote of at least 51% of the outstanding
shares of the Company Common Stock, as a class, and Company Preferred Stock, as
a class, approving the Merger and this Agreement are the only votes and/or
consents of the holders of any class or series of the Company's capital stock
necessary to approve this Agreement and the transactions contemplated hereby.
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4.32 Company Expenses. Schedule 4.32 sets forth a true, correct and
complete schedule of all Company expenses relating to this Agreement, the letter
of intent dated January 1, 1999 and the transactions contemplated hereby and
thereby that have been incurred or paid by or on behalf of the Company (whether
or not theretofore billed) through the Effective Date, and there are no other
such Company expenses other than as set forth therein.
4.33 Officers and Directors. Set forth on Schedule 4.33 is a true and
complete list of the current officers and directors of the Company.
4.34 Broker's Fees. Except with respect to fees payable to b|z partners and
as set forth in Schedule 4.34, which fees shall be paid by the Shareholders,
neither the Shareholders nor the Company have any liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
4.35 Disclosure. No representation, warranty or statement by the Company or
the Shareholders in this Agreement or in any written statement or certificate
furnished or to be furnished to the Parents pursuant to this Agreement
(including all exhibits and schedules hereto and any other agreements or
documents delivered on the Closing or any Financial Statements referred to in
Section 4.9 hereof) contains or will contain any untrue statement of a material
fact or, when taken together, omits or will omit to state a material fact
necessary to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Founders that has not been disclosed to the Parent in writing that (1)
materially adversely affects or could materially adversely affect the business,
earnings, prospects, properties or condition (financial or other) of the Company
or (2) adversely affects or could adversely affect the ability of the Company,
the Shareholders or the Optionholders to perform their obligations under this
Agreement.
4.36 Investment Representations.
(a) The Shareholders and the Optionholders are acquiring the Parent
Common Stock for their own account and not with a view to or for sale in
connection with any distribution of the Parent Common Stock.
(b) The offer and sale of the Parent Common Stock to the Shareholders
and the Optionholders was not accompanied by the publication of any
advertisement.
(c) The Shareholders and the Optionholders have carefully reviewed the
Parent's financial statements for the year ended December 31, 1997,
together with the interim report for the nine-month period ended September
30, 1998, and have had access to all other information regarding the Parent
and its present and prospective business, assets, liabilities and financial
condition that the Shareholders and the Optionholders reasonably consider
important in making the decision to acquire the Parent Common Stock, and
the Shareholders and the Optionholders have had ample opportunity to ask
questions of the Parent's representatives concerning such matters and the
acquisition of the Parent Common Stock.
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(d) By reason of the Shareholders' and the Optionholders business or
financial experience, the Shareholders and the Optionholders are each
capable of evaluating the merits and risks of their investment in the
Parent Common Stock, have the ability to protect their own interests in
this transaction and are financially capable of bearing a total loss of
this investment.
(e) The Shareholders and the Optionholders understand that
their ability to transfer the Parent Common Stock is subject to the
restrictions set forth in the Lock-Up Agreement and, with respect to the
Shareholders, is further subject to the Escrow Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND ACQUISITION
SUB
The Parent and Acquisition Sub represent and warrant to the Company and
the Shareholders as follows:
5.1 Organization, Standing and Power. Each of Parent and Acquisition Sub
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation and (ii) has the corporate power to
own its properties and to carry on its business as now being conducted. Each of
the Parent and the Acquisition Sub is qualified or licensed and in good standing
as a foreign corporation in all jurisdictions where the failure to be so
qualified or licensed could reasonably be expected to materially impair the
ability to consummate the transaction contemplated hereby or materially
adversely affect the business of Parent or Acquisition Sub.
5.2 Authority. Each of Parent and Acquisition Sub has all requisite
corporate power and authority to enter into this Agreement, the Agreement of
Merger and any Related Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the Agreement of Merger and any Related Agreements to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate and stockholder action on
the part of each of the Parent and Acquisition Sub, and no further action is
required on the part of either the Parent or Acquisition Sub to authorize this
Agreement, the Agreement of Merger or any Related Agreements to which it is a
party and the transactions contemplated hereby and thereby. This Agreement, the
Agreement of Merger and any Related Agreements to which it is a party have been
duly executed and delivered by each of Parent and Acquisition Sub, and, assuming
the due authorization, execution and delivery by the other parties hereto and
thereto, constitute the valid and binding obligation of each of the Parent and
Acquisition Sub, enforceable in accordance with their respective terms, except
as such enforceability may be limited by principles of public policy and subject
to the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and to rules of law governing specific performance, injunctive
relief or other equitable remedies.
5.3 No Conflict. The execution and delivery of this Agreement and any
Related Agreements by each of Parent and Acquisition Sub do not, and, the
consummation of the
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transactions contemplated hereby and thereby will not, conflict with, or result
in any violation of, or default under (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any benefit under (i) any provision of
the organizational documents of the Parent or Acquisition Sub, (ii) any
mortgage, indenture or lease to which the Parent or Acquisition Sub or any of
their respective properties or assets are subject, or (iii) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Parent or
Acquisition Sub or their respective properties or assets.
5.4 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity or any third
party, including a party to any agreement with the Parent, is required by or
with respect to the Parent in connection with the execution and delivery of this
Agreement and any Related Agreements or the consummation of the transactions
contemplated hereby and thereby.
5.5 Capital Stock. All outstanding shares of Parent Common Stock are
validly issued, fully paid and non-assessable and not subject to preemptive
rights. The Parent has duly authorized and reserved for issuance the Merger
Shares, and, when issued in accordance with the terms of ARTICLE II, the Merger
Shares will be validly issued, fully paid and non-assessable and free of
preemptive rights. The Parent directly owns all of the outstanding shares of
capital stock of Acquisition Sub, and all of such shares are validly issued,
fully paid and non-assessable and not subject to preemptive rights.
5.6 Broker's Fees. The Parent has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Commercially Reasonable Efforts. Subject to the terms and conditions
provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to take promptly, or cause to be taken, all
reasonable actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
6.2 Expenses. All fees and expenses incurred in connection with the
transactions contemplated by this Agreement including, without limitation, all
legal, accounting, financial advisory, consulting and all other fees and
expenses ("Transaction Expenses") incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this Agreement, the
Related Agreements and the transactions contemplated hereby and thereby, shall
be the obligation of the respective party incurring such fees and expenses; it
being understood that the Transaction Expenses of the Company shall be the
responsibility of the Shareholders and Optionholders, except that Parent agrees
to pay up to $10,000 of the
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Company's expenses. All Transaction Expenses of the Company and the Shareholders
shall be payable at Closing. To the extent that the Company pays or becomes
liable with respect to any Transaction Expenses of the Company or the
Shareholders, the cash consideration payable pursuant to Section 2.1(a)(i) shall
be reduced dollar for dollar.
6.3 Confidentiality. Each party hereto agrees that any information obtained
by such party (the "Receiving Party") pursuant to or in connection with this
Agreement, the Related Agreements and the transactions contemplated hereby and
thereby which may be proprietary or otherwise confidential to any other party
hereto (the "Disclosing Party") will not be disclosed by the Receiving Party
without the prior written consent of the Disclosing Party. Each party further
acknowledges and understands that any information obtained which may be
considered "inside" non-public information will not be utilized by such party in
connection with purchases and/or sales of the Parent Common Stock except in
compliance with applicable state and federal anti-fraud statutes. The provisions
of this Section 6.3 shall not be in limitation of any rights which the Parent
may have with respect to the books and records of the Company, or to inspect its
properties or discuss its affairs, finances and accounts, under the laws of the
jurisdiction in which it is incorporated.
6.4 Operation of Business. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Closing Date, the Shareholders
shall use their best efforts to cause the Company to conduct its operations in
the ordinary course of business and in compliance in all material respects with
all applicable laws and regulations and, to the extent consistent therewith, the
Shareholders shall use their best efforts to cause the Company to use all
commercially reasonable efforts to preserve intact its current business
organization, keep its physical assets in good working condition, keep available
the services of its current officers and employees and preserve its
relationships with customers and others having business dealings with it to the
end that its good will and ongoing business shall not be impaired in any
material respect. Without the prior written consent of Parent, the Company shall
not, among other things, (a) except for the issuance of shares of capital stock
of the Company upon exercise or conversion of presently outstanding warrants,
options, rights or convertible securities, issue or sell, or contract to issue
or sell, any shares of capital stock of the Company or any securities
convertible into or exchangeable for shares of capital stock of the Company or
securities, warrants, options or rights to purchase any of the foregoing (other
than the issuance of employee stock options and stock appreciation rights under
existing stock option plans), (b) purchase or redeem any shares of capital stock
of the Company, (c) declare or pay any dividends or agree to make any other
distribution with respect to any shares of capital stock of the Company or (d)
amend the Articles of Incorporation or By-Laws of the Company.
6.5 Right of First Refusal.
(a) If any Shareholder shall receive a bona fide written offer (an
"Offer") from a Third Party (as defined below) to purchase all or a portion
of the Merger Shares held by such Shareholder and such Shareholder desires
to accept the offer, such Shareholder, before accepting the Offer, shall
deliver to the Parent an offer (the "First Refusal Offer") to sell such
Merger Shares in accordance with this Section 6.5.
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(b) The First Refusal Offer shall state that such Shareholder proposes
to effect a sale of Merger Shares to a Third Party, the number of Merger
Shares proposed to be sold, the terms and conditions of the Offer, and the
name and address of the Third Party. The Parent shall have the right to
purchase all, but not part, of such Merger Shares. Such right may be
exercised by the Company by delivery of a written notice to the Shareholder
within 30 days after delivery of the First Refusal Offer (the "Acceptance
Period"). Upon delivery of such notice, the purchase of such Merger Shares
shall be consummated on a business day designated by such Shareholder at
the offices of the Parent within 60 days after the delivery of such notice
on the terms of the First Refusal Offer.
(c) If the Parent did not accept all Merger Shares offered in the
First Refusal Offer, or if the Parent failed to purchase such shares within
the 60-day period referred to in Section 6.5(b) above, such Shareholder may
sell such Merger Shares on the terms of the Offer to the Third Party within
90 days after the expiration of the Acceptance Period or the 60-day period
referred to in Section 6.5(b), as the case may be. If such sale is not made
within such 90-day period, the restrictions provided for in this Section
6.5 shall again become effective.
(d) For purposes of this Section 6.5, "Third Party" shall mean, with
respect to any Shareholder, any person or entity that is not the spouse or
lineal descendant of such Shareholder or a trust for the benefit of any of
the foregoing.
(e) The restrictions under this Section 6.5 shall terminate upon
closing of the first underwritten public offering for the account of the
Parent of Parent Common Stock pursuant to a registration statement filed
under the Securities Act of 1933, as amended.
6.6 Appointment of Representative.
(a) Powers of Attorney. Each Shareholder irrevocably constitutes and
appoints David W. Fox (the "Representative") as such Shareholder's true and
lawful agent, proxy, and attorney-in-fact and agent and authorizes the
Representative acting for such Shareholder and in such Shareholder's name,
place, and stead, in any and all capacities to do and perform every act and
thing required or permitted to be done in connection with the transactions
contemplated by this Agreement and the Related Documents, as fully to all
intents and purposes as such person might or could do in person, including,
without limitation, the power to :
(i) receive all notices required to be delivered to such
Shareholder under this Agreement, including, without limitation, any
notice of a claim for which indemnification is sought under Section
8.2 below;
(ii) take any and all action on behalf of such Shareholder from
time to time as the Representative may deem necessary or desirable to
defend, pursue, resolve, and/or settle claims under this Agreement,
including, without limitation, claims for indemnification under
Section 8.2; and
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(iii) engage and employ agents and representatives (including
accountants, legal counsel, and other professionals) and incur such
other expenses as he deems necessary or prudent in connection with the
administration of the foregoing.
Each Shareholder grants unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing necessary or
desirable to be done in connection with the transactions contemplated by
this Agreement and the Related Documents, as fully to all intents and
purposes as such Shareholder might or could do in person, hereby ratifying
and confirming all that the Representative may lawfully do or cause to be
done by virtue hereof. Each Shareholder, by executing this Agreement,
agrees that such agency, proxy, and power of attorney are coupled with an
interest, and are therefore irrevocable without the consent of the
Representative and shall survive the death, incapacity, or bankruptcy of
such Shareholder to the extent permitted by applicable law. Each
Shareholder acknowledges and agrees that upon execution of this Agreement,
any delivery by the Representative of any waiver, amendment, agreement,
opinion, certificate, or other documents executed by the Representative or
any decisions made by the Representative pursuant to this Section 6.6 shall
bind such Shareholder with respect to such documents or decision as fully
as if such Shareholder had executed and delivered such documents or made
such decisions.
(b) Not Liable. The Representative shall not have, by reason of this
Agreement, a fiduciary relationship in respect of any Shareholder, except
in respect of amounts received on behalf of such Shareholder. The
Representative shall not be liable to any Shareholder for any action taken
or omitted by him or any agent employed by him hereunder or under any
Related Document, or in connection therewith, except that the
Representative shall not be relieved of any liability imposed by law for
gross negligence or willful misconduct. The Representative shall not be
liable to Shareholders for any apportionment or distribution of payments
made by him in good faith, and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse from
other Shareholder to whom payment was due, but not made, shall be to
recover from other Shareholders any payment in excess of the amount to
which they are determined to have been entitled. The Representative, in
such capacity, shall not be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions, or
conditions of this Agreement.
(c) Replacement of the Representative. Upon the death, disability, or
incapacity of the initial Representative appointed pursuant to Section
6.6(a) above, each Shareholder acknowledges and agrees that such
Representative's executor, guardian, or legal representative, as the case
may be, shall (in consultation with the Shareholders) appoint a replacement
reasonably believed by such person as capable of carrying out the duties
and performing the obligations of the Representative hereunder within
thirty (30) days. In the event that the Representative resigns for any
reason, the Representative shall (in consultation with Shareholders) select
another representative to fill such vacancy. Any substituted representative
shall be deemed the Representative for all purposes of this Agreement and
the Related Documents.
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(d) Actions of the Representative; Liability of the Representative.
Each Shareholder agrees that the Parent shall be entitled to rely on any
action taken by the Representative, on behalf of the Shareholders, pursuant
to Section 6.6(a) above (each, an "Authorized Action"), and that each
Authorized Action shall be binding on each Shareholder as fully as if such
Shareholder had himself taken such Authorized Action. The Parent agrees
that the Representative shall have no liability to the Parent for any
Authorized Action, except to the extent that such Authorized Action is
found by a final order of a court of competent jurisdiction to have
constituted fraud or willful misconduct. The Shareholders hereby release
and discharge the Parent from and against any liability arising out of or
in connection with the Representative's failure to distribute any amounts
received by the Representative on Shareholders' behalf to Shareholders.
6.7 Access to Information. The Company shall afford to the Parent, and to
the Parent's accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Closing to the books
and records relating to the Company's business, and shall furnish promptly to
the Parent or its representative all information concerning the operations,
properties and personnel of the Company as the Parent may reasonably request.
6.8 Use of Name. Except in the course of their employment, if any, by the
Company, the Shareholders will not use the names "KnowledgeWeb" or
"Astrology.Net" or any derivative thereof in any way whatsoever at any time
after the Closing.
ARTICLE VII
CONDITIONS TO THE SALE OF THE SHARES
7.1 Conditions to Obligations of Each Party. The respective obligations of
each party to this Agreement shall be subject to the satisfaction or waiver at
or prior to the Closing Date of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this
Agreement or the related Documents shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending; nor shall there by any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the sale contemplated hereby, which makes the consummation of
such sale illegal.
(b) Government Approvals. The Company and the Shareholders shall have
obtained all other consents and approvals required from all governmental
authorities for the consummation of the transactions contemplated by this
Agreement.
7.2 Additional Conditions to the Obligations of the Parent. The obligations
of the Parent to consummate and effect this Agreement and the transactions
contemplated hereby
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shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
the Parent:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Company and the Shareholders in this Agreement shall be
true and correct in all material respects, and the Company and the
Shareholders shall have performed and complied in all material respects
with all covenants, obligations and conditions of this Agreement required
to be performed and complied with by them as of the Closing Date.
(b) Certificate of the Company and Shareholders. The Parent shall have
been provided with a certificate executed on behalf of the Company by an
authorized officer and by the representative on behalf of the Shareholders
to the effect that, as of the Closing Date:
(i) all representations and warranties made by the Company and
the Shareholders in this Agreement are true and correct; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by the Shareholders, or by the Company at the
direction of the Shareholders, on or before such date have been so
performed.
(c) Claims. There shall not have occurred any written claims (whether
or not asserted in litigation) which may materially and adversely affect
the consummation of the transactions contemplated by this Agreement or the
Related Documents or materially adversely affect the business, earnings,
prospects, properties or condition (financial or other) of the Company.
(d) Third Party Consents. All required consents, waivers and approvals
required to be obtained in order to consummate the transactions
contemplated by this Agreement and the Related Documents shall have been
obtained.
(e) Additional Closing Documents. The Parent shall have received each
document required to be delivered by the Shareholders and the Optionholders
at the Closing pursuant to Section 3.2 and Section 3.3.
7.3 Additional Conditions to Obligations of the Shareholders. The
obligation of the Shareholders to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, by the Representative on behalf of the Shareholders:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Parent and Acquisition Sub in this Agreement shall be
true and correct in all material respects, and each of the Parent and
Acquisition Sub shall have performed and complied in all material respects
with all covenants, obligations and conditions of
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this Agreement required to be performed and complied with by them as of the
Closing Date.
(b) Certificate of the Parent and Acquisition Sub. The Shareholders
shall have been provided with a certificate executed on behalf of the
Parent and Acquisition Sub by an authorized officer to the effect that, as
of the Closing Date:
(i) all representations and warranties made by the Parent and
Acquisition Sub in this Agreement are true and correct; and
(ii) all covenants, obligations and conditions of this Agreement to be
performed by the Parent and Acquisition Sub on or before such date have
been so performed.
(c) The Shareholders shall have received a tax opinion of Perkins Coie
LLP, substantially in the form of Exhibit 7.3(c), to the effect that the
Merger will be treated as a reorganization within the meaning of Section
368(a) by reason of Section 368(a)(2)(E) of the Code, such opinion to be
supported by tax certificates supplied by the Parent and the Company and
satisfactory to Perkins Coie LLP;
(d) Additional Closing Documents. The Shareholders shall have received
each document required to be delivered by the Parent at the Closing
pursuant to Section 3.3.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The representations and
warranties of the Company and the Shareholders in ARTICLE IV and of the Parent
in ARTICLE V shall survive the execution, delivery and performance of this
Agreement for a period of eighteen months, except with respect to any claim
arising from or related to a breach of the representations and warranties of the
Company and the Shareholders set forth in Section 4.2 (Capitalization) and
Section 4.14 (Tax Matters) which shall survive until the date of expiration of
the applicable statute of limitations (including any extensions thereto to the
extent that such statute of limitations may be tolled) applicable to the event
which gave rise to such claim.
8.2 Indemnification by the Shareholders. Except as otherwise limited by
this ARTICLE VIII, each Shareholder, jointly and severally, shall indemnify,
defend and hold harmless the Parent and its affiliates, shareholders, officers,
directors, employees, subsidiaries, successors and assigns (collectively, the
"Parent Indemnified Parties") from and against, and pay or reimburse the Parent
Indemnified Parties for, any and all losses, damages, claims, costs and
expenses, interest, awards, judgments, fines and penalties (including legal
costs and expenses) suffered or incurred by them (hereinafter a "Parent Loss")
arising out of or resulting from:
(a) the inaccuracy of any representation or warranty of the Company
and the Shareholders set forth in ARTICLE IV;
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(b) any other breach or violation of this Agreement by the Company,
the Shareholders or the Optionholders; or
(c) any and all debts, liabilities and obligations of the Company of
any nature (including debts, liabilities and obligations resulting from any
audit of the Company's federal or state income or sales tax returns)
arising out of or resulting from any transaction or event occurring prior
to the Closing to the extent that such debts, liabilities or obligations
were not fully reserved against in the Financial Statements.
8.3 General Indemnification Provisions.
(a) For the purposes of this Section 8.3 and Section 8.4, the term
"Indemnitee" shall refer to the person or persons indemnified, or entitled,
or claiming to be entitled, to be indemnified, pursuant to the provisions
of Section 8.2, and the term "Indemnitor" shall refer to the Shareholders.
(b) Within a reasonable time following the determination thereof, an
Indemnitee shall give the Indemnitor notice of any matter which an
Indemnitee has determined has given or could give rise to a right of
indemnification under this Agreement, stating the amount of the Parent
Loss, if known, and method of computation thereof, all with reasonable
particularity and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligations and liabilities of an Indemnitor under this ARTICLE
VIII with respect to Parent Losses arising from claims of any third party
that are subject to the indemnification provided for in this ARTICLE VIII
("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: If an Indemnitee shall receive
notice of any Third Party Claim, the Indemnitee shall promptly give the
Indemnitor notice of such Third Party Claim and shall permit the
Indemnitor, at its option, to undertake the defense of such Third Party
Claim by counsel of its own choice and at its expense; provided, however,
that the failure of the Indemnitee to notify the Indemnitor during the
required notification period shall only relieve the Indemnitor from its
obligation to indemnify the Indemnitee pursuant to this ARTICLE VIII to the
extent that the Indemnitor is materially prejudiced by such failure
(whether as a result of the forfeiture of substantive rights or defenses or
otherwise). If the Indemnitor acknowledges in writing its obligation to
indemnify the Indemnitee hereunder against any Parent Losses that may
result from such Third Party Claims, then the Indemnitor shall be entitled,
at its option, to assume and control the defense of such Third Party Claim
at its expense and through counsel of its reasonable choice if it gives
notice to the Indemnitee within 20 calendar days of the receipt of notice
of such Third Party Claim from the Indemnitee of its intention to do so. If
the Indemnitor elects to assume and control the defense of any such Third
Party Claim, the Indemnitee shall have the right to employ separate counsel
and to participate in (but not control) the defense, compromise or
settlement of the Third Party Claim, but the fees and expenses of such
counsel will be at the expense of the Indemnitee, unless (i) the Indemnitor
has agreed to pay such fees and expenses, (ii) any relief other than the
payment of money damages is sought against the Indemnitee, or (iii) the
Indemnitee has been advised by its counsel that there may be one or more
defenses reasonably available to it which are different from or additional
to those
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available to the Indemnitor, and in any such case that portion of the fees
and expenses of such separate counsel that are reasonably related to
matters covered by the indemnification provided by this ARTICLE VIII will
be paid by the Indemnitor. Expenses of counsel to the Indemnitee shall be
reimbursed on a current basis by the Indemnitor if there is no dispute as
to the obligation of the Indemnitor to pay such amounts pursuant to this
ARTICLE VIII. In the event the Indemnitor exercises its right to undertake
the defense against any such Third Party Claim as provided above, the
Indemnitee shall cooperate with the Indemnitor in such defense and make
available to the Indemnitor, at the Indemnitor's expense, all witnesses,
pertinent records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnitor.
Similarly, in the event the Indemnitee is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnitor
shall cooperate with the Indemnitee in such defense and make available to
it, at the Indemnitor's expense, all such witnesses, records, materials and
information in its possession or under its control relating thereto as is
reasonably required by the Indemnitee. No such Third Party Claim, except
the settlement thereof which involves the payment of money only (by a party
or parties other than the Indemnitee) and for which the Indemnitee is
released by the third party claimant and is totally indemnified by the
Indemnitor, may be settled by the Indemnitor without the written consent of
the Indemnitee. No Third Party Claim which is being defended in good faith
by the Indemnitor shall be settled by the Indemnitee without the written
consent of the Indemnitor.
8.4 Limitations on Indemnification. No claim or claims may be made against
an Indemnitor for indemnification pursuant to Section 8.2(a) unless the
collective Parent Losses of the Indemnitees with respect to such subsection
shall exceed in the aggregate an amount equal to $50,000, in which case the
Indemnitor shall be obligated to the Indemnitee for the full amount of the
Parent Loss or Losses. The sole recourse for the Shareholders indemnity
obligations or any other breach or cause of action under the Agreement shall be
limited to the Escrow Shares, except with respect to claims based upon fraud and
any claim arising from or related to a breach of the representations and
warranties of the Company and the Shareholders set forth in Section 4.2(e)
(Capitalization) and Section 4.14 (Tax Matters). With respect to any claim
arising from or related to a breach by one or more Shareholders of the
representations and warranties set forth in Section 4.2(e) (Capitalization), or
based upon the fraudulent conduct of one or more Shareholders, a Shareholder
shall be liable only if, and to the extent that, the breach or fraud is based
upon his misrepresentation or his act(s) or failure to act. With respect to any
claim arising from or related to a breach of the representations and warranties
of the Company and the Founders set forth in Section 4.14 (Tax Matters), or
based upon the fraudulent conduct of the Company, the Founders shall be solely
responsible for the satisfaction of any claims in excess of the amounts
satisfied by application of the Escrow Shares pursuant to the terms of the
Escrow Agreement.
ARTICLE IX
TERMINATION, AMENDMENT, EXTENSION AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
may be terminated and the transaction abandoned at any time prior to the Closing
Date:
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(a) by mutual consent of the Shareholders and the Parent;
(b) by the Shareholders and the Parent if the Closing has not occurred
by February 28, 1999;
(c) by the Shareholders if they are not in material breach of their
obligations under this Agreement, and there has been a material breach of
any representation, warranty, covenant or agreement contained in this
Agreement on the part of the Parent and such breach has not been cured
within fifteen (15) calendar days after written notice to the Parent
(provided that no cure period shall be required for a breach which by its
nature cannot be cured); or
(d) by the Parent if it is not in material breach of its obligations
under this Agreement, and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of the Shareholders and such breach has not been cured within
fifteen (15) calendar days after written notice to the Company (provided
that no cure period shall be required for a breach which by its nature
cannot be cured).
9.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of the Shareholders or the
Parent, or its officers, directors or shareholders, provided that each party
shall remain liable for any breaches of this Agreement prior to its termination
and provided further that the provisions of Sections 6.2 and 6.3 shall remain in
full force and effect and shall survive any termination of this Agreement.
9.3 Amendment. Except as is otherwise required by applicable law, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time, the Parent and the Shareholders may, to
the extent legally allowed, (i) extend the time for the performance of any of
the obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefits of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISION
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgement of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
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if to the Parent, to:
iVillage
170 Fifth Avenue
New York, NY 10010
Attention: Caterina Conti, Esq.
Telephone No.: (212) 206-2894
Facsimile No.: (212) 367-9133
with a copy to:
Orrick, Herrington & Sutcliffe LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: Martin Levenglick
Telephone No.: (212) 506-3660
Facsimile No.: (212) 506-3730
if to the Shareholders, to:
David and Kelli Fox
3220 Sacramento Street
San Francisco, CA 94115
Telephone No.: (415) 447-6193
Facsimile No.: (415) 447-6191
with a copy to:
Britton, Silberman and Cervantez LLP
461 2nd Street, Suite 332
San Francisco, CA 94107
Attention: Tom Cervantez
Telephone No.: (415) 538-9000
Facsimile No.: (415) 538-9001
10.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The words "knowledge" (and terms of similar import) mean, with
respect to a given matter, the knowledge of David Fox and Kelli Fox and any
information contained in the files of the Company. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. The
references herein to Sections, Exhibits and Schedules, unless otherwise
indicated, are references to sections of and exhibits and schedules to this
Agreement.
10.3 Entire Agreement; Assignment. This Agreement, the schedules and
exhibits hereto, the Non-Disclosure Agreement, dated August 5, 1998, between the
Company and the Parent and the documents and instruments and other agreements
among the parties hereto
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referenced herein: (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided.
10.4 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.5 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of California regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of the federal court encompassing the County of San
Francisco, California, in connection with any matter based upon or arising out
of this Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of California
for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction, venue and such process.
10.6 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.8 Attorneys' Fees; Disputes. If either party to this Agreement or any of
the agreements contemplated hereby brings any action, suit, counterclaim,
appeal, arbitration, or proceeding for any relief against the other (an
"Action"), the prevailing party shall be entitled to reasonable attorneys' fees
and costs incurred in such Action.
[Remainder of Page Intentionally Blank]
38
<PAGE>
IN WITNESS WHEREOF, the Shareholders, the Company, the Parent and
Acquisition Sub have caused this Agreement to be signed themselves or by a
duly authorized officer, all as of the date first written above.
SHAREHOLDERS:
/s/ David Fox
----------------------------------------------
David Fox
/s/ Kelli Fox
----------------------------------------------
Kelli Fox
/s/ Peter C. Levin
----------------------------------------------
IA Holdings Limited
By: Peter C. Levin
Title: Director
/s/ Jim Hoffman
----------------------------------------------
Jim Hoffman
/s/ Lenny Barshak
----------------------------------------------
Lenny Barshak
/s/ John Robinson
----------------------------------------------
John Robinson
/s/ Vasudev Narayanan
----------------------------------------------
Vasudev Narayanan
/s/ Gil Silberman
----------------------------------------------
BSC Ventures I LLC
By: Gil Silberman
Title: Member
Signature Page to Agreement
39 and Plan of Reorganization
<PAGE>
COMPANY:
KNOWLEDGEWEB, INC.
By: /s/ David W. Fox
------------------------------------------
Name: David W. Fox
Title: President
PARENT:
iVILLAGE INC.
By: /s/ Steve Elkes
------------------------------------------
Name:
Title:
ACQUISITION SUB:
KNOWLEDGEWEB ACQUISITION
CORPORATION
By: /s/ Steve Elkes
------------------------------------------
Name:
Title:
40
<PAGE>
EXHIBIT I
List of Shareholders
Number of Company
Name Shares Owned
---- ------------
David Fox.................................. 2,300,000
Kelli Fox.................................. 2,300,000
IA Holdings Limited........................ 511,111
Jim Hoffman................................ 51,104
Lenny Barshak.............................. 153,690
John Robinson.............................. 52,341
Vasudev Narayanan.......................... 154,541
BSC Ventures I LLC......................... 10,204
---------
Total...................................... 5,532,991
=========
<PAGE>
EXHIBIT III
List of Optionholders
Number of Options to
Name Purchase Company Shares
---- -----------------------
Mark Wladika................................ 29,774
Jung Vu..................................... 29,774
Jennifer Hughes............................. 14,887
Erik Runia.................................. 17,865
Cicely Sweed................................ 2,233
Julie Joyce................................. 11,165
Christina Bailey............................ 8,932
Krista Bruun................................ 4,466
Sprinza Katz................................ 1,117
Alan Lipton................................. 2,233
Linea Van Horn.............................. 1,117
Elaine Sosa................................. 2,233
Nina Barlow................................. 1,117
Claire Calvino.............................. 1,117
Vasudev Narayanan........................... 3,000
Ellen Levy.................................. 1,500
Brett Sharenow.............................. 6,000
Lynn Moris.................................. 3,000
David Cochran............................... 4,000
Gary Christen............................... 2,000
Michael Ax.................................. 5,000
Rainmaker Capital, LLC...................... 5,000
Ian Webster................................. 1,000
Dennis Moncrief............................. 1,000
Stuart Klein................................ 1,000
Tom Cervantez............................... 1,000
b|z partners................................ 57,594
-------
Total....................................... 219,124
=======
<PAGE>
EXHIBIT 2.2
Calculation of Earnout Shares to be Released
<TABLE>
<CAPTION>
Due Dates Number of Earnout Shares (1)(2)
- --------- ---------------------------------------------------------------------------
<S> <C>
6 Months from Closing.............. (Gross revenue in dollars for the period beginning on the date of Closing
thru 6/30/99)/$2,000,000X(601,191 shares)
9 Months from Closing.............. (Gross revenue in dollars for the period beginning 7/1/99 thru 9/30/99)/
$2,000,000X(601,191 shares)
12 Months from Closing............. (Gross revenue in dollars for the period beginning 10/1/99 thru 12/31/99)/
$2,000,000X(601,191 shares)
15 Months from Closing............. (Gross revenue in dollars for the period beginning 1/1/00 thru
3/31/00)/$4,000,000X(601,191 shares)
18 Months from Closing............. (Gross revenue in dollars for the period beginning 4/1/00 thru 6/30/00)/
$4,000,000X(601,191 shares)
21 Months from Closing............. (Gross revenue in dollars for the period beginning 7/1/00 thru 9/30/00)/
$4,000,000X(601,191 shares)
24 Months from Closing............. (Gross revenue in dollars for the period beginning 10/1/00 thru 12/31/00)/
$4,000,000X(601,191 shares)
27 Months from Closing............. (Gross revenue in dollars for the period beginning 1/1/01 thru 3/30/01)/
$4,000,000X(601,191 shares)
30 Months from Closing............. (Gross revenue in dollars for the period beginning 4/1/01 thru 6/30/01)/
$4,000,000X(601,191 shares)
33 Months from Closing............. (Gross revenue in dollars for the period beginning 7/1/01 thru 9/30/01)/
$4,000,000X(601,191 shares)
37 Months from Closing............. (Gross revenue in dollars for the period beginning 10/1/01 thru 36 Months
from Closing)/ $4,000,000X(601,191 shares)
</TABLE>
(1) In no event shall the aggregate number of Earnout Shares released exceed
1,202,382.
(2) If, and once, 601,191 Earnout Shares have been released prior to 12 months
from Closing, then additional Earnout Shares to be released shall be
calculated as follows: (Gross revenue in dollars for the respective
period)/ $4,000,000X(601,191 shares).
The Earnout Shares will be released to the Shareholders on a pro rata basis as
follows:
Shareholder Percentage of Earnout Shares
- ----------- ----------------------------
David Fox.......................... 41.5688%
Kelli Fox.......................... 41.5688
IA Holdings Limited................ 9.2375
Jim Hoffman........................ 0.9236
Lenny Barshak...................... 2.7777
John Robinson...................... 0.9460
Vasudev Narayanan.................. 2.7931
BSC Ventures I LLC................. 0.1844
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I GENERAL....................................................................................1
1.1 The Merger.....................................................................................1
1.2 The Effective Date of the Merger...............................................................2
1.3 Effect of Merger...............................................................................2
1.4 Charter and By-Laws of Surviving Corporation...................................................2
1.5 Taking of Necessary Action.....................................................................2
1.6 Tax-Free Reorganization........................................................................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS..................3
2.1 Total Consideration............................................................................3
2.2 Earnout Shares.................................................................................4
2.3 Approval of Transaction; Exchange of Securities................................................5
2.4 Escrow Deposits................................................................................5
ARTICLE III CLOSING....................................................................................6
3.1 Closing........................................................................................6
3.2 Company's and Shareholders' Obligations at the Closing.........................................6
3.3 Optionholders' Obligations at the Closing......................................................8
3.4 Parent's and Acquisition Sub's Obligations at the Closing......................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE FOUNDERS.............................9
4.1 Organization and Standing......................................................................9
4.2 Capitalization................................................................................10
4.3 Binding Obligation............................................................................10
4.4 Subsidiaries..................................................................................11
4.5 Governmental Consents.........................................................................11
4.6 Compliance with Other Instruments and Laws....................................................11
4.7 Litigation....................................................................................12
4.8 Intellectual Property.........................................................................12
4.9 Financial Statements..........................................................................16
4.10 Accounts and Notes Receivable.................................................................16
4.11 Accounts and Notes Payable....................................................................17
4.12 Internal Accounting Controls..................................................................17
4.13 Outstanding Indebtedness; Liabilities.........................................................17
4.14 Tax Matters...................................................................................17
4.15 Absence of Certain Changes....................................................................18
4.16 Material Contracts and Commitments............................................................19
4.17 Registration Rights...........................................................................21
4.18 Title to Property and Assets..................................................................21
4.19 Employee Compensation and Benefit Plans.......................................................22
4.20 Labor Union Activities........................................................................22
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
4.21 Employee Relations............................................................................23
4.22 No Discrimination.............................................................................23
4.23 Certain Transactions..........................................................................23
4.24 Environmental Laws and Regulations............................................................23
4.25 Other Names...................................................................................23
4.26 Minute Books..................................................................................23
4.27 Insurance Coverage............................................................................24
4.28 Business Metrics..............................................................................24
4.29 Year 2000 Compliant Systems...................................................................24
4.30 Bank Accounts; Powers of Attorney.............................................................24
4.31 Vote Required.................................................................................24
4.32 Company Expenses..............................................................................25
4.33 Officers and Directors........................................................................25
4.34 Broker's Fees.................................................................................25
4.35 Disclosure....................................................................................25
4.36 Investment Representations....................................................................25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PARENT AND ACQUISITION SUB..........................26
5.1 Organization, Standing and Power..............................................................26
5.2 Authority.....................................................................................26
5.3 No Conflict...................................................................................26
5.4 Consents......................................................................................27
5.5 Capital Stock.................................................................................27
5.6 Broker's Fees.................................................................................27
ARTICLE VI ADDITIONAL AGREEMENTS.....................................................................27
6.1 Commercially Reasonable Efforts...............................................................27
6.2 Expenses......................................................................................27
6.3 Confidentiality...............................................................................28
6.4 Operation of Business.........................................................................28
6.5 Right of First Refusal........................................................................28
6.6 Appointment of Representative.................................................................29
6.7 Access to Information.........................................................................31
6.8 Use of Name...................................................................................31
ARTICLE VII CONDITIONS TO THE SALE OF THE SHARES......................................................31
7.1 Conditions to Obligations of Each Party.......................................................31
7.2 Additional Conditions to the Obligations of the Parent........................................31
7.3 Additional Conditions to Obligations of the Shareholders......................................32
ARTICLE VIII INDEMNIFICATION...........................................................................33
8.1 Survival of Representations and Warranties....................................................33
8.2 Indemnification by the Shareholders...........................................................33
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
8.3 General Indemnification Provisions............................................................34
8.4 Limitations on Indemnification................................................................35
ARTICLE IX TERMINATION, AMENDMENT, EXTENSION AND WAIVER..............................................35
9.1 Termination...................................................................................35
9.2 Effect of Termination.........................................................................36
9.3 Amendment.....................................................................................36
9.4 Extension; Waiver.............................................................................36
ARTICLE X GENERAL PROVISION.........................................................................36
10.1 Notices.......................................................................................36
10.2 Interpretation................................................................................37
10.3 Entire Agreement; Assignment..................................................................37
10.4 Severability..................................................................................38
10.5 Governing Law; Jurisdiction...................................................................38
10.6 Rules of Construction.........................................................................38
10.7 Counterparts..................................................................................38
10.8 Attorneys' Fees; Disputes.....................................................................38
</TABLE>
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TABLE OF CONTENTS
Page
----
An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any
pages following the Table of Contents/Authorities.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION OF iVILLAGE INC.
iVillage Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The name of the corporation is iVillage Inc. The corporation was
originally incorporated under the name iVillage Inc. and the
original Certificate of Incorporation of the corporation was filed
with the Secretary of State of the State of Delaware on
__________________.
B. Pursuant to Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and further amends the
provisions of the Certificate of Incorporation of this
corporation.
C. The text of the Certificate of Incorporation as heretofore amended
or supplemented is hereby amended and restated in its entirety to
read as follows:
ARTICLE I
The name of this Corporation is iVillage Inc.
ARTICLE II
The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such office is The Corporation
Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
The Corporation shall be authorized to issue 120,000,000 shares of all
classes, consisting of (i) 65,000,000 shares of common stock, $.01 par value
(the "Common Stock"), and (ii) 55,000,000 shares of preferred stock, $.01 par
value. Authority is hereby expressly granted to the Board of Directors, subject
to the provisions of Section 3 hereof, from time to time to issue the preferred
stock in one or more series, and in connection with the creation of any such
series, by resolution or resolutions providing for the issuance of the shares
thereof, to determine and fix such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative participating, optional
or other special rights, and qualifications limitations or restrictions thereof,
including, without limitation thereof, dividend rights, conversion rights,
voting rights, redemption privileges and liquidation preferences, as shall be
stated and expressed in such resolution or resolutions, all to the full extent
now or hereafter permitted by the General Corporation Law. Of such preferred
stock, 1,000,000 shares shall be designated as "Series A Preferred Stock",
5,629,846 shares shall be
1
<PAGE>
designated as "Series B Preferred Stock", 300,000 shares shall be designated as
"Series B-1 Preferred Stock", 13,528,762 shares shall be designated as "Series C
Preferred Stock", 13,000,000 shares shall be designated as "Series D Preferred
Stock and 18,953,616 shares shall be designated "Series E Preferred Stock". (For
convenience of reference, the shares of Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are sometimes hereinafter
collectively referred to as the "Preferred Stock".) The Series A Preferred
Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock shall have the
following designations, powers, preferences and other rights, and
qualifications, limitations and restrictions:
1. Dividends. The holders of Preferred Stock shall be entitled to share in any
dividends declared and paid upon or set aside for the Common Stock of the
Corporation, pro rata in accordance with the number of shares of Common Stock
into which such shares of Preferred Stock are then convertible pursuant to
Section 4.
2. Liquidation.
(a) Upon a Liquidation (as defined below), after payment or provision
for payment of the debts and other liabilities of the Corporation and all
amounts which the holders of any class of capital stock ranking senior to the
Preferred Stock shall be entitled to receive upon such Liquidation,
(i) the holders of Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall be entitled to receive, on a pari-passu
basis in accordance with their respective Preference Amounts (as defined below),
out of the remaining assets of the Corporation available for distribution to its
stockholders with respect to each share of Series C Preferred Stock, an amount
(the "Series C Preference Amount") equal to the sum of (A) $1.954 and (B) all
declared but unpaid dividends payable with respect to such share under Section
1, with respect to each share of Series D Preferred Stock, an amount (the
"Series D Preference Amount") equal to the sum of (A) $2.50 and (B) all declared
but unpaid dividends payable with respect to such share under Section 1, and
with respect to each share of Series E Preferred Stock, an amount (the "Series E
Preference Amount") equal to the sum of (A) $2.85 and (B) all declared but
unpaid dividends payable with respect to such share under Section 1, before any
distribution shall be made to the holders of the Series A Preferred Stock, the
Series B Preferred Stock, the Series B-1 Preferred Stock, the Common Stock or
any other class of capital stock of the Corporation ranking junior to the Series
C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock. If upon
any Liquidation the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock the full respective
Series C Preference Amounts, Series D Preference Amounts and Series E Preference
Amounts to which they shall be entitled, respectively, the holders of Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
share ratably in any distribution of assets based on the respective amounts
which would be payable to them on or with respect to the shares of Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock held by
them upon such
2
<PAGE>
distribution pursuant to this Section 2 as if all amounts payable on or with
respect to such shares were paid in full.
(ii) After distribution to the holders of Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock of the full Series C
Preference Amount, Series D Preference Amount and Series E Preference Amount set
forth in Section 2(a)(i), the holders of Series A Preferred Stock, the holders
of Series B Preferred Stock and the holders of Series B-1 Preferred Stock shall
be entitled to receive, on a pari passu basis in accordance with their
respective Preference Amounts, out of the remaining assets of the Corporation
available for distribution to its stockholders, with respect to each share of
Series A Preferred Stock an amount (the "Series A Preference Amount") equal to
the sum of (A) $1.00 and (B) all declared but unpaid dividends payable with
respect to such share under Section 1, and with respect to each share of Series
B Preferred Stock and each share of Series B-1 Preferred Stock an amount (the
"Series B Preference Amount") equal to the sum of (A) $2.50 and (B) all declared
but unpaid dividends payable with respect to such share under Section 1, in each
case, before any distribution shall be made to the holders of the Common Stock
or any other class of capital stock of the Corporation ranking junior to the
Preferred Stock. If upon any Liquidation the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the holders of
Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred
Stock the full respective Preference Amounts to which they shall be entitled,
respectively, the holders of Series A Preferred Stock, Series B Preferred Stock
and Series B-1 Preferred Stock shall share ratably in any distribution of assets
based on the respective amounts which would be payable to them on or with
respect to the shares of Series A Preferred Stock, Series B Preferred Stock and
Series B-1 Preferred Stock held by them upon such distribution pursuant to this
Section 2 as if all amounts payable on or with respect to such shares were paid
in full. The Series A Preference Amount, Series B Preference Amount, Series C
Preference Amount, Series D Preference Amount and Series E Preference Amount
sometimes hereinafter shall be collectively referred to as the "Preference
Amount" and each such Preference Amount shall be subject to equitable adjustment
to reflect stock splits, stock dividends, stock combinations, recapitalizations
and like occurrences.
(b) Upon any Liquidation, the holders of Series A Preferred Stock,
Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall, after any distribution to such holders of
the full amount to which they shall be entitled under paragraph (a) above, not
share in the distribution of the remaining assets of the Corporation, except to
the extent that such holders also hold Common Stock of the Corporation. After
distribution of the Preference Amount, the remaining assets of the Corporation
available for distribution, if any, to the stockholders of the Corporation shall
be distributed to the holders of shares of Common Stock and Series E Preferred
Stock, pro rata based on the respective number of shares of Common Stock then
owned or then issuable upon conversion of the Series E Preferred Stock then
owned by such stockholders, provided, however, that the aggregate distribution
per share of Series E Preferred Stock pursuant to Section 2(a)(i) and 2(b) shall
not exceed $5.70 (subject to equitable adjustment to reflect stock splits, stock
dividends, stock combinations, recapitalizations and like occurrences).
(c) For purposes of this Section 2, a Corporate Transaction (as defined
below) shall be treated as a Liquidation and shall entitle the holders of
Preferred Stock to receive, upon
3
<PAGE>
the consummation of such Corporate Transaction, consideration in the same form
as is to be provided in such Corporate Transaction (whether cash, securities,
other property or any combination thereof), having a value (as determined in
accordance with the next sentence) equivalent to the sum of (i) the amounts to
which such holders of Preferred Stock would otherwise have been entitled
pursuant to Section 2(a) and Section 2(b) assuming such Corporate Transaction
had constituted a Liquidation within the meaning of this Section 2 and (ii) that
in the case of each share of Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, an additional amount that, when added to the
amount of declared but unpaid dividends (if any) then payable with respect to
such share of Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, as the case may be, will constitute an amount representing a
10% (calculated daily and compounded annually) internal rate of return (computed
in accordance with generally accepted financial practice) with respect to the
Series C Preference Amount, Series D Preference Amount or Series E Preference
Amount, as the case may be, of such share calculated for the period commencing
with the date of the original issuance thereof and ending on the date of such
Corporate Transaction and in connection with such calculation, the Corporation
shall provide each holder of Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock with the information set forth in Section 4(f)
within the time period specified therein. In the event that any distribution
pursuant to this Section 2(c) shall be payable in a form other than cash, the
value thereof shall be its fair market value as determined in good faith by the
Board of Directors of the Company; provided, however, that if the holders of 60%
of the then outstanding Preferred Stock shall dispute in writing such
determination within ten (10) business days of such determination, the
Corporation shall promptly engage a nationally-recognized independent investment
banking firm or independent competent appraisers, jointly selected by the
Corporation and the holders of at least 60% of the then outstanding Preferred
Stock, to determine the value of the non-cash assets and property to be
distributed to the holders of Preferred Stock pursuant to this Section 2, whose
determination shall be conclusive (the "Fair Market Value").
(d) As used herein, the following terms shall have the following
respective meanings:
(i) "Corporate Transaction" means (A) any consolidation or merger
of the Corporation, other than any merger or consolidation resulting in the
holders of the capital stock of the Corporation entitled to vote for the
election of directors holding a majority of the capital stock of the surviving
or resulting entity entitled to vote for the election of directors, (B) any
person or entity (including any affiliates thereof) becoming the holder of a
majority of the capital stock of the Corporation entitled to vote for the
election of directors, or (C) any sale or other disposition by the Corporation
of all or substantially all of its assets.
(ii) "Liquidation" means any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, other than any
dissolution, liquidation or winding up in connection with any reincorporation of
the Corporation in another jurisdiction.
3. Voting Rights.
(a) In addition to the rights provided by law and in the Corporation's
By-laws, each share of Preferred Stock (except for shares of Series B-1
Preferred Stock) shall entitle the
4
<PAGE>
holder thereof to such number of votes as shall equal the nearest whole number
of shares of Common Stock into which such share of Preferred Stock is then
convertible pursuant to Section 4. Except as provided in paragraphs (b) and (c)
below or as otherwise provided by law, the holders of Preferred Stock (except
for Series B-1 Preferred Stock) shall be entitled to vote on all matters as to
which holders of Common Stock shall be entitled to vote, in the same manner and
with the same effect as such holders of Common Stock, voting together with the
holders of Common Stock as one class. Except as otherwise required by law, all
shares of Series B-1 Preferred Stock shall be non-voting, and the holders
thereof shall not be entitled to vote on any matters.
(b) The Corporation shall not, without the affirmative consent or
approval of each of (i) the holders of a majority of the shares of Series A
Preferred Stock then outstanding (with respect to clauses (1), (2), (3) and (4)
below), voting as a separate class, (ii) the holders of at least 60% of the
shares of Series B Preferred Stock then outstanding (with respect to clauses
(1), (2), (3) and (4) below), voting as a separate class, (iii) the holders of
at least a majority of the shares of Series A Preferred Stock and Series B
Preferred Stock then outstanding, voting together as a class (with respect to
clauses (5) and (6) below), (iv) the holders of at least 66 2/3% (by voting
power) of the shares of Series D Preferred Stock then outstanding voting as a
separate class (with respect to clauses (2), (3), (4) and (7) below) and (v) the
holders of at least 66 2/3% (by voting power) of the shares of Series E
Preferred Stock then outstanding voting as a separate class (with respect to
clauses (2), (3), (4) and (8) below):
(1) authorize, create, designate or establish any class or series
of capital stock ranking senior to such series of Preferred Stock or reclassify
any shares of Common Stock into shares having any preference or priority as to
dividends or assets superior to any such preference or priority of such series
of Preferred Stock;
(2) in any other manner alter or change the powers, preferences, or
rights, or qualifications, limitations or restrictions thereof, of the shares of
such series of Preferred Stock as to affect them adversely;
(3) in any other manner amend the Certificate of Incorporation of
the Corporation so as to materially adversely affect the powers, preferences or
rights, or qualifications, limitations or restrictions thereof, of the shares of
such series of Preferred Stock, except (1) to authorize, create, designate or
establish any class or series of capital stock ranking, with respect to voting
rights or rights to dividends or assets, pari passu with or junior to such
series of Preferred Stock and (2) that the number of shares of Common Stock that
the Corporation is authorized to issue may, without separate class vote, be
increased or decreased from time to time by the affirmative vote of the holders
of a majority of the capital stock of the Corporation entitled to vote thereon;
(4) amend the By-laws of the Corporation in any manner that would
materially adversely affect the powers, preferences or rights, or
qualifications, limitations or restrictions thereof, of the shares of such
series of Preferred Stock;
(5) consummate any Corporate Transaction; or
5
<PAGE>
(6) approve or authorize any Liquidation or any recapitalization or
reorganization of the Corporation.
(7) notwithstanding clause (3) above, authorize, create, designate
or establish any class or series of capital stock ranking, with respect to
voting rights or rights to dividends or assets, senior to or pari passu with the
Series D Preferred Stock.
(8) notwithstanding clause (3) above, authorize, create, designate
or establish any class or series of capital stock ranking, with respect to
voting rights or rights to dividends or assets, senior to or pari passu with the
Series E Preferred Stock.
(c) The Corporation shall not, without the affirmative consent or
approval of each of (i) the holders of at least 66 2/3% of the shares of Series
C Preferred Stock (with respect to clauses (1), (2), (3) and (4) below), voting
separately as a class, (ii) the holders of at least 66 2/3% of the shares of
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
(with respect to clauses (5), (6), (7) below), voting together as a class and
(iii) the holders of least 60% of the shares of Series C Preferred Stock (with
respect to clause (8) below), voting separately as a class:
(1) authorize, create, designate or establish any class or series
of capital stock ranking senior to or pari passu with Series C Preferred Stock
or reclassify any shares of Common Stock into shares pari passu with or having
any preference or priority as to dividends or assets pari passu with or superior
to any such preference or priority of Series C Preferred Stock;
(2) in any other manner alter or change the powers, preferences, or
rights, or qualifications, limitations or restrictions thereof, of the shares of
Series C Preferred Stock as to affect them adversely;
(3) in any other manner amend the Certificate of Incorporation of
the Corporation so as to adversely affect the powers, preferences or rights, or
qualifications, limitations or restrictions thereof, of the shares of Series C
Preferred Stock, except to authorize, create, designate or establish any class
or series of capital stock ranking, with respect to voting rights or rights to
dividends or assets, junior to Series C Preferred Stock;
(4) amend the By-laws of the Corporation in any manner that would
adversely affect the powers, preferences or rights, or qualifications,
limitations or restrictions thereof, of the shares of Series C Preferred Stock;
(5) consummate any Corporate Transaction;
(6) approve or authorize any Liquidation or any recapitalization or
reorganization of the Corporation;
(7) incur or guaranty any indebtedness for money borrowed, having a
maturity of twelve months or greater, in the excess of $5,000,000 in the
aggregate at any time outstanding; or
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(8) increase or decrease the authorized number of shares of Series
C Preferred Stock, except as contemplated by Section 7.13 of the Series C
Preferred Stock Purchase Agreement dated as of May 28, 1997 among the
Corporation and the other parties identified therein.
(b) The Corporation shall not, without the affirmative consent or
approval of the holders of 66 2/3% of the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock then outstanding, voting together as a class:
(1) directly or indirectly pay or declare any dividend or make any
distribution upon, or redeem, retire, repurchase or otherwise acquire, any
shares of capital stock of the Corporation, other than (i) pursuant to any stock
vesting or similar agreement with an officer, director or employee of the
Company or (ii) in accordance with Sections 3.2 and 3.4 of the Fourth Amended
and Restated Stockholders' Agreement dated as of the Original Issuance Date (as
defined in Section 4(a)), among the Corporation and its stockholders named
therein;
(2) increase or decrease the authorized number of shares of
Preferred Stock or Common Stock; or
(3) sell, transfer, or grant any lien or encumbrance on any
material intellectual property right of the Corporation, other than licenses
granted in the ordinary course of business of the Corporation.
4. Optional Conversion.
(a) Upon the terms set forth in this Section 4, each holder of shares
of Preferred Stock shall have the right, (x) in the case of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock at such holder's option, at any time and from
time to time, and (y) in the case of Series B-1 Preferred Stock, if and only to
the extent permitted under the provisions of this Section 4(a), to convert any
of such shares into the number of fully paid and nonassessable shares of Common
Stock equal to the quotient obtained by dividing (i) (A) in the case of the
Series A Preferred Stock, the product of $1.00 and the number of shares of
Series A Preferred Stock being converted, (B) in the case of the Series B
Preferred Stock and Series B-1 Preferred Stock, the product of $2.50 and the
number of shares of Series B Preferred Stock or Series B-1 Preferred Stock (as
the case may be) being converted, (C) in the case of the Series C Preferred
Stock, the product of $1.954 and the number of shares of Series C Preferred
Stock being converted, (D) in the case of the Series D Preferred Stock, the
product of $2.50 and the number of shares of Series D Preferred Stock being
converted and (E) in the case of Series E Preferred Stock, the product of $2.85
and the number of shares of Series E Preferred Stock being converted, by (ii)
the applicable Conversion Price (as defined below) therefor, as last adjusted
and then in effect, and in addition, in the case of the Series B-1 Preferred
Stock (in lieu of converting into Common Stock), into an equal number of shares
of Series B Preferred Stock, by surrender of the certificates representing the
shares of Preferred Stock to be converted. The conversion price per share at
which shares of Common Stock shall be issuable upon conversion of shares of
Preferred Stock shall initially be $1.00 for the Series A Preferred Stock, $2.24
for the Series B Preferred
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Stock and the Series B-1 Preferred Stock, $1.954 for the Series C Preferred
Stock, $2.50 for the Series D Preferred Stock and $2.85 for the Series E
Preferred Stock (as to each such series of Preferred Stock, the "Conversion
Price"), subject to adjustment as set forth in paragraph (d) below. Each holder
of shares of Series B-1 Preferred Stock shall have the right, at such time as
such holder and its affiliates would hold, in the aggregate, voting capital
stock of the Corporation representing less than nineteen and nine-tenths (19.9%)
percent of the then outstanding voting capital stock of the Corporation
(assuming solely for the purpose of such calculation that shares of Series B-1
Preferred Stock then held by such holder or any affiliate thereof constituting
in the aggregate at least twenty-five (25%) percent of the number of shares of
Series B-1 Preferred Stock held by such holder on May 6, 1996 (the "Minimum
Number of Shares") would entitle such holder to such number of votes as shall
equal the nearest whole number of shares of Common Stock into which said shares
of Series B-1 Preferred Stock would then be convertible but for the provisions
of this Section 4(a)), to convert up to that number of such holder's shares of
Series B-1 Preferred Stock (but in no event representing less than the Minimum
Number of Shares), that, after giving effect to such conversion, would result in
such holder and its affiliates holding, in the aggregate, voting capital stock
of the Corporation representing less than nineteen and nine-tenths (19.9%)
percent of the then outstanding voting capital stock of the Corporation into, at
the option of the holder thereof, either (a) an equal number of fully paid and
nonassessable shares of Series B Preferred Stock or (ii) that number of shares
of Common Stock as is determined in accordance with the foregoing provisions of
this Section 4(a). Shares of Series B-1 Preferred Stock shall be converted into
shares of Series B Preferred Stock or Common Stock (as requested by the holder
thereof), as aforesaid, within five business days of written notice from such
holder(s) of Series B-1 Preferred Stock to the Corporation requesting that the
specified number of such holder's shares of Series B-1 Preferred Stock be
converted into shares of Series B Preferred Stock or Common Stock (as requested
by the holder thereof), and otherwise in accordance with Section 4(b). As used
herein, the term "Original Issuance Date" shall mean the date of original
issuance of the first share of Series E Preferred Stock.
(b) The holder of any shares of Preferred Stock may exercise the
conversion right pursuant to paragraph (a) above by delivering to the
Corporation the certificate or certificates for the shares to be converted, duly
endorsed or assigned in blank or to the Corporation (if required by it),
accompanied by written notice stating that the holder elects to convert such
shares and stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Conversion shall
be deemed to have been effected on the date when such delivery is made (the
"Conversion Date"). As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, to the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock (in the case of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock) or Series B Preferred Stock (in the case of Series B-1
Preferred Stock) to which such holder is entitled, and a cash amount in respect
of any fractional interest in a share of Common Stock (in the case of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock) or Series B Preferred Stock (in
the case of Series B-1 Preferred Stock) as provided in paragraph (c) below. The
person in whose name the certificate or certificates for Common Stock (in the
case of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock) or Series B
Preferred Stock (in the case of Series B-1 Preferred Stock) are to be
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issued shall be deemed to have become a stockholder of record on the applicable
Conversion Date unless the transfer books of the Corporation are closed on that
date, in which event such person shall be deemed to have become a stockholder of
record on the next succeeding date on which the transfer books are open, but the
Conversion Price shall be that in effect on the Conversion Date. Upon conversion
of only a portion of the number of shares covered by a certificate representing
shares of Preferred Stock surrendered for conversion, the Corporation shall
issue and deliver to or upon the written order of the holder of the certificate
so surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Preferred Stock representing the
unconverted portion of the certificate so surrendered.
(c) No fractional shares of Common Stock (in the case of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock), Series B Preferred Stock (in the
case of Series B-1 Preferred Stock) or scrip shall be issued upon conversion of
shares of Preferred Stock. The number of full shares of Common Stock issuable
upon conversion of Preferred Stock shall be computed on the basis of the
aggregate number of shares of Preferred Stock to be converted. Instead of any
fractional shares of Common Stock (in the case of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock), Series B Preferred Stock (in the case of Series B-1
Preferred Stock) which would otherwise be issuable upon conversion of any shares
of Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to the product of (i) the price of
one share of Common Stock (in the case of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock), Series B Preferred Stock (in the case of Series B-1 Preferred
Stock) as determined in good faith by the Board of Directors and (ii) such
fractional interest. The holders of fractional interests shall not be entitled
to any rights as stockholders of the Corporation in respect of such fractional
interests.
(d) The Conversion Price applicable to the Series A Preferred Stock,
the Series B Preferred Stock, the Series B-1 Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and/or the Series E Preferred
Stock (as the case may be) shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall at any time or from time to time after the
Original Issuance Date issue any shares of Common Stock (including shares of
Common Stock deemed to be issued pursuant to subdivision (3) of clause (ii)
below) other than Excluded Stock (as defined in clause (iii) below) without
consideration or for a consideration per share less than the Conversion Price
applicable to such series of Preferred Stock in effect immediately prior to the
issuance of such Common Stock, then the applicable Conversion Price in effect
immediately prior to each such issuance shall forthwith be lowered to a price
equal to the quotient obtained by dividing:
(1) an amount equal to the sum of (x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock deemed to have
been issued pursuant to subdivision (3) of clause (ii) below) immediately prior
to such issuance, multiplied by the applicable Conversion Price in effect
immediately prior to such issuance, and (y) the consideration received by the
Corporation upon such issuance; by
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(2) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of clause (ii) below) immediately after the issuance of such
Common Stock.
(ii) For the purposes of any adjustment of the Conversion Price
pursuant to clause (i) above, the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be deemed to be
the amount of cash paid therefor after deducting therefrom any discounts,
commissions or placement fees payable by the Corporation to any underwriter or
placement agent in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the Fair Market Value thereof (such Fair Market Value
being determined as provided in the definition thereof but with reference to
such consideration), irrespective of any accounting treatment.
(3) The issuance after the Original Issuance Date of options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities shall be
deemed to be an issuance of Common Stock for purposes of clause (i) above. In
the case of any such issuance of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities:
a. the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
b. the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities, options, or rights were issued and for a consideration equal to
the consideration received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of such securities
or the exercise of any related options or rights (the consideration in each case
to be determined in the manner provided in subdivisions (1) and (2) above);
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c. on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchange for such securities, other than a change resulting
from the antidilution provisions thereof, the applicable Conversion Price shall
forthwith be readjusted to such Conversion Price as would have been obtained had
the adjustment made upon the issuance of such options, rights or securities not
converted prior to such change or options or rights related to such securities
not converted prior to such change been made upon the basis of such change; and
d. on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
applicable Conversion Price shall forthwith be readjusted to such Conversion
Price as would have been obtained had the adjustment made upon the issuance of
such options, rights, securities or options or rights related to such securities
been made upon the basis of the issuance of only the number of shares of Common
Stock actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities, or upon the exercise of the options
or rights related to such securities and subsequent conversion or exchange
thereof.
(iii) "Excluded Stock" means (A) shares of Common Stock, and options
therefor, issued or granted from time to time to employees, directors and
officers of and consultants to the Corporation pursuant to agreements, plans or
arrangements approved by the Board of Directors; (B) shares of Series B
Preferred Stock issued upon exercise or exchange of stock subscription warrants
dated September 19, 1995 and May 6, 1996 to purchase shares of Series B
Preferred Stock; (C) shares of Common Stock issued upon conversion of shares of
Preferred Stock; (D) shares of Common Stock issued by the Corporation as a stock
dividend or upon any subdivision, split-up or combination of shares of Common
Stock; (E) shares of Series B Preferred Stock issued upon conversion of shares
of Series B-1 Preferred Stock; (F) shares of Common Stock issued upon exercise
or exchange of stock subscription warrants dated May 28, 1997, issued to Bear,
Stearns & Co. Inc. to purchase shares of Common Stock; (G) shares of Series C
Preferred Stock issued upon exercise or exchange of stock subscription warrants
dated February 27, 1997 and April 2, 1997 to purchase shares of Series C
Preferred Stock; (H) shares of Common Stock issued to Tenet Healthcare
Corporation ("Tenet") pursuant to the Common Stock Purchase Agreement dated as
of February 24, 1998 (the "Tenet Agreement"), between the Corporation and Tenet;
(I) Additional Shares (as such term is defined in the Tenet Agreement), (J)
shares of Common Stock issued in connection with the acquisition of Health
ResponseAbility Systems, Inc. on May 29, 1997; (K) shares of capital stock of
the Company issued to one or more broadcast networks or their affiliates in
exchange for in-kind consideration (which may include, by way of example, but
not in limitation thereof, promotion, marketing and advertising time); (L)
shares of capital stock of the Corporation issued as consideration in connection
with the acquisition by the Corporation of all or substantially all of the
assets or all capital stock of any person or entity and (M) securities that were
declared to be "Excluded Stock" for purposes of this Section by the holders of
at least 60% of (1) the shares of Series A Preferred Stock and Series B
Preferred Stock if an adjustment to the Conversion Price of the Series A
Preferred Stock and/or Series B Preferred Stock would otherwise result pursuant
to Section 4(d)(i) with respect to Series A Preferred Stock and/or Series B
Preferred Stock, (2) the shares of Series C Preferred Stock if an adjustment to
the Conversion Price of the Series C Preferred Stock would otherwise result
pursuant to Section 4(d)(i) with respect to Series C Preferred Stock, (3) the
shares of Series
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D Preferred Stock if an adjustment to the Conversion Price of the Series D
Preferred Stock would otherwise result pursuant to Section 4(d)(i) with respect
to Series D Preferred Stock and (4) the shares of Series E Preferred Stock if an
adjustment to the Conversion Price of the Series E Preferred Stock would
otherwise result pursuant to Section 4(d)(i) with respect to Series E Preferred
Stock.
(iv) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of Preferred Stock
shall be increased in proportion to such increase in outstanding shares.
(v) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares.
(vi) In the event of any capital reorganization of the Corporation, any
reclassification of the stock of the Corporation (other than a change in par
value or from par value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any change in the Common Stock), each share of Preferred Stock shall
after such reorganization, reclassification, consolidation or merger (unless, in
the case of a consolidation or merger, payment shall have been made to the
holders of Preferred Stock of the full amount to which they shall have been
entitled pursuant to Section 2(c) of this Article Fourth) be convertible into
the kind and number of shares of stock or other securities or property of the
Corporation or of the corporation resulting from such consolidation or surviving
such merger to which the holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon conversion of such share of
Preferred Stock would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers.
(vii) All calculations under this paragraph shall be made to the
nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10) of a
share, as the case may be.
(viii) In any case in which the provisions of this paragraph (d) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
(i) issuing to the holder of any share of Preferred Stock converted after such
record date and before the occurrence of such event the shares of capital stock
issuable upon such conversion by reason of the adjustment required by such event
in addition to the shares of capital stock issuable upon such conversion before
giving
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effect to such adjustments, and (ii) paying to such holder any amount in
cash in lieu of a fractional share of capital stock pursuant to paragraph (c)
above; provided, however, that the Corporation shall deliver to such holder an
appropriate instrument evidencing such holder's right to receive such additional
shares and such cash.
(e) Whenever the Conversion Price shall be adjusted as provided in
paragraph (d), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its chief
executive officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to each holder of Preferred
Stock as to which the Conversion Price shall be so adjusted at such holder's
address appearing on the Corporation's records. Where appropriate, such copy may
be given in advance and may be included as part of any notice required to be
mailed under the provisions of paragraph (f) below.
(f) If the Corporation shall propose to take any action of the types
described in clauses (iv), (v) or (vi) of paragraph (d) above, the Corporation
shall give notice to each holder of shares of Preferred Stock, in the manner set
forth in paragraph (e) above, which notice shall specify the record date, if
any, with respect to any such action and the date on which such action is to
take place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Price and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice shall be
given at least 20 days prior to the date so fixed, and in case of all other
action, such notice shall be given at least 30 days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(g) The Corporation shall reserve, and at all times from and after the
date of Original Issuance Date keep reserved, free from preemptive rights, out
of its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Preferred Stock, sufficient shares of
Common Stock to provide for the conversion of all outstanding shares of
Preferred Stock.
(h) At any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock, provision shall be made so that each holder of shares of Preferred
Stock shall receive upon conversion thereof, in addition to the shares of Common
Stock receivable thereupon, the number of securities of the Corporation which it
would have received had its shares of Preferred Stock been converted into shares
of Common Stock on the date of such event and had such holder thereafter, during
the period from the date of such event to and including the date of conversion,
retained such securities receivable by it pursuant to this paragraph during such
period, subject to the sum of all other adjustments called for during such
period under this Section 4 with respect to the rights of such holder of shares
of Preferred Stock.
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5. Mandatory Conversion.
(a) Upon the consummation of the first underwritten public offering for
the account of the Corporation of Common Stock pursuant to a registration
statement filed under the Securities Act of 1933, as amended, at an offering
price per share of Common Stock to the public (subject to equitable adjustment
for stock splits, stock dividends, stock combinations, recapitalizations and
like occurrences) of not less than $3.93 and with aggregate proceeds (net of
underwriting discounts and commissions) to the Corporation of not less than
$20,000,000 (a "Qualified Public Offering"), each share of Preferred Stock then
outstanding shall, by virtue of and simultaneously with such Qualified Public
Offering, be deemed automatically converted into the number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(i) (A) in the case of the Series A Preferred Stock $1.00, (B) in the case of
the Series B Preferred Stock and the Series B-1 Preferred Stock $2.50, (C) in
the case of the Series C Preferred Stock $1.954, (D) in the case of the Series D
Preferred Stock $2.50 and (E) in the case of the Series E Preferred Stock $2.85
by (ii) the applicable Conversion Price, as last adjusted and then in effect.
(b) As promptly as practicable after the date of consummation of any
Qualified Public Offering and the delivery to the Corporation of the certificate
or certificates for the shares of Preferred Stock which have been converted,
duly endorsed or assigned in blank to the Corporation (if required by it), the
Corporation shall issue and deliver to or upon the written order of each holder
of Preferred Stock, to the place designated by such holder, a certificate or
certificates for the number of full shares of Common Stock to which such holder
is entitled, and a cash amount in respect of any fractional interest in a share
of Common Stock as provided in paragraph (c) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the date of such Qualified Public
Offering and on such date the shares of Preferred Stock shall cease to be
outstanding, whether or not the certificates representing such shares have been
received by the Corporation.
(c) The provisions set forth in Sections 4(b) and (c) shall apply to
the conversion of Preferred Stock pursuant to this Section in the same manner as
they apply to the conversion of Preferred Stock pursuant to Section 4.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.
ARTICLE VI
The number of directors which constitute the whole Board of Directors of
the corporation shall be as specified in the Bylaws of the corporation.
ARTICLE VII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provisions
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contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
Bylaws of the corporation.
ARTICLE VIII
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders.
ARTICLE IX
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Bylaws and no action shall be taken by the stockholders by written consent. The
affirmative vote of sixty-six and two thirds percent (66 2/3%) of the then
outstanding voting securities of the corporation, voting together as a single
class, shall be required for the amendment, repeal or modification of the
provisions of Article VIII or IX of this Amended and Restated Certificate of
Incorporation or Sections 2.3, 2.5 and 3.2(b) of the Corporation's Bylaws.
ARTICLE X
To the fullest extent permitted by the Delaware General Corporation Law, a
director of the Corporation shall not be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this Article X nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article X, shall eliminate or reduce the effect of this Article X in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article X, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
ARTICLE XI
1. The Corporation shall indemnify each of the Corporation's directors and
officers in each and every situation where, under Section 145 of the General
Corporation Law of the State of Delaware, as amended from time to time ("Section
145"), the Corporation is permitted or empowered to make such indemnification.
The Corporation may, in the sole discretion of the Board of Directors of the
Corporation, indemnify any other person who may be indemnified pursuant to
Section 145 to the extent the Board of Directors deems advisable, as permitted
by Section 145. The Corporation shall promptly make or cause to be made any
determination required to be made pursuant to Section 145.
2. No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is subsequently amended to
further eliminate or limit the liability of a director, then a
15
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director of the Corporation, in addition to the circumstances in which a
director is not personally liable as set forth in the preceding sentence, shall
not be liable to the fullest extent permitted by the amended General Corporation
Law of the State of Delaware. For purposes of this Article XI, "fiduciary duty
as a director" shall include any fiduciary duty arising out of serving at the
Corporation's request as a director of another corporation, partnership, joint
venture or other enterprise, and "personal liability to the corporation or its
stockholders" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
corporation in its capacity as a security holder, joint venture, partner,
beneficiary, creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE XIII
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
16
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IN WITNESS WHEREOF, the corporation has caused this
Certificate to be signed by Candice Carpenter, its Chief Executive Officer, and
attested by ____________________, its Secretary, this _______ day of
____________________, 1999.
iVillage Inc.
By:
---------------------------------------
Candice Carpenter
Chief Executive Officer
ATTEST:
17
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RESTATED CERTIFICATE OF INCORPORATION OF iVILLAGE INC.
iVillage Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The name of the corporation is iVillage Inc. The corporation was
originally incorporated under the name iVillage Inc. and the
original Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on
__________________.
B. Pursuant to Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and further amends the
provisions of the Certificate of Incorporation of this
corporation.
C. The text of the Certificate of Incorporation as heretofore
amended or supplemented is hereby amended and restated in its
entirety to read as follows:
ARTICLE I
The name of this Corporation is iVillage Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such office is The Corporation Trust
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
This Corporation is authorized to issue two classes of stock to be
designated Common Stock and Preferred Stock. The total number of shares of
Common Stock which this Corporation has authority to issue is 65,000,000 with
par value of $.01 per share. The total number of shares of Preferred Stock
which this Corporation has authority to issue is 5,000,000 with a par value of
$.01 per share.
The shares of Preferred Stock shall be undesignated Preferred Stock and may be
issued from time to time in one or more series pursuant to a resolution or
resolutions providing for such issue duly adopted by the board of directors
(authority to do so being hereby expressly vested in
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the board). The board of directors is further authorized to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and to fix the number of shares of
any series of Preferred Stock and the designation of any such series of
Preferred Stock. The board of directors, within the limits and restrictions
stated in any resolution or resolutions of the board of directors originally
fixing the number of shares constituting any series, may increase or decrease
(but not below the number of shares in any such series then outstanding) the
number of shares of any series subsequent to the issue of shares of that series.
The authority of the board of directors with respect to each such class
or series shall include, without limitation of the foregoing, the right to
determine and fix:
i. the distinctive designation of such class or series and the
number of shares to constitute such class or series;
ii. the rate at which dividends on the shares of such class or
series shall be declared and paid, or set aside for payment,
whether dividends at the rate so determined shall be cumulative
or accruing, and whether the shares of such class or series
shall be entitled to any participating or other dividends in
addition to dividends at the rate so determined, and if so, on
what terms;
iii. the right or obligation, if any, of the Corporation to redeem
shares of the particular class or series of Preferred Stock and,
if redeemable, the price, terms and manner of such redemption;
iv. the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or
series of Preferred Stock shall be entitled to receive upon any
voluntary or involuntary liquidation, dissolution or winding up
of the Corporation;
v. the terms and conditions, if any, upon which shares of such
class or series shall be convertible into, or exchangeable for,
shares of capital stock of any other class or series, including
the price or prices or the rate or rates of conversion or
exchange and the terms of adjustment, if any;
vi. the obligation, if any, of the Corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking
fund or fund of a similar nature or otherwise, and the terms and
conditions of such obligation;
vii. voting rights, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series
of Preferred Stock;
viii. limitations, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series
of Preferred Stock; and
ix. such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors
of the Corporation, acting in
2
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accordance with this Certificate of Incorporation, may deem
advisable and are not inconsistent with law and the provisions
of this Certificate of Incorporation.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
ARTICLE VII
The number of directors which constitute the whole board of directors
of the corporation shall be as specified in the Bylaws of the corporation.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
Holders of stock of any class or series of the Corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders.
ARTICLE X
No action shall be taken by the stockholders of the Corporation except
at an annual or special meeting of the stockholders called in accordance with
the Bylaws and no action shall be taken by the stockholders by written consent.
The affirmative vote of sixty-six and two thirds percent (66 2/3%) of the then
outstanding voting securities of the Corporation, voting together as a single
class, shall be required for the amendment, repeal or modification of the
provisions of Article IX or X of this Amended and Restated Certificate of
Incorporation or Sections 2.3, 2.5 and 3.2(b) of the Corporation's Bylaws.
ARTICLE XI
To the fullest extent permitted by the Delaware General Corporation
Law, a director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Neither any amendment nor repeal of this Article XI nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article XI, shall eliminate or reduce the effect of this Article XI in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this Article XI, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
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ARTICLE XII
3. The Corporation shall indemnify each of the corporation's directors
and officers in each and every situation where, under Section 145 of the General
Corporation Law of the State of Delaware, as amended from time to time ("Section
145"), the Corporation is permitted or empowered to make such indemnification.
The Corporation may, in the sole discretion of the Board of Directors of the
Corporation, indemnify any other person who may be indemnified pursuant to
Section 145 to the extent the Board of Directors deems advisable, as permitted
by Section 145. The Corporation shall promptly make or cause to be made any
determination required to be made pursuant to Section 145.
4. No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is subsequently amended to
further eliminate or limit the liability of a director, then a director of the
corporation, in addition to the circumstances in which a director is not
personally liable as set forth in the preceding sentence, shall not be liable to
the fullest extent permitted by the amended General Corporation Law of the State
of Delaware. For purposes of this Article XII, "fiduciary duty as a director"
shall include any fiduciary duty arising out of serving at the Corporation's
request as a director of another corporation, partnership, joint venture or
other enterprise, and "personal liability to the corporation or its
stockholders" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
corporation in its capacity as a security holder, joint venture, partner,
beneficiary, creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE XIII
Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the Corporation.
ARTICLE XIV
The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this Certificate, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
4
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Candice Carpenter, its Chief Executive Officer, and attested by
____________________, its Secretary, this _______ day of ____________________,
1999.
iVillage Inc.
By:
-------------------------------
Candice Carpenter
Chief Executive Officer
5
<PAGE>
BYLAWS OF
iVILLAGE INC.
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the third
Wednesday in November in each year at 9:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected,
and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the board of
directors, or by the chairman of the board, or by the president, or by one or
more stockholders holding shares in
<PAGE>
the aggregate entitled to cast not less than ten percent (10%) of the votes at
that meeting. No other person or persons are permitted to call a special
meeting.
If a special meeting is called by any person or persons other than the
board of directors, then the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president, or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.6 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.6 of these bylaws not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
Subject to the rights of holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation, (a)
nominations for the election of directors, and (b) business proposed to be
brought before any stockholder meeting may be made by the board of directors or
proxy committee appointed by the board of directors or by any stockholder
entitled to vote in the election of directors generally if such nomination or
business proposed is otherwise proper business before such meeting. However, any
such stockholder may nominate one or more persons for election as directors at a
meeting or propose business to be brought before a meeting, or both, only if
such stockholder has given timely notice in proper written form of their intent
to make such nomination or nominations or to propose such business. To be
timely, such stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date specified in the corporation's
proxy statement released to stockholders in connection with the previous year's
annual meeting of stockholders; provided, however, that in
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<PAGE>
the event that no annual meeting was held in the previous year or the date of
the annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
stockholder to be timely must be so received a reasonable time before the
solicitation is made. To be in proper form, a stockholder's notice to the
secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, of
the person or persons to be nominated or of the business to be
proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and,
if applicable, intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the
notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required
to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee
been nominated, or intended to be nominated, or the matter been
proposed, or intended to be proposed by the board of directors;
and
(v) if applicable, the consent of each nominee to serve as director
of the corporation if so elected.
The chairman of the meeting shall refuse to acknowledge the nomination
of any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
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<PAGE>
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder and stockholders shall not be entitled
to cumulate their votes in the election of directors or with respect to any
matter submitted to a vote of the stockholders.
Notwithstanding the foregoing, if the stockholders of the corporation
are entitled, pursuant to Sections 2115 and 301.5 of the California Corporations
Code, to cumulate their votes in the election of directors, each such
stockholder shall be entitled to cumulate votes (i.e., cast for
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any candidate a number of votes greater than the number of votes that such
stockholder normally is entitled to cast) only if the candidates' names have
been properly placed in nomination (in accordance with these bylaws) prior to
commencement of the voting, and the stockholder requesting cumulative voting has
given notice prior to commencement of the voting of the stockholder's intention
to cumulate votes. If cumulative voting is properly requested, each holder of
stock, or of any class or classes or of a series or series thereof, who elects
to cumulate votes shall be entitled to as many votes as equals the number of
votes that (absent this provision as to cumulative voting) he or she would be
entitled to cast for the election of directors with respect to his or her shares
of stock multiplied by the number of directors to be elected by him, and he or
she may cast all of such votes for a single director or may distribute them
among the number to be voted for, or for any two or more of them, as he or she
may see fit.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any
action required or permitted to be taken at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal place of business, or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
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The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, or, in the absence of the president and the chairman of the board, one of
the corporation's vice presidents, shall call the meeting of the stockholders to
order, and shall act as chairman of the meeting. In the absence of the
president, the chairman of the board, and all of the vice presidents, the
stockholders shall appoint a chairman for such meeting. The chairman of any
meeting of stockholders shall determine the order of business and the procedures
at the meeting, including such matters as the regulation of the manner of voting
and the conduct of business. The secretary of the corporation shall act as
secretary of all meetings of the stockholders, but in the absence of the
secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.15 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be
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deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or these
bylaws.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS
(a) The board of directors shall consist of [ ] members. The
number of directors may be changed by an amendment to this
bylaw, duly adopted by the board of directors or by the
stockholders, or by a duly adopted amendment to the certificate
of incorporation.
(b) Upon the closing of the first sale of the corporation's common
stock pursuant to a firmly underwritten registered public
offering (the "IPO"), the directors shall be divided into three
classes, with the term of office of the first class, which class
shall initially consist of two directors, to expire at the first
annual meeting of stockholders held after the IPO; the term of
office of the second class, which class shall initially consist
of two directors, to expire at the second annual meeting of
stockholders held after the IPO; the term of office of the third
class, which class shall initially consist of three directors,
to expire at the third annual meeting of stockholders held after
the IPO; and thereafter for each such term to expire at each
third succeeding annual meeting of stockholders held after such
election.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office as provided in
Section 3.2 of these bylaws. Each director, including a director elected or
appointed to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
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3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office for
a term expiring at the next annual meeting of the stockholders at which the term
of office of the class to which such director has been elected expires.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of
the stockholders having the right to vote as a single class may
be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the
provisions of the certificate of incorporation, vacancies and
newly created directorships of such class or classes or series
may be filled by a majority of the directors elected by such
class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), then the Court of Chancery
may, upon application of any stockholder or stockholders holding at least ten
(10) percent of the total number of the shares at the time outstanding having
the right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office as aforesaid, which election
shall be governed by the provisions of Section 211 of the General Corporation
Law of Delaware as far as applicable.
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3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, if and so long as stockholders of the corporation are entitled to
cumulative voting, if less than the entire board is to be removed, no director
may be removed without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time as shall from time to time be determined by the board of directors.
If any regular meeting day shall fall on a legal holiday, then the meeting shall
be held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting other than for the express purposed of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. All such waivers shall be filed with the corporate records
or made part of the minutes of the meeting. A waiver of notice need not specify
the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner
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specified in Section 3.9 of these bylaws, to the directors who were not present
at the time of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have and
may exercise all the powers and authority of the board, but no such committee
shall have the power or authority to (i) amend the certificate of incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
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4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS
The corporate officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents (however denominated), one or more assistant secretaries, a treasurer
and one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 5.3 of these bylaws. Any
number of offices may be held by the same person.
In addition to the corporate officers of the corporation described
above, there may also be such administrative officers of the corporation as may
be designated and appointed from time to time by the president of the
corporation in accordance with the provisions of Section 5.12 of these bylaws.
5.2 ELECTION OF OFFICERS
The corporate officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other corporate officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
The president may from time to time designate and appoint
administrative officers of the corporation in accordance with the provisions of
Section 5.12 of these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a corporate officer under any
contract of employment, any corporate officer may be removed, either with or
without cause, by the board of directors at any regular or special meeting of
the board or, except in case of a corporate officer chosen
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by the board of directors, by any corporate officer upon whom such power of
removal may be conferred by the board of directors.
Any corporate officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any administrative officer designated and appointed by the president
may be removed, either with or without cause, at any time by the president. Any
administrative officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the Proper Officers of the
corporation. He or she shall preside at all meetings of the stockholders and, in
the absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He or she shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no
chairman of the board, the vice presidents, if any, in order of their rank as
fixed by the board of directors or, if not ranked, a vice president designated
by the board of directors, shall perform all the duties of the president and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the
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president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of the board
of directors, committees of directors and stockholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
The chief financial officer shall deposit all money and other valuables in the
name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He or she shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order
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of their election) shall, in the absence of the secretary or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the corporate officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate corporate officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
administrative officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
corporate officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such administrative
officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such administrative officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers
of the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists or
may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director of officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or
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not the corporation would have the power to indemnify him or her against such
liability under the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine (and to make copies of)
the corporation's stock ledger, a list of its stockholders and its other books
and records for a purpose reasonably related to his or her position as a
director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
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7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
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8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full
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or summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote or by the board of directors of
the corporation. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit their power
to adopt, amend or repeal bylaws.
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Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which the
repeal was enacted or the filing of the operative written consent(s) shall be
stated in said book.
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iVILLAGE INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as
of this __ day of February, 1999, by and between iVillage Inc., a Delaware
corporation (the "Company") and ______ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the continued
difficulty in obtaining liability insurance for its directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the
substantial increase in corporate litigation in general, subjecting directors,
officers, employees, agents and fiduciaries to expensive litigation risks at the
same time as the availability and coverage of liability insurance has been
severely limited;
WHEREAS, Indemnitee, as a director of the Company, does not
regard the current protection available as adequate under the present
circumstances, and the Indemnitee and other directors, officers, employees,
agents and fiduciaries of the Company may not be willing to continue to serve in
such capacities without additional protection;
WHEREAS, the Company desires to attract and retain the
services of highly qualified individuals, such as Indemnitee, to serve the
Company and, in part, in order to induce Indemnitee to continue to provide
services to the Company, wishes to provide for the indemnification and advancing
of expenses to Indemnitee to the maximum extent permitted by law; and
WHEREAS, in view of the considerations set forth above, the
Company desires that Indemnitee shall be indemnified by the Company as set forth
herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as
follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent provided under the provisions of the Company's
Certificate of Incorporation, the Company's Bylaws, and to the fullest extent
permitted by law if Indemnitee was or is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, any threatened, pending or completed action, suit, claim,
hearing, proceeding or alternative dispute resolution mechanism, or any hearing,
inquiry or investigation that Indemnitee in good faith believes might lead to
the institution of any such action, suit, claim, hearing, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "Claim") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, agent or fiduciary of the
Company, or any subsidiary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent or fiduciary of
<PAGE>
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity (hereinafter an "Indemnifiable Event") against any and all
expenses (including attorneys' fees and all other costs, expenses and
obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in, any such action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of
such Claim and any federal, state, local or foreign taxes imposed on the
Indemnitee as a result of the actual or deemed receipt of any payments under
this Agreement (collectively, hereinafter "Expenses"), including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses. Such payment of Expenses shall be made by the Company as soon
as practicable but in any event no later than thirty (30) days after written
demand by Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Indemnitee shall initially be presumed in
all cases to be entitled to indemnification pursuant to the terms hereof, and
Indemnitee may establish a conclusive presumption of any fact necessary to such
a determination by delivering to the Company a declaration made under penalty
of perjury that such fact is true and that, unless the Reviewing Party shall
deliver to Indemnitee, in accordance with the provisions of this Section 1(b),
written notice that Indemnitee is not entitled to indemnification, such
determination shall conclusively be deemed to have been made in favor of the
Indemnitee's request for indemnification. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(f) hereof) shall not have
determined (in a written opinion, in any case in which the Independent Legal
Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "Expense Advance") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to
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commence litigation seeking an initial determination by the court or challenging
any such determination by the Reviewing Party or any aspect thereof, including
the legal or factual bases therefor, and the Company hereby consents to service
of process and to appear in any such proceeding. Any determination by the
Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
the Company shall seek legal advice only from Independent Legal Counsel (as
defined in Section 10(d) hereof) selected by Indemnitee and approved by the
Company (which approval shall not be unreasonably withheld). Such counsel, among
other things, shall render its written opinion to the Company and Indemnitee as
to whether and to what extent Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to fully indemnify such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
(d) Establishment of Trust. In the event of a Potential Change
in Control (as defined in Section 10(e) hereof), the Company shall, upon written
request by Indemnitee, create a trust for the benefit of Indemnitee and, from
time to time upon written request of Indemnitee, shall fund such trust in an
amount sufficient to satisfy any and all Expenses reasonably anticipated at the
time of each such request to be incurred in connection with investigating,
preparing for and defending any Claim relating to an Indemnifiable Event, and
any and all judgments, fines, penalties and settlement amounts of any and all
Claims relating to an Indemnifiable Event from time to time actually paid or
claimed, reasonably anticipated or proposed to be paid. The amount or amounts to
be deposited in the trust pursuant to the foregoing funding obligation shall be
determined by the Reviewing Party, in any case in which the Independent Legal
Counsel referred to above is involved. The terms of the trust shall provide that
upon a Change in Control (i) the trust shall not be revoked or the principal
thereof invaded, without the written consent of Indemnitee, (ii) the trustee
shall advance, within five (5) business days of a request by Indemnitee, any and
all Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the trust
under the circumstances under which Indemnitee would be required to reimburse
the Company under Section 1(b) of this Agreement), (iii) the trust shall
continue to be funded by the Company in accordance with the funding obligation
set forth above, (iv) the trustee shall promptly pay to Indemnitee all amounts
for which Indemnitee shall be entitled to indemnification pursuant to this
Agreement or otherwise, and (v) all unexpended funds in such trust shall revert
to the Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee shall be chosen by
Indemnitee. Nothing in this Section 1(d) shall relieve the Company of any of its
obligations under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any
other provision of this Agreement other than Section 9 hereof, to the extent
that Indemnitee
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has been successful on the merits or otherwise, including, without limitation,
the dismissal of an action without prejudice, in defense of any action, suit,
proceeding, inquiry or investigation referred to in Section (1)(a) hereof or in
the defense of any claim, issue or matter therein, Indemnitee shall be
indemnified against all Expenses incurred by Indemnitee in connection therewith.
(f) Written Assurance. Notwithstanding anything to the
contrary contained herein, the Company shall not effect any Change in Control of
the Company, unless the surviving entity agrees in writing to assume all of the
Company's obligations under this Agreement.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than five (5) days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any claim, action, suit or proceeding, by
judgment, order, settlement (whether with or without court approval) or
conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that Indemnitee did not meet any particular standard of
conduct or have any particular belief or that a court has determined that
indemnification is not permitted by applicable law. In addition, neither the
failure of the Reviewing Party to have made a determination as to whether
Indemnitee has met any particular standard of conduct or had any particular
belief, nor an actual determination by the Reviewing Party that Indemnitee has
not met such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under applicable law, shall
be a defense to Indemnitee's claim or create a presumption that Indemnitee has
not met any particular standard of conduct or did not have any particular
belief. In connection with any determination by the Reviewing Party or otherwise
as to whether the Indemnitee is entitled to be indemnified hereunder, the burden
of proof shall be on the Company to establish that Indemnitee is not so
entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of
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such Claim to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such action, suit, proceeding, inquiry or
investigation in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any action, suit, proceeding, inquiry
or investigation, the Company, if appropriate, shall be entitled to assume the
defense of such action, suit, proceeding, inquiry or investigation with counsel
approved by Indemnitee, upon the delivery to Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same action, suit,
proceeding, inquiry or investigation; provided that, (i) Indemnitee shall have
the right to employ Indemnitee's counsel in any such action, suit, proceeding,
inquiry or investigation at Indemnitee's expense and (ii) if (A) the employment
of counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
action, suit, proceeding, inquiry or investigation, then the fees and expenses
of Indemnitee's counsel shall be at the expense of the Company.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the
Indemnitee to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested directors, the General Corporation Law of
the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
4. No Duplication of Payments.
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The Company shall not be liable under this Agreement to make
any payment in connection with any action, suit, proceeding, inquiry or
investigation made against Indemnitee to the extent Indemnitee has otherwise
actually received payment (under any Company insurance policy, the Company's
Certificate of Incorporation, its Bylaw or otherwise from a Company source) of
the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification.
If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for some or a portion of Expenses in
the investigation, defense, appeal or settlement of any civil or criminal
action, suit, proceeding, inquiry or investigation, but not, however, for all of
the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgement.
Both the Company and Indemnitee acknowledge that in certain
instances, Federal law or applicable public policy may prohibit the Company from
indemnifying its directors, officers, employees, agents or fiduciaries under
this Agreement or otherwise. Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
Securities and Exchange Commission to submit the question of indemnification to
a court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
7. Liability Insurance.
To the extent the Company maintains liability insurance
applicable to directors, officers, employees, agents or fiduciaries, Imdemnitee
shall be covered by such policies in such a manner as to provide Indemnitee the
same rights and benefits as are accorded to the most favorably insured of the
Company's directors, if Indemnitee is a director; or of the Company's officers,
if Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
8. Exceptions.
Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
acts, omissions or transactions from which Indemnitee may not be relieved of
liability under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except (i) with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other agreement or insurance policy
or under the Company's Certificate of Incorporation or Bylaws now or hereafter
in effect relating to
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Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such suit, or (iii) as
otherwise as required under Section 145 of the General Corporation Law of the
State of Delaware, regardless of whether Indemnitee ultimately is determined to
be entitled to such indemnification, advance expense payment or insurance
recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitations.
No legal action shall be brought and no cause of action shall
be asserted by or in the right of the Company against Indemnitee, Indemnitee's
estate, spouse, heirs, executors or personal or legal representatives after the
expiration of one year from the date of accrual of such cause of action, and any
claim or cause of action of the Company shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
one-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall
govern.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees,
agents or fiduciaries, so that if Indemnitee is or was a director, officer,
employee, agent or fiduciary of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, Indemnitee shall stand in the
same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent or fiduciary of the
Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries.
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(c) For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing more than 20% of the total voting power represented by the
Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of transactions) all of substantially all of the
Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 1(c) hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last three years
(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Potential Change in
Control" shall be deemed to have occurred if: (i) the Company enters into an
agreement, the consummation of which would result in the occurrence of a Change
in Control, (ii) any person (including the Company) publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control, or (iii) any person, other than a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
acting in such capacity or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, who is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 9.5% or more
of the combined voting power of the Company's then outstanding Voting
Securities, increases his or her beneficial ownership of such securities by five
percentage points (5%) or more over the percentage so owned by such person; or
(iv) the Board of Directors adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(f) For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or members of the
Company's Board of
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Directors or any other person or body appointed by the Board of Directors who is
not a party to the particular Claim for which Indemnitee is seeking
indemnification, or Independent Legal Counsel.
(g) For purposes of this Agreement, "Voting Securities" shall
mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit
of and be enforceable by the parties hereto and their respective successors,
assigns, including any direct or indirect successor by purchase, merger,
consolidation or otherwise to all or substantially all of the business and/or
assets of the Company, spouses, heirs, and personal and legal representatives.
The Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation or otherwise) to all, substantially all, or a
substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to Indemnitee, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as a director or officer of the Company or of any other
enterprise at the Company's request.
13. Attorneys' Fees.
In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be paid all Expenses incurred by Indemnitee with respect to
such action, regardless of whether Indemnitee is ultimately successful in such
action, and shall be entitled to the advancement of Expenses with respect to
such action, unless as a part of such action the court of competent jurisdiction
over such action determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in
defense of such action (including costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), and shall be
entitled to the advancement Expenses with respect to such action, unless as a
part of such action the court having jurisdiction over such action determines
that each of Indemnitee's material defenses to such action were made in bad
faith or were frivolous.
14. Notice.
All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked.
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Addresses for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.
15. Consent to Jurisdiction.
The Company and Indemnitee each hereby irrevocably consent to
the jurisdiction of the courts of the State of Delaware for all purposes in
connection with any action or proceeding which arises out of or relates to this
Agreement and agree that any action instituted under this Agreement shall be
commenced, prosecuted and continued only in the courts of the State of Delaware,
which shall be the exclusive and only proper forum for adjudicating such a
claim.
16. Severability.
The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are held by a court of competent jurisdiction to
be invalid, void or otherwise unenforceable, and the remaining provisions shall
remain enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including, without
limitations, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
17. Choice of Law.
This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to the conflict
of laws principles thereof.
18. Subrogation.
In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination.
No amendment, modification, termination or cancellation of
this Agreement shall be effective unless it is in writing signed by both the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement.
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This Agreement sets forth the entire understanding between the
parties hereto and supercedes and merges all previous written and oral
negotiations, commitments, understandings and agreements relating to the subject
matter hereof between the parties hereto.
21. No Construction as Employment Agreement.
Nothing contained in this Agreement shall be construed as
giving Indemnitee any right to be retained in the employ of the Company or any
of its subsidiaries.
22. Specific Performance
The Company and Indemnitee agree that a monetary remedy for
breach of this Agreement, at some later date, will be inadequate, impracticable
and difficult to prove, and the Company and the Indemnitee further agree that
such breach would cause Indemnitee irreparable harm. Accordingly, the Company
and Indemnitee agree that Indemnitee shall be entitled to temporary and
permanent injunctive relief to enforce this Agreement without the necessity of
proving actual damages or irreparable harm. The Company and Indemnitee further
agree that Indemnitee shall be entitled to such injunctive relief, including
temporary restraining orders, preliminary injunctions and permanent injunctions,
without the necessity of posting bond or other undertaking in connection
therewith. The Company hereby waives any such requirement of bond or
undertaking.
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IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
iVILLAGE INC.
By: _____________________________
Title: __________________________
170 Fifth Avenue
New York, New York 10010
AGREED TO AND ACCEPTED
INDEMNITEE: _______________________
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iVILLAGE INC.
1999 EMPLOYEE STOCK OPTION PLAN
1. Purposes of the Plan.
The purposes of this Plan are:
(1) to attract and retain the best available personnel for
positions of substantial responsibility,
(2) to provide additional incentive to Employees, Directors
and Consultants, and
(3) to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions.
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means iVillage Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
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(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
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(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1999 Employee Stock Option Plan, as amended
and restated.
(y) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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3. Stock Subject to the Plan.
Subject to the provisions of Section 13 of the Plan, the maximum aggregate
number of Shares, which may be optioned and sold under the Plan shall be
796,951.
If an Option or Stock Purchase Right expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines it
to be desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan shall
be administered by (A) the Board or (B) a Committee, which committee shall be
constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan, and
in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase
Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered by
each Option and Stock Purchase Right granted hereunder;
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(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase Right
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option or Stock Purchase Right shall have declined since
the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans established for
the purpose of qualifying for preferred tax treatment under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right (subject to
Section 15(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator; and
(xiii) to make all other determinations deemed necessary or advisable for
administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all Optionees
and any other holders of Options or Stock Purchase Rights.
5. Eligibility.
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Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon
an Optionee any right with respect to continuing the Optionee's relationship as
a Service Provider with the Company, nor shall they interfere in any way with
the Optionee's right or the Company's right to terminate such relationship at
any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than [_______] Shares.
(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional [300,000] Shares, which
shall not count against the limit, set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 13.
(iv) If an Option is cancelled in the same fiscal year of the Company in
which it was granted (other than in connection with a transaction described in
Section 13), the cancelled Option will be counted against the limits set forth
in subsections (i) and (ii) above. For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8 Term of Option.
The term of each Option shall be stated in the Option Agreement. In the case
of an Incentive Stock Option, the term shall be ten (10) years from the date of
grant or such shorter term as may be provided in the Option Agreement. Moreover,
in the case of an Incentive Stock Option granted to an Optionee who, at the time
the Incentive Stock Option is granted, owns stock
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representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Administrator,
subject to the following:
(i) In the case of an Incentive Stock Option
a. granted to an Employee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
b. granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be determined by the Administrator. In the case of a Nonstatutory
Stock Option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share on the
date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any conditions that must be satisfied before the Option may be
exercised.
(c) Form of Consideration. The Administrator shall determine the acceptable
form of consideration for exercising an Option, including the method of payment.
In the case of an Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such consideration may
consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon exercise
of an option, have been owned by the Optionee for more than six months on the
date of surrender, and
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(B) have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the Optionee,
including any liability attributable to the Optionee's participation in any
Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee ceases
to be a Service Provider, other than upon the Optionee's death or Disability,
the Optionee may exercise his or her Option within such period of time as is
specified in the Option Agreement to the extent that the Option is vested on the
date of termination (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for three (3)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her
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entire Option, the Shares covered by the unvested portion of the Option shall
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or inheritance, but
only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
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(b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
service with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) Other Provisions. The Restricted Stock Purchase Agreement shall contain
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a shareholder, and shall
be a shareholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 13 of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights.
Unless determined otherwise by the Administrator, an Option or Stock
Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
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(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon
as practicable prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have the right to
exercise his or her Option until ten (10) days prior to such transaction as to
all of the Optioned Stock covered thereby, including Shares as to which the
Option would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares purchased
upon exercise of an Option or Stock Purchase Right shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option or Stock Purchase Right will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Administrator
shall notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable for a period of fifteen
(15) days from the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
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14. Date of Grant.
The date of grant of an Option or Stock Purchase Right shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option or Stock Purchase Right, or such other later date as is determined
by the Administrator. Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration, suspension
or termination of the Plan shall impair the rights of any Optionee, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of
an Option or Stock Purchase Right unless the exercise of such Option or Stock
Purchase Right and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an Option
or Stock Purchase Right, the Company may require the person exercising such
Option or Stock Purchase Right to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required.
17. Inability to Obtain Authority.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
18. Reservation of Shares.
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The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
19. Shareholder Approval.
The Plan shall be subject to approval by the shareholders of the Company
within twelve (12) months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required under
Applicable Laws.
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iVILLAGE INC.
1999 EMPLOYEE STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT.
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.
Termination Period:
This Option may be exercised for 30 days after Optionee ceases to be a
Service Provider. Upon the death or Disability of the Optionee, this Option may
be exercised for one year after Optionee ceases to be a Service Provider. In no
event shall this Option be exercised later than the Term/Expiration Date as
provided above.
<PAGE>
II. AGREEMENT.
1. Grant of Option.
The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Chief Financial Officer of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
3. Method of Payment.
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
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(c) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, AND (ii) have a Fair Market Value on the
date of surrender equal to the aggregate Exercise Price of the Exercised Shares;
or
(e) with the Administrator's consent, delivery of Optionee's promissory
note (the "Note") in the form attached hereto as Exhibit C, in the amount of the
aggregate Exercise Price of the Exercised Shares together with the execution and
delivery by the Optionee of the Security Agreement attached hereto as Exhibit B.
The Note shall bear interest at the "applicable federal rate" prescribed under
the Code and its regulations at time of purchase, and shall be secured by a
pledge of the Shares purchased by the Note pursuant to the Security Agreement.
4. Non-Transferability of Option.
This Option may not be transferred in any manner otherwise than by will
or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this Option
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
5. Term of Option.
This Option may be exercised only within the term set out in the Notice
of Grant, and may be exercised during such term only in accordance with the Plan
and the terms of this Option Agreement.
6. Tax Consequences.
Some of the federal tax consequences relating to this Option, as of the
date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur regular
federal income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
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<PAGE>
(ii) Incentive Stock Option. If this Option qualifies as an ISO,
the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one year,
any gain realized on disposition of the Shares will be treated as long-term
capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law.
The Plan is incorporated herein by reference. The Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
Delaware.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER
17
<PAGE>
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES
AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: iVILLAGE INC.
- ----------------------------------- ---------------------------------
Signature By
- ----------------------------------- ---------------------------------
Print Name Title
- ----------------------------------
Residence Address
- ----------------------------------
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<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
---------------------------------------
Spouse of Optionee
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<PAGE>
EXHIBIT A
1999 EMPLOYEE STOCK OPTION PLAN
EXERCISE NOTICE
iVillage, Inc.
170 Fifth Avenue
New York, New York 10010
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, ________________, 199__, the
undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of iVillage Inc. (the
"Company") under and pursuant to the 1999 Employee Stock Option Plan
(the "Plan") and the Stock Option Agreement dated __________, 19___
(the "Option Agreement"). The purchase price for the Shares shall be
$______, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions.
4. Rights as Stockholder. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Shares so acquired shall be issued to the Optionee as soon
as practicable after exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the
date of issuance, except as provided in Section 13 of the Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has
consulted with any tax consultants Purchaser deems advisable in
connection with the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the
Option Agreement constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede in their entirety
all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely
to the Purchaser's interest except by means of a writing signed by the
Company and Purchaser. This
20
<PAGE>
agreement is governed by the internal substantive laws, but not the
choice of law rules, of Delaware.
Submitted by: Accepted by:
PURCHASER: iVILLAGE INC.
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
Address: Address:
iVillage Inc.
170 Fifth Avenue
New York, New York 10010
- ----------------------------------
Date Received
21
<PAGE>
iVILLAGE INC.
1999 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1999 Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions.
As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means iVillage Inc., a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient in and of itself to
constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean
between the high bid and low asked prices for the Common
Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable; or
<PAGE>
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith
by the Board.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1999 Director Option Plan.
(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 133,333 Shares of Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to
be covered by Options granted to Outside Directors.
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<PAGE>
(ii) Each Outside Director shall be automatically granted an Option
to purchase 1,666 Shares (the "Annual Option") on the date of
the annual stockholders' meeting of each year provided he or
she is then an Outside Director and if as of such date, he
or she shall have served on the Board for at least the preceding
six (6) months.
(iii) Notwithstanding the provisions of subsection (ii) or (iii)
hereof, any exercise of an Option granted before the Company has
obtained shareholder approval of the Plan in accordance with
Section 16 hereof shall be conditioned upon obtaining such
shareholder approval of the Plan in accordance with Section 16 hereof.
(iv) The terms of each Option granted hereunder shall be as follows:
(A) the term of the Option shall be ten (10) years.
(B) the Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of Fair Market
Value per Share on the date of grant of the Option.
(D) subject to Section 10 hereof, the Option shall become
exercisable as to [________] percent of the Shares subject
on each anniversary of its date of grant, provided that the
Optionee continues to save as a director on such dates.
(v) In the event that any Option granted under the Plan would cause the
number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then
the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further
grants shall be made until such time, if any, as additional Shares
become available for grant under the Plan through action of the Board
or the shareholders to increase the number of Shares which may be
issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof. The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.
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<PAGE>
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to Section
10 hereof, in the event an Optionee's status as a Director terminates (other
than upon the Optionee's death or total and permanent disability (as defined in
Section 22(e)(3) of the Code)), the Optionee may exercise his or her Option, but
only within three (3) months following the date of such termination, and only to
the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the
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<PAGE>
Optionee may exercise his or her Option, but only within twelve (12) months
following the date of such termination, and only to the extent that the Optionee
was entitled to exercise it on the date of such termination (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of termination, or
if he or she does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger
or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each outstanding
Option, the number of Shares which have been authorized for issuance under the
Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share covered by each such outstanding Option, and the number of
Shares issuable pursuant to the automatic grant provisions of Section 4 hereof
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation or the sale of substantially all of the assets of
the Company, outstanding Options shall become fully vested and exercisable,
including as to Shares for which it would not
5
<PAGE>
otherwise be exercisable. In such event the Board shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension, or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with any applicable law, regulation
or stock exchange rule, the Company shall obtain shareholder approval of any
Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4 hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated there
under, state securities laws, and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
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<PAGE>
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
7
<PAGE>
iVILLAGE INC.
DIRECTOR OPTION AGREEMENT
iVillage Inc., a Delaware corporation (the "Company"), has granted to
_______________ (the "Optionee), an option to purchase a total of
[__________________ (_________________)] shares of the Company's Common Stock
(the "Optioned Stock"), at the price determined as provided herein, and in all
respects subject to the terms, definitions and provisions of the Company's 1999
Director Option Plan (the "Plan") adopted by the Company which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
(a) This Option shall become exercisable in installments
cumulatively with respect to _________ percent (___%) of the Optioned Stock one
year after the date of grant, and as to an additional_____________ percent
(___%) of the Optioned Stock on each anniversary of the date of grant; so that
one hundred percent (100%) of the Optioned Stock shall be exercisable _____
years after the date of grant; provided, however, that in no event shall any
option be exercisable prior to the date the stockholders of the Company approve
the Plan.
(b) This option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the option and the
number of Shares in respect of which the option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
4. Method of Payment. Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
(iii) surrender of other shares which (x) in the case of Shares
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<PAGE>
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said option shall be exercised; or
(iv) d elivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date of exercise of the Option, to the extent
not included in income as described above, will be treated as capital gain or
loss.
9
<PAGE>
DATE OF GRANT: ______________
iVILLAGE INC.,
a Delaware corporation
By: __________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is attached
hereto, and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions arising
under the Plan.
Dated: ______________________________________
__________________________
Optionee
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<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
iVillage Inc.
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ___ shares of the Common Stock (the
"Shares") of iVillage Inc., (the "Company") under and pursuant to the Company's
1999 Director Option Plan and the Director Option Agreement dated __________
(the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof. This
Exercise Notice and the Agreement are governed by Utah law except for that body
of law pertaining to conflict of laws.
11
<PAGE>
Submitted by: Accepted by:
OPTIONEE: iVILLAGE INC.
_________________________ By: ___________________________
Its: __________________________
Address:
Dated: __________________________ Dated: ________________________
<PAGE>
iVILLAGE INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock
Purchase Plan of iVillage Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as to
extend and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean iVillage Inc. and any Designated Subsidiary
of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible
to participate in the Plan.
(g) "Employee" shall mean any individual who is a full-time regular
employee of the Company for tax purposes whose customary employment with the
Company is more than twenty (20) hours per week and more than five (5) months
in any calendar year. For purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed
to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day on the date of such determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable,
or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the Board,
or;
(4) For purposes of the Enrollment Date of the first Offering Period
under the Plan, the Fair Market Value shall be the initial price to the public
as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for
the initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after February 1
and August 1 of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence three months after the first
Trading Day on or after the date on which the Securities and Exchange
Commission declares the Company's Registration Statement effective and ending
on the last Trading Day on or before July 31, 2001. The duration and timing of
Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
<PAGE>
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth
of stock (determined at the fair market value of the shares at the time such
option is granted) for each calendar year in which such option is outstanding
at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the
first Trading Day on or after February 1 and August 1 of each year, or on such
other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 20 hereof; provided, however, that the
first Offering Period under the Plan shall commence three months after the
first Trading Day on or after the date on which the Securities and Exchange
Commission declares the Company's Registration Statement effective and ending
on the last Trading Day on or before July 31, 2001. The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without shareholder approval
if such change is announced at least five (5) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
<PAGE>
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount not exceeding 15% of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate
shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10
hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first
Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any
time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale
or early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted
an option to purchase on each Exercise Date during such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided
that in no event shall an Employee be permitted to purchase during each
Purchase Period more than 30,000 shares of the Company's Common Stock (subject
to any adjustment pursuant to Section 19), and provided
<PAGE>
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number
of full shares subject to option shall be purchased for such participant at
the applicable Purchase Price with the accumulated payroll deductions in his
or her account. No fractional shares shall be purchased; any payroll
deductions accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Purchase Period or Offering Period, subject to earlier withdrawal
by the participant as provided in Section 10 hereof. Any other monies left
over in a participant's account after the Exercise Date shall be returned to
the participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company
in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option
for the Offering Period shall be automatically terminated, and no further
payroll deductions for the purchase of shares shall be made for such Offering
Period. If a participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the
payroll deductions credited to such participant's account during the Offering
Period but not yet used to exercise the option shall be returned to such
participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall
be automatically terminated. The preceding sentence notwithstanding, a
participant who receives payment in lieu of notice of termination of
employment shall be treated as continuing to be an Employee for the
participant's
<PAGE>
customary number of hours per week of employment during the period in which
the participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of
a participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 83,333 shares. If, on a given Exercise Date, the number of
shares with respect to which options are to be exercised exceeds the number of
shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall deter mine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant
and his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision
and determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse,
<PAGE>
dependent or relative is known to the Company, then to such other person as
the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date"), and shall terminate immediately prior to the consummation of such
proposed dissolution or liquidation, unless provided otherwise by the Board.
The New Exercise Date shall be before the date of the Company's proposed
dissolution or liquidation. The Board shall notify each participant in
writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised
<PAGE>
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or
an equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase
Periods then in progress shall be shortened by setting a new Exercise Date
(the "New Exercise Date") and any Offering Periods then in progress shall end
on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date,
that the Exercise Date for the participant's option has been changed to the
New Exercise Date and that the participant's option shall be exercised
automatically on the New Exercise Date, unless prior to such date the
participant has withdrawn from the Offering Period as provided in Section 10
hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided in
Section 19 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Section 423 of the Code (or any successor rule or
provision or any other applicable law, regulation or stock exchange rule), the
Company shall obtain shareholder approval in such a manner and to such a
degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars, permit payroll withholding in excess of
the amount designated by a participant in order to adjust for delays or
mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with amounts
withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its
sole discretion advisable which are consistent with the Plan.
21. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
<PAGE>
22. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering
Period is lower than the Fair Market Value of the Common Stock on the
Enrollment Date of such Offering Period, then all participants in such
Offering Period shall be automatically withdrawn from such Offering Period
immediately after the exercise of their option on such Exercise Date and
automatically re-enrolled in the immediately following Offering Period as of
the first day thereof.
<PAGE>
EXHIBIT A
iVILLAGE INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: _______________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________hereby elects to participate in the
iVillage Inc. 1999 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the
amount of ____% of my Compensation on each payday (from 0 to 15%)
during the Offering Period in accordance with the Employee Stock
Purchase Plan. (Please note that no fractional percentages are
permitted.)
3. I understand that said payroll deductions shall be accumulated for
the purchase of shares of Common Stock at the applicable Purchase
Price determined in accordance with the Employee Stock Purchase
Plan. I understand that if I do not withdraw from an Offering
Period, any accumulated payroll deductions will be used to
automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan.
I understand that my participation in the Employee Stock Purchase
Plan is in all respects subject to the terms of the Plan. I
understand that my ability to exercise the option under this
Subscription Agreement is subject to shareholder approval of the
Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan
should be issued in the name(s) of (Employee or Employee and Spouse
only): _________________________.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day
of the Offering Period during which I purchased such shares) or one
year after the Exercise Date, I will be treated for federal income
tax purposes as having received ordinary income at the time of such
disposition in an amount equal to the excess of the fair market
value of the shares at the time such shares were purchased by me
over the price which I paid for the shares. I hereby agree to notify
the Company in writing within 30 days after the date of any
disposition of my shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but
will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including
any withholding
<PAGE>
necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock
by me. If I dispose of such shares at any time after the expiration
of the 2-year and 1-year holding periods, I understand that I will
be treated for federal income tax purposes as having received income
only at the time of such disposition, and that such income will be
taxed as ordinary income only to the extent of an amount equal to
the lesser of (1) the excess of the fair market value of the shares
at the time of such disposition over the purchase price which I paid
for the shares, or (2) 15% of the fair market value of the shares on
the first day of the Offering Period. The remainder of the gain, if
any, recognized on such disposition will be taxed as capital gain.
7. I understand that, in the event the Fair Market Value of a share of
the Company's Common Stock is lower on an Exercise Date than on my
Enrollment Date, I will be withdrawn from the Offering Period and
enrolled in the next following Offering Period to the extent
permitted under the Employee Stock Purchase Plan.
8. I hereby agree to be bound by the terms of the Employee Stock
Purchase Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Employee Stock
Purchase Plan.
9. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under
the Employee Stock Purchase Plan:
NAME: (Please print)___________________________________________________________
_______________________________ ___________________________________________
Relationship (Address)
Employee's Social
Security Number: _____________________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________
Signature of Employee
_____________________________________
Spouse's Signature (If beneficiary
other than spouse)
A-2
<PAGE>
EXHIBIT B
iVILLAGE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned is a participant in the Offering Period of
the iVillage Inc. 1999 Employee Stock Purchase Plan beginning on
_________________. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
____________________________________
____________________________________
____________________________________
Signature:
____________________________________
Date:_______________________________
B-1
<PAGE>
iVILLAGE INC.
1999 ACQUISITION STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this iVILLAGE INC. 1999 ACQUISITION STOCK OPTION PLAN (the
"Plan") is (i) to further the growth and success of iVILLAGE INC., a Delaware
corporation (the "Company"), and its Subsidiaries (as hereinafter defined) in
connection with the acquisition of other businesses or assets directly or
indirectly by the Company by enabling directors who are employees, officers and
other employees of, and independent consultants to, the Company and any of its
Subsidiaries, or as part of one or more of such acquisitions, to acquire shares
of the Common Stock, $0.01 par value (the "Common Stock"), of the Company,
thereby increasing their personal interest in such growth and success, and (ii)
to provide a means of rewarding outstanding performance by such persons to the
Company and/or its Subsidiaries. Options granted under the Plan may be either
"incentive stock options" ("ISOs"), intended to qualify as such under the
provisions of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or non-qualified stock options ("NSOs"). For purposes of the Plan, the
terms "Parent" and "Subsidiary" shall mean "Parent Corporation" and "Subsidiary
Corporation", respectively, as such terms are defined in Sections 424(e) and (f)
of the Code. Unless the context otherwise requires, any ISO or NSO shall
hereinafter be referred to as an "Option."
2. ADMINISTRATION OF THE PLAN.
(A) STOCK OPTION COMMITTEE. The Plan shall be administered by
the Board of Directors of the Company (the "Board") or a Compensation Committee
(the "Committee") consisting of three persons appointed to such Committee from
time to time by the Board; provided, however, that, so long as it shall be
required to comply with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities
and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934,
as amended (the "1934 Act"), in order to permit officers and directors of the
Company to be exempt from the provisions of Section 16(b) of the 1934 Act with
respect to transactions pursuant to the Plan, each person appointed to the
Committee, at the effective date of his or her appointment to the Committee,
shall be a "Non-Employee Director" within the meaning of Rule 16b-3; provided,
further, that to the extent the Company deems it desirable to qualify Options
granted under the Plan as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the Plan shall be administered by a Committee of two
or more "outside directors" within the meaning of Section 162(m) of Code. The
members of the Committee may be removed at any time either with or without cause
by the Board. Any vacancy on the Committee, whether due to action of the Board
or any other cause, shall be filled by the Board. The term "Committee" shall,
for all purposes of the Plan other than this Section 2, be deemed to refer to
the Board if the Board is administering the Plan.
(B) PROCEDURES. If the Plan is administered by a Committee,
the Committee shall from time to time select a Chairman from among the members
of the Committee. The Committee shall adopt such rules and regulations as it
shall deem appropriate concerning the holding of meetings and the administration
of the Plan. A majority of the entire Committee shall constitute a quorum and
the actions of a majority of the members of the Committee present at a
<PAGE>
meeting at which a quorum is present, or actions approved in writing by all of
the members of the Committee, shall be the actions of the Committee; provided,
however, that if the Committee consists of only two members, both shall be
required to constitute a quorum and to act at a meeting or to approve actions in
writing.
(C) INTERPRETATION. Except as otherwise expressly provided in
the Plan, the Committee shall have all powers with respect to the administration
of the Plan, including, without limitation, full power and authority to
interpret the provisions of the Plan and any Option Agreement (as defined in
Section 5(b)), and to resolve all questions arising under the Plan. All
decisions of the Board or the Committee, as the case may be, shall be conclusive
and binding on all participants in the Plan.
3. SHARES OF STOCK SUBJECT TO THE PLAN.
(A) NUMBER OF SHARES. Subject to the provisions of Section 9
relating to adjustments upon changes in capital structure and other corporate
transactions), the number of shares of Common Stock subject at any one time to
Options granted under the Plan, shall not exceed 333,333 shares. If and to the
extent that Options granted under the Plan terminate, expire or are canceled
without having been fully exercised, new Options may be granted under the Plan
with respect to the shares of Common Stock constituting the unexercised portion
of such terminated, expired or canceled Options.
(B) CHARACTER OF SHARES. The shares of Common Stock issuable
upon exercise of an option granted under the Plan shall be (i) authorized but
unissued shares of Common Stock, (ii) shares of Common Stock held in the
Company's treasury or (iii) a combination of the foregoing.
(C) RESERVATION OF SHARES. The number of shares of Common
Stock reserved for issuance under the Plan shall at no time be less than the
maximum number of shares which may be purchased at any time pursuant to
outstanding Options.
4. ELIGIBILITY.
(A) GENERAL. Options may be granted under the Plan only to
persons who are employees, directors, officers of, or independent consultants
to, the Company or any of its Subsidiaries. No individual may be granted Options
to purchase more than [______] Shares in any fiscal year of the Company.
Options granted to officers or employees (including directors
who are officers or employees) of the Company or any of its Subsidiaries shall
be, in the discretion of the Committee, either ISOs or NSOs, and Options granted
to independent consultants to or directors of the Company or any of its
Subsidiaries who are not officers or employees of the Company or any of its
Subsidiaries shall be NSOs. Notwithstanding the foregoing, Options may be
conditionally granted to persons who are prospective employees, officers or
directors of, or independent consultants to, the Company or any of its
Subsidiaries; provided, however, that any such conditional grant of an ISO to a
prospective employee shall, by its terms, become effective no earlier than the
date on which such person actually becomes an employee.
2
<PAGE>
(B) EXCEPTIONS. Notwithstanding anything contained in Section
4(a) to the contrary, no ISO may be granted under the Plan to an employee who
owns, directly or indirectly (within the meaning of Sections 422(b)(6) and
424(d) of the Code), stock possessing more than lot of the total combined voting
power of all classes of stock of the Company or of its Parent, if any, or any of
its Subsidiaries, unless (A) the Option Price (as defined in Section 6(a)) of
the shares of Common Stock subject to such ISO is fixed at not less than 110% of
the Fair Market Value on the date of grant (as determined in accordance with
Section 6(b)) of such shares and (B) such ISO by its terms is not exercisable
after the expiration of five years from the date it is granted.
5. GRANT OF OPTIONS.
(A) GENERAL. Options may be granted under the Plan at any time
and from time to time on or prior to the tenth anniversary of the Effective Date
(as defined in Section 12). Subject to the provisions of the Plan, the Committee
shall have plenary authority, in its discretion, to determine:
(i) the persons (from among the class of persons
eligible to receive Options under the Plan) to whom options shall be
granted (the "Optionees");
(ii) the time or times at which Options shall be
granted;
(iii) the number of shares subject to each Option;
(iv) the Option Price (as hereinafter defined) of the
shares subject to each Option, which price, in the case of ISOs, shall
not be less than the minimum specified in Section 4(b)(i) or 6(a) (as
applicable); and
(v) the time or times when each option shall become
exercisable and the duration of the exercise period.
(B) OPTION AGREEMENTS. Each Option granted under the Plan
shall be designated as an ISO or an NSO and shall be subject to the terms and
conditions applicable to ISOs and/or NSOs (as the case may be) set forth in the
Plan. In addition, each Option shall be evidenced by a written agreement (an
"Option Agreement"), containing such terms and conditions and in such form, not
inconsistent with the Plan, as the Committee shall, in its discretion, provide.
Each Option Agreement shall be executed by the Company and the Optionee.
(C) NO EVIDENCE OF EMPLOYMENT OR SERVICE. Nothing contained in
the Plan or in any Option Agreement shall confer upon any Optionee any right
with respect to the continuation of his or her employment by or service with the
Company or any of its Subsidiaries or interfere in any way with the right of the
Company or any such Subsidiary (subject to the terms of any separate agreement
to the contrary) at any time to terminate such employment or service or to
increase or decrease the compensation of the Optionee from the rate in existence
at the time of the grant of an Option.
3
<PAGE>
(D) DATE OF GRANT. The date of grant of an option under this
Plan shall be the date as of which the Committee approves the grant; provided,
however, that in the case of an ISO, the date of grant shall in no event be
earlier than the date as of which the Optionee becomes an employee of the
Company or one of its Subsidiaries.
6. OPTION PRICE.
(A) GENERAL. Subject to Section 9, the price (the "Option
Price") at which each share of Common Stock subject to an Option granted under
the Plan may be purchased shall be determined by the Committee at the time the
option is granted; provided, however, that in the case of an ISO (subject to
Section 4(b)(i)), or an NSO granted at any time after the initial public
offering of the Common Stock, such Option Price shall in no event be less than
100% (or 110% if the provisions of Section 4(b)(i) hereof are applicable) of the
Fair Market Value on the date of grant (as determined in accordance with Section
6(b)) of such share of Common Stock.
(B) DETERMINATION OF FAIR MARKET VALUE. Subject to the
requirements of Section 422 of the Code, for purposes of the Plan, the "Fair
Market Value" of shares of Common Stock shall be equal to:
(i) if such shares are publicly traded, (x) the
closing price, if applicable, or the average of the last bid and asked
prices on the date of grant or, if such date is not a business day
on-which shares are traded, the next immediately preceding trading day,
in the over-the-counter market as reported by NASDAQ or, (y) if the
Common Stock is then traded on a national securities exchange, the
closing price, if applicable, or the average of the high and low prices
on the date of grant or, if such date is not a business day on which
shares are traded, the next immediately preceding trading day, on the
principal national securities exchange on which it is so traded; or
(ii) if there is no public trading market for such
shares, the fair value of such shares on the date of grant as
determined by the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale
and offer prices of the capital stock in private transactions
negotiated at arms' length.
Notwithstanding anything contained in the Plan to the
contrary, all determinations pursuant to Section 6(b)(ii) shall be made without
regard to any restriction other than a restriction which, by its terms, will
never lapse.
7. EXERCISABILITY OF OPTIONS.
(A) COMMITTEE DETERMINATION.
(i) Each Option granted under the Plan shall be
exercisable at such time or times, or upon the occurrence of such event
or events, and for such number of shares subject to the Option, as
shall be determined by the Committee and set forth in the
4
<PAGE>
Option Agreement evidencing such Option; provided, however, that if the
Company files a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), for the initial public
offering of the Common Stock, no Option granted under the Plan shall be
exercisable during the 180-day period immediately following the
effective date of such registration statement (the "Lock-up Period");
provided further, however, that if an Option by its terms is to expire
during the Lock-up Period, the Committee may extend the expiration date
of such option for a period co-extensive with the period representing
the period between the commencement of the Lock-up Period and the
expiration date of such Option. Subject to the provisos of the
immediately preceding sentence, if an option is not at the time of
grant immediately exercisable, the Committee may (A) in the Option
Agreement evidencing such Option, provide for the acceleration of the
exercise date or dates of the subject option upon the occurrence of
specified events and/or (B) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such
Option, provided that, except as otherwise provided in the pertinent
Option Agreement, the Committee shall not accelerate the exercise date
of any installment of any Option granted to any employee as an ISO (and
not previously converted into a NSO pursuant to Section 12) if such
acceleration would violate the annual vesting limitation contained in
Section 422(d) of the Code as described in Section 7(c).
(ii) The Committee may, in its discretion, amend any
term or condition of an outstanding option provided (A) such term or
condition as amended is permitted by the Plan, (B) any such amendment
shall be made only with the consent of the Optionee to whom the Option
was granted, or in the event of the death of the Optionee, the
Optionee's survivors, if the amendment is materially adverse to the
Optionee, and (C) any such amendment of any ISO shall be made only
after the Committee, after consulting with counsel for the Company,
determines whether such amendment would constitute a "modification" of
any option which is an ISO (as that term is defined in Section 424(h)
of the Code).
(B) AUTOMATIC TERMINATION OF OPTION. Except as otherwise
determined by the Committee and set forth in the Option Agreement, the
unexercised portion of any option granted under the Plan shall automatically
terminate and shall become null and void and be of no further force or effect
upon the first to occur of the following:
(i) the tenth anniversary of the date on which such
Option is granted or, in the case of any ISO granted to a person
described in Section 4(b)(i), the fifth anniversary of the date on
which such ISO is granted;
(ii) the expiration of three months from the date
that the Optionee ceases to be an employee, director or officer of, or
consultant to, the Company or any of its Subsidiaries (other than as a
result of an Involuntary Termination (as defined in subparagraph (iii)
below)) or a Termination For Cause (as defined in subparagraph (iv)
below)); provided, however, that if the optionee shall die during such
three-month period, the time of termination of the unexercised portion
of such Option shall be the expiration of 12 months from the date that
such Optionee ceased to be an employee, director or officer of, or
consultant to, the Company or any of its Subsidiaries;
5
<PAGE>
(iii) the expiration of 12 months from the date that
the Optionee ceases to be an employee, director or officer of, or
consultant to, the Company or any of its Subsidiaries, if such
termination is due to such Optionee's death or permanent and total
disability (within the meaning of Section 22(e)(3) of the Code) (an
"Involuntary Termination");
(iv) immediately if the Optionee ceases to be an
employee, director or officer of, or consultant to, the Company or any
of its Subsidiaries, if such termination is for cause or is otherwise
attributable to a breach by the Optionee of an employment, consulting
or other similar agreement with the Company or any such Subsidiary (a
"Termination For Cause");
(v) the expiration of such period of time or the
occurrence of such event as the Committee in its discretion may provide
in the Option Agreement;
(vi) on the effective date of a Corporate Transaction
(as defined in Section 9(b)) to which Section 9(b)(ii) (relating to
assumptions and substitutions of Options) does not apply; provided,
however, that an Optionee's right to exercise any Option outstanding
prior to such effective date shall in all events be suspended during
the period commencing 10 days prior to the proposed effective date of
such Corporate Transaction and ending on either the actual effective
date of such Corporate Transaction or upon receipt of notice from the
Company that such Corporate Transaction will not in fact occur; and
(vii) except to the extent permitted by Section
9(b)(ii), the date on which an option or any part thereof or right or
privilege relating thereto is transferred (other than by will or the
laws of descent and distribution), assigned, pledged, hypothecated,
attached or otherwise disposed of by the Optionee.
The Board shall have the power to determine what constitutes a
Termination For Cause, and the date upon which such Termination For Cause shall
occur. All such determinations shall be final and conclusive and binding upon
the Optionee.
Notwithstanding anything contained in the Plan to the
contrary, unless otherwise provided in an Option Agreement, no Option granted
under the Plan shall be affected by any change of duties or position of the
Optionee (including a transfer to or from the Company or one of its
Subsidiaries), so long as such Optionee continues to be an employee, director or
officer of, or consultant to, the Company or one of its Subsidiaries.
(C) LIMITATIONS ON EXERCISE. To the extent that Options
designated as ISOs become exercisable by an Optionee for the first time during
any calendar year for stock having an aggregate Fair Market Value greater than
one hundred thousand dollars ($100,000), the portion of such options which
exceeds such amount shall be treated as NSOs. For purposes of this Section 7(c),
options designated as ISOs shall be taken into account in the order in which
they were granted, and the Fair Market Value of stock shall be determined as of
the time the option with respect to such stock is granted.
6
<PAGE>
8. PROCEDURE FOR EXERCISE.
(A) PAYMENT. At the time an option is granted under the Plan,
the Committee shall, in its discretion, specify one or more of the following
forms of payment which may be used by an Optionee upon exercise of his Option:
(i) cash or personal or certified check payable to
the Company in an amount equal to the aggregate Option Price of the
shares with respect to which the Option is being exercised;
(ii) stock certificates (in negotiable form)
representing shares of Common Stock having a Fair Market Value on the
date of exercise (as determined in accordance with Section 6(b)) equal
to the aggregate cash Option Price of the shares with respect to which
the option is being exercised;
(iii) a combination of the methods set forth in
clauses (i) and (ii); or
(iv) in the case of NSOs only, in compliance with any
cashless exercise program authorized by the Company for use in
connection with the Plan at the time of such exercise.
(B) NOTICE. An Optionee (or other person, as provided in
Section 10(b)) may exercise an Option granted under the Plan in whole or in
part, as provided in the Option Agreement evidencing his or her Option, by
delivering a written notice (the "Notice") to the Secretary of the Company. The
Notice shall:
(i) state that the Optionee elects to exercise the
option;
(ii) state the number of shares with respect to which
the Option is being exercised (the "Optioned Shares");
(iii) state the method of payment for the Optioned
Shares (which method must be available to the Optionee under the terms
of his or her Option Agreement);
(iv) state the date upon which the Optionee desires
to consummate the purchase (which date must be prior to the termination
of such Option and no later than 30 days from delivery of such Notice);
(v) include any representations of the optionee
required pursuant to Section 10(a);
(vi) if the Option is exercised pursuant to Section
10(b) by any person other than the optionee, include evidence to the
satisfaction of the Committee of the right of such person to exercise
the option; and
(vii) include such further provisions consistent with
the Plan as the Committee may from time to time require.
7
<PAGE>
The exercise date of an Option shall be the date on which the
Company receives the Notice from the Optionee.
(C) ISSUANCE OF CERTIFICATES. The Company shall issue a stock
certificate in the name of the optionee (or such other person exercising the
option in accordance with the provisions of Section 10(b)) for the Optioned
Shares as soon as practicable after receipt of the Notice and payment of the
aggregate Option Price for such shares. Neither the Optionee nor any person
exercising an option in accordance with the provisions of Section 10(b) shall
have any privileges as a stockholder of the Company with respect to any shares
of stock subject to an Option granted under the Plan until the date of issuance
of a stock certificate pursuant to this Section 8(c).
9. ADJUSTMENTS.
(A) CHANGES IN CAPITAL STRUCTURE. Subject to Section 9(b), if
the Common Stock is changed by reason of a stock split, reverse stock split,
stock dividend or recapitalization, or converted into or exchanged for other
securities as a result of a merger, consolidation or reorganization, the
Committee shall make such adjustments in the number and class of shares of stock
with respect to which Options may be granted under the Plan as shall be
equitable and appropriate in order to make such Options, as nearly as may be
practicable, equivalent to such Options immediately prior to such change. A
corresponding adjustment changing the number and class of shares allocated to,
and the Option Price of, each option or portion thereof outstanding at the time
of such change shall likewise be made. Notwithstanding anything contained in the
Plan to the contrary, in the case of ISOs, no adjustment under this Section 9(a)
shall be appropriate if such adjustment (i) would constitute a modification,
extension or renewal of such ISOs within the meaning of Sections 422 and 424 of
the Code, and the regulations promulgated by the Treasury Department thereunder,
or (ii) would, under Section 422 of the Code and the regulations promulgated by
the Treasury Department thereunder, be considered as the adoption of a new plan
requiring stockholder approval.
(B) CORPORATE TRANSACTIONS. The following rules shall apply in
connection with the dissolution or liquidation of the Company, a reorganization,
merger or consolidation in which the Company is not the surviving corporation,
or a sale of all or substantially all of the capital stock or assets of the
Company to another person or entity (a "Corporate Transaction"):
(i) each holder of an Option outstanding at such time
shall be given (A) written notice of such Corporate Transaction at
least 20 days prior to its proposed effective date (as specified in
such notice) and (B) an opportunity, during the period commencing with
delivery of such notice and ending 10 days prior to such proposed
effective date, to exercise the Option to the full extent to which such
option would have been exercisable by the Optionee at the expiration of
such 20-day period; provided, however, that upon the occurrence of a
merger or consolidation in which the Company is not the surviving
corporation and the stockholders of the Company receive distributions
of cash, securities or other property of a third party in complete
exchange for their equity interests in the Company or a sale of all of
the capital stock or all or substantially all of the assets of the
Company to another person or entity (a "Sale Event"), under
circumstances in which provision for assumption or substitution of
options in accordance
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with Section 9(b)(ii) is not made, the exercise dates of all Options
granted under the Plan shall accelerate and become fully exercisable
with respect to the total number of shares of stock to which such
Options relate, and if and to the extent not so exercised as provided
in this Section 9(b)(i), such Options shall automatically terminate;
and
(ii) notwithstanding anything contained in the Plan
to the contrary, Section 9(b)(i) shall not be applicable if provision
shall be made in connection with such Corporate Transaction for the
assumption of outstanding Options by, or the substitution for such
Options of new options covering the stock of, the surviving, successor
or purchasing corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number, kind and option prices of
shares subject to such options; provided, however, that in the case of
ISOs, the Board shall, to the extent not inconsistent with the best
interests of the Company or its Subsidiaries (such best interests to be
determined in good faith by the Board in its sole discretion), use its
best efforts to ensure that any such assumption or substitution will
not constitute a modification, extension or renewal of the ISOs within
the meaning of Section 424(h) of the Code and the regulations
promulgated by the Treasury Department thereunder.
(C) SPECIAL RULES. The following rules shall apply in
connection with Sections 9(a) and (b) above:
(i) no fractional shares shall be issued as a result
of any such adjustment, and any fractional shares resulting from the
computations pursuant to Sections 9(a) or (b) shall be eliminated
without consideration from the respective Options;
(ii) no adjustment shall be made for cash dividends
or the issuance to stockholders of rights to subscribe for additional
shares of Common Stock or other securities; and
(iii) any adjustments referred to in Sections 9(a) or
(b) shall be made by the Board or the Committee (as the case may be) in
its sole discretion and shall be conclusive and binding on all persons
holding options granted under the Plan.
10. RESTRICTIONS ON OPTIONS AND OPTIONED SHARES.
(A) COMPLIANCE WITH SECURITIES LAWS. No Options shall be
granted under the Plan, and no shares of Common Stock shall be issued and
delivered upon the exercise of Options granted under the Plan, unless and until
the Company and/or the optionee shall have complied with all applicable Federal
or state registration, listing and/or qualification requirements and all other
requirements of law or of any regulatory agencies having jurisdiction.
The Committee in its discretion may, as a condition to the
exercise of any Option granted under the Plan, require an optionee (i) to
represent in writing that the shares of Common Stock to be received upon
exercise of an option are being acquired for investment and not with a view to
distribution and (ii) to make such other representations and warranties as are
deemed appropriate by the Company. Stock certificates representing shares of
Common Stock acquired
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upon the exercise of Options that have not been registered under the Securities
Act shall, unless otherwise directed by the Committee, bear the following
legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR AN
OPINION OF COUNSEL TO iVILLAGE INC. THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT."
(B) NONASSIGNABILITY OF OPTION RIGHTS. Except as otherwise
determined by the Committee and set forth in the option Agreement, no Option
granted under the Plan shall be assignable or otherwise transferable by the
optionee except by will or by the laws of descent and distribution. Except as
otherwise determined by the Committee and set forth in the option Agreement, an
Option may be exercised during the lifetime of the Optionee only by the
Optionee. If an Optionee dies, his or her Option shall thereafter be
exercisable, except as otherwise determined by the Committee and set forth on
the Option Agreement, during the period specified in Section 7(b)(ii) or (iii)
(as the case may be), by his or her executors or administrators to the full
extent to which such option was exercisable by the Optionee at the time of his
or her death.
(C) RIGHT OF FIRST REFUSAL. Until the initial public offering
of Common Stock of the Company registered under the Securities Act, the Company
shall be entitled to a right of first refusal in the event that the Optionee
proposes to sell any of his, her or its shares of Common Stock issuable upon
exercise of the option, on such terms as are set forth in the Option Agreement
between the Company and the Optionee. The Company may, in its sole discretion,
assign such right of first refusal.
11. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date (the "Effective
Date") of its adoption by the Board; provided, however, that no Option shall be
exercisable by an optionee unless and until the Plan shall have been approved by
the stockholders of the Company in accordance with the provisions of its
Certificate of Incorporation and By-laws, which approval shall be obtained by a
simple majority vote of stockholders, voting either in person or by proxy, at a
duly held stockholders, meeting or by written action in lieu of a stockholder's
meeting as permitted by and in accordance with the Certificate of Incorporation
and By-laws of the Company within 12 months before after the adoption of the
Plan by the Board.
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12. CONVERSION OF ISOS INTO NON-OUALIFIED OPTIONS: TERMINATION OF
ISOS.
The Committee, at the written request of any Optionee, may in
its discretion take such actions as may be necessary to convert such Optionee
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into NSOs at any time prior to the expiration of such ISOs,
regardless of whether the Optionee is an employee of the Company at the time of
such conversion. Such actions may include, but not be limited to, extending the
exercise period or reducing the exercise price of the appropriate installments
of such Options. At the time of such conversion, the Committee (with the consent
of the optionee) may impose such conditions on the exercise of the resulting
NSOs as the Committee in its discretion may determine, provided that such
conditions shall not be inconsistent with this Plan. Nothing in the Plan shall
be deemed to give any optionee the right to have such Optionee ISOs converted
into NSOs, and no such conversion shall occur until and unless the Committee
takes appropriate action. The Committee, with the consent of the optionee, may
also terminate any portion of any ISO that has not been exercised at the time of
such termination.
13. EXPIRATION AND TERMINATION OF THE PLAN.
Except with respect to Options then outstanding, the Plan
shall expire on the first to occur of (i) the tenth anniversary of the date on
which the Plan is adopted by the Board, (ii) the tenth anniversary of the date
on which the Plan is approved by the stockholders of the Company and (iii) the
date as of which the Board, in its sole discretion, determines that the Plan
shall terminate (the "Expiration Date"). Any Options outstanding as of the
Expiration Date shall remain in effect until they have been exercised or
terminated or have expired by their respective terms.
14. AMENDMENT OF PLAN.
The Board may at any time prior to the Expiration Date modify
and amend the Plan in any respect; provided, however, that the approval of the
holders of a majority of the votes that may be cast by all of the holders of
shares of Common Stock and preferred stock of the Company, if any, entitled to
vote (voting as a single class) shall be obtained prior to any such amendment
becoming effective if such approval is required by law or is necessary to comply
with regulations promulgated by the SEC under Section 16(b) of the 1934 Act or
with Section 422 of the Code or the regulations promulgated by the Treasury
Department thereunder.
15. CAPTIONS.
The use of captions in this Plan is for convenience. The
captions are not intended to provide substantive rights.
16. DISQUALIFYING DISPOSITIONS.
If Optioned Shares acquired by exercise of an ISO granted
under this Plan are disposed of within two years following the date of grant of
the ISO or one year following the transfer of the Optioned Shares to the
Optionee (a "Disqualifying Disposition"), the holder of the Optioned Shares
shall, immediately prior to such Disqualifying Disposition, notify the Company
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in writing of the date and terms of such Disqualifying Disposition and provide
such other information regarding the Disqualifying Disposition as the Company
may reasonably require.
17. WITHHOLDING TAXES.
Whenever under the Plan shares of Common Stock are to be
delivered by an Optionee upon exercise of an NSO, the Company shall be entitled
to require as a condition of delivery that the Optionee remit or, in appropriate
cases, agree to remit when due, an amount sufficient to satisfy all current or
estimated future Federal, state and local withholding tax and employment tax
requirements relating thereto. At the time of a Disqualifying Disposition, the
Optionee shall remit to the Company in cash the amount of any applicable
Federal, state and local withholding taxes and employment taxes.
18. OTHER PROVISIONS.
Each Option granted under the Plan may contain such other
terms and conditions not inconsistent with the Plan as may be determined by the
Committee, in its sole discretion. Notwithstanding the foregoing, each ISO
granted under the Plan shall include those terms and conditions which are
necessary to qualify the ISO as an "incentive stock option" within the meaning
of Section 422 of the Code and the regulations thereunder and shall not include
any terms or conditions which are inconsistent therewith.
19. NUMBER AND GENDER.
With respect to words used in this Plan, the singular form
shall include the plural form, the masculine gender shall include the feminine
gender, and vice-versa, as the context requires.
20. GOVERNING LAW.
The validity and construction of this Plan and the instruments
evidencing the Options granted hereunder shall be governed by the laws of the
State of New York.
As adopted by the Board of Directors of iVILLAGE INC. on _______, 1999.
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PROMOTION, DISTRIBUTION & LICENSE AGREEMENT
Promotion Distribution and License Agreement (this "Agreement"), dated October
21, 1998 ("Effective Date") between:
AT&T Corp., a New York corporation with an office at 295 N. Maple Avenue,
Basking Ridge, New Jersey 07920, on behalf of itself and its Affiliates
(collectively, "AT&T"); and
iVillage, Inc., a Delaware corporation with an office at 170 Fifth Avenue, New
York, NY 10010, on behalf of itself and its Affiliates (collectively,
"iVillage")
RECITALS
A. AT&T is a provider of certain telecommunication services.
B. iVillage owns and operates websites currently known as "iVillage"
(www.ivillage.com), and all current and future domains thereof, including
without limitation the Parent Soup, Parents Place, Better Health, Money, Work
from Home, Shopping and Career, and owns or operates certain other web sites on
the public Internet, both within and outside the United States (collectively,
the "iVillage Sites"), where it offers end users certain chat and search
services and other products and services.
C. AT&T and iVillage wish to work together (1) to promote and market certain
AT&T telecommunication services on the iVillage Sites, and (2) to integrate,
test and promote on the iVillage Sites certain AT&T telecommunication services
that combine web-based services with both traditional and non-traditional (e.g.,
Internet Protocol) communication services.
D. This Agreement includes the following exhibits: Exhibit A:
Bounties/Compensation; Exhibit B: Promotion Plan: Exhibit C: AIC Trial Plan;
Exhibit D: Editorial Guidelines; Exhibit E: Definitions; Exhibit F: Key Words.
AT&T CORP. iVILLAGE, INC.
/s/ D. H. Schulman /s/ Steven Elkes
- --------------------------- -------------------------------
Signature Signature
D. H. Schulman Steven Elkes
- --------------------------- -------------------------------
Print Name Print Name
Vice President Vice President
- --------------------------- -------------------------------
Title Title
10/21/98 10/22/98
- --------------------------- -------------------------------
Date Date
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1. PROMOTION OF AT&T SERVICES: AIC TRIAL PLAN
1.1 Promoted AT&T Services. iVillage shall promote and market the AT&T
services listed on Exhibit A ("Promoted AT&T Services") on the iVillage Sites
during the Term in accordance with the placement commitments, Guaranteed
Impression Levels and other terms of the Promotion Plan attached as Exhibit B.
The list of Promoted AT&T Services shall be amended from time to time by the
parties in accordance with Section 1.8. Any reference to a specific URL or web
site in this Agreement shall be deemed to include any successor URL or web site
at which the same or substantially similar content, products or services are
offered on the public Internet.
1.2 Co-Branded Communications Center. iVillage shall, at its expense,
develop and make available on the iVillage Sites in accordance with the
Promotion Plan one or more pages that will reside on its servers and contain
offers for Promoted AT&T Services as well as certain other functionality and
features to be mutually determined (the "Co-Branded Communications Center"). The
Co-Branded Communications Center will link directly to AT&T's servers for online
sign-up by users. iVillage shall be responsible for the design of the Co-Branded
Communications Center, subject to AT&T's reasonable design specifications and
final approval by AT&T. iVillage shall provide AT&T with mock-ups of the
Co-Branded Communication Center on a password protected web site for AT&T's
final review and approval at least ten (10) days prior to the Deployment Date.
Without AT&T's prior consent, there shall be no advertisements, promotions or
other offers for any products or services on or through the Co-Branded
Communication Center, other than for AT&T's products and services.
1.3 Co-Branded AnyWho. iVillage shall, at its expense, develop and make
available on the iVillage Sites in accordance with Promotion Plan, a co-branded
interface page (i.e., initial navigation page and query forms) for AT&T's AnyWho
directory, which page will reside on iVillage's servers (the "Co-Branded
AnyWho"), iVillage shall provide AT&T with design guidelines, graphics and other
creative so that AT&T can develop mock-ups of the "search results" page of the
Co-Branded AnyWho for each of the iVillage Sites. iVillage and AT&T shall
mutually agree on the final design of the Co-Branded AnyWho. iVillage shall
provide AT&T with a mock-up of the interface page of the Co-Branded AnyWho on a
password protected web site for AT&T's review at least fourteen (14) days prior
to the agreed upon deployment date for the Co-Branded AnyWho. iVillage is solely
responsible for serving ads on the Co-Branded AnyWho and revenues from such ads
shall be split between the parties in accordance with Section 3.5. AT&T shall
have the right, on a monthly basis, to use up to [*] of all Unsold Inventory in
the Co-Branded AnyWho for promotions of AT&T products and services (but may not
resell such inventory to third parties). iVillage will manage and keep AT&T
informed of all Unsold Inventory on the Co-Branded AnyWho to ensure that AT&T is
able to fill such Unsold Inventory on a monthly basis. iVillage will place
AT&T's in-house ads for any such Unsold inventory within 2 days of its receipt
of the creative for such ads from AT&T.
1.4 AT&T WorldNet Promotions. (a) iVillage will promote, on the
iVillage Sites, the AT&T WorldNet Service, which shall be marketed and Promoted
exclusively as "iVillage Online Powered by AT&T WorldNet Service", or some other
branding mutually agreed to by the parties ("iVillage Online").
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(b) AT&T will create a Gold Master of the consumer version of its
standard AT&T WorldNet Software that will default to a co-branded iVillage Site
or the standard AT&T WorldNet home page, as provided in (e) below. Promotions of
AT&T WorldNet Service from iVillage Sites will direct users to either download
the AT&T WorldNet Service client software, or order the software on CD-ROM.
(c) iVillage will develop programs specifically designed to retain
iVillage Online Powered by AT&T WorldNet Service customers.
(d) AT&T will include and promote the iVillage sites through the AT&T
WorldNet Service "Come to Your Senses Sweepstakes". iVillage may promote the
sweepstakes prominently on iVillage sites as mutually agreed. Promotion of the
sweepstakes will not be counted against the Guaranteed Impressions Levels or
Clickthrus.
(e) iVillage will have the option to determine whether iVillage Online
customers should default to the AT&T WorldNet Service home page or the iVillage
home page. If iVillage opts to have the customers default to the iVillage home
page, iVillage will design and host a co-branded version of the iVillage Sites
and incorporate a content area (size & format TBD), above the fold, on the home
page, to be used for AT&T WorldNet Service customer communication. Such area
shall include space for AT&T to promote and offer its communications services,
customer care and such other services as mutually agreed. Links to AT&T WorldNet
customer care will be included throughout iVillage Online as mutually agreed.
(f) AT&T and iVillage will collaborate and mutually agree on the
appearance, content, and user interface of the co-branded version of the
iVillage Sites.
(g) iVillage shall provide all support, including without limitation
customer care, in connection with the iVillage Online content at a level at
least as high as the customer care it provides with respect to similar content
on the unbranded iVillage Sites. AT&T will provide billing, network care and
access-related customer care in connection with iVillage Online. The parties
shall agree on an interface agreement for providing "seamless" customer support
and problem resolution for subscribers to iVillage Online, including a mechanism
for transferring subscribers between AT&T and iVillage.
1.5 Targeting and Marketing. Subject to iVillage's privacy policy,
iVillage will actively market the Promoted AT&T Services on the iVillage Sites
during the Term using a variety of targeting tools, including without limitation
Domain Name Targeting and category specific placements; in each case with a goal
to maximize take rates and ensure an optimal product mix (as mutually agreed by
the parties) for the Promoted AT&T Services.
1.6 Change Requests. The Anchor Positions set forth in Exhibit B may
not be changed without AT&T's prior written consent, which shall not be
unreasonably denied (it shall not be unreasonable for AT&T to deny such consent
if it believes the change will reduce the value of the exposure to AT&T's
services). In the event of a redesign of the iVillage Sites, iVillage will
provide AT&T with similar placement in any successor or equivalent content areas
provided the change does not reduce the value of the exposure to AT&T's
services. AT&T and iVillage will mutually define and may verbally agree on the
locations of the Promotional
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Positions set forth in Exhibit B; provided that (a) all such placements conform
to AT&T's Marcom Guidelines as provided to iVillage (b) if AT&T objects to any
placement position, iVillage shall, within 3 business days notice from AT&T,
remove any AT&T Mark (and any related material referencing an AT&T product or
service) from such position and provide an alternative position acceptable to
AT&T, provided that if AT&T designates such a change as "Urgent", iVillage shall
remove the AT&T Mark (and any related material referencing an AT&T product or
service) within 8 hours of AT&T's request. AT&T may, from time to time,
reasonably request that iVillage update the AT&T Marks and for other trade dress
on the Co-Branded Communications Center, the Co-Branded AnyWho or other
previously AT&T branded areas on the iVillage Sites, in which case iVillage
shall make such changes to the AT&T Marks or trade dress within 3 days of
receipt of any update's from AT&T. The parties shall also cooperate with respect
to reasonable changes and updates to the layout, general image, formats and
appearance (i.e., the "look and feel") of the Co-Branded Communications Center,
the Co-Branded AnyWho and other AT&T branded areas of the iVillage Sites;
iVillage agrees to make any changes to such "look and feel" reasonably requested
by AT&T in accordance with a production schedule mutually determined by the
parties, which the parties agree shall mean that changes will be implemented
within 10 days of AT&T's written request.
1.7 AIC Services. iVillage and AT&T shall participate in a trial for
AIC Services in accordance with the AIC Trial Plan attached as Exhibit C. The
AIC Trial Plan will include items such as AT&T's and iVillage's deliverables for
the AIC Trial, the schedule for the AIC Trial and how the parties will staff the
AIC Trial.
1.8 Other Services. iVillage shall, in accordance with this Agreement,
promote any AT&T Telecommunication Services not listed on Exhibit A as AT&T
makes them available and provides them to iVillage with reasonable advance
notice, provided the parties can mutually agree upon a bounty. During the Term,
AT&T will also have the right to buy additional impressions for the Promoted
AT&T Services or other products and services at no more than a $[*] CPM (capped
at [*]% of available inventory).
1.9 Control over Products & Services. Except as expressly provided
below in this Section 1 and Section 2, each party shall have complete control
over the timing, ramp-up, type, pricing, continuation or termination and all
other aspects of its offers for its respective products or services.
(a) Without AT&T's prior written consent, iVillage shall not charge
users any fees for any of the Promoted AT&T Services, for any of the AIC
Services or for accessing or using any AT&T-branded area of the iVillage Sites.
(b) For as long as AT&T offers its "One Rate Online" calling plan (i.e.
under the terms of its existing tariff), iVillage registered members that
subscribe to AT&T One Rate Online will be eligible to pay 9 cents per minute and
no monthly fee (or such other rate as determined by any change to such tariff)
on all direct dialed state-to-state residential long distance calls. iVillage
shall clearly and prominently state on all promotional and other materials on
the iVillage Sites relating to the 9 cent One Rate Online offer that the 9 cent
offer is made available by iVillage to registered members of iVillage only.
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1.10 Each party shall appoint and maintain a designated representative
to manage the provision and updating of Promoted AT&T Services on the iVillage
Sites. Each party will provide the other with access (which may be by beeper) to
the other's technical support for "emergency purposes" twenty-four (24) hours
per day, three hundred sixty-five (365) days per year during the Term of this
Agreement.
1.11 AT&T Promotions. (a) AT&T will display a persistent, above the
fold, text link for the iVillage Site on the standard version of the consumer
AT&T WorldNet Service (i.e., www.att.net) for [*] during the Term. The size and
form of the teaser link shall be mutually agreed and shall conform with AT&T
then-standard requirements for teaser links.
(b) During the Term, AT&T will promote and market iVillage through the
inclusion of iVillage marks in at least [*] dollars (measured using AT&T's
standard accounting practices and average CPMs) worth of AT&T television, mass
media marketing (at least [*] dollars of which will be done in the first
Contract Year); provided that AT&T does such television mass media marketing for
the AT&T WorldNet Service. If AT&T does not do such television mass media for
AT&T WorldNet Service, such [*] dollar commitment shall be fulfilled in other
mass media (e.g., radio, print and TV). The specific form of the advertisement
shall be jointly worked out by the parties, provided that the final
determination as to the media buy shall be made by AT&T.
2. EXCLUSIVITY
2.1 Except as expressly stated in Section 2, this Agreement is
non-exclusive and does not prohibit either party from entering into similar
agreements with third parties involving identical, similar, or different
products, services, and technologies.
2.2 During the Term, (A) AT&T will be the exclusive provider of
Telecommunication Services (as defined in Exhibit E) on iVillage Sites and
iVillage will not itself provide or enter into any agreement with any third
party to provide any Telecommunications Services and (B) no page of the iVillage
Sites that contains any AT&T Anchor Position or Promotional Position, as set
forth in the Promotion Plan, or any other page that contains any AT&T Mark,
shall contain any marketing, advertising or other promotion for any
Telecommunication Service other than a Telecommunication Service offered by
AT&T, except that: [*].
2.3 During the Term, AT&T will be the exclusive white page directory
provider (i.e., a directory that includes residential, business, governmental
listings of phone numbers, addresses, email addressees, etc,) on the iVillage
Sites.
2.4 If and when AT&T makes such a service available, AT&T will be the
exclusive yellow page directory provider (i.e., a directory primarily devoted to
business listings) on the iVillage Sites; [*].
2.5 Notwithstanding anything in this Agreement to the contrary,
iVillage may provide custom online content aggregation, hosting services and/or
branded versions of iVillage's services to third parties (including providers of
Telecommunication Services) ("Content Outsourcing"), subject to the following:
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In consultation with AT&T, iVillage will offer the Promoted AT&T Services and
the AIC Services under this Agreement to all web sites that involve a Content
Outsourcing arrangement in existence at the execution of this Agreement or
created by iVillage during the term of this Agreement; provided that if such
third party objects to using or promoting AT&T's services on its sites, iVillage
shall have no obligation to include any AT&T products and services on their web
sites to the extent that such third party objects to their inclusion. AT&T shall
have the right to approve or disapprove, on a case by case basis, the extension
of any AT&T offers for products or services as part of any such Content
Outsourcing arrangement. AT&T shall respond to iVillage's request for such
approval within 10 business days.
3. FINANCIAL MATTERS
3.1 In General. Except as this Section 3 provides, neither party is
obligated to compensate the other in any way in connection with this Agreement.
Each party will fully fund and pay for all of the costs and expenses it incurs
in connection this Agreement, including the costs of providing its deliverables
as specified in the Promotion Plan and the AIC Trial Plan.
3.2 Minimum Payments. During each Contract Year, subject to Section 3.4
(Shortfalls) and Section 10 (Termination), AT&T will make "Quarterly Minimum
Payments" to iVillage equal as follows:
(a) in the first Contract Year, $[*] (1/4 of an "Annual Minimum" of
$[*]) as a non-refundable, minimum payment for iVillage's performance under this
Agreement;
(b) in the second Contract Year,
(i) if iVillage's Market Reach is less than [*]%. $[*] (1/4 of an
"Annual Minimum" of $[*]) as a non-refundable, minimum payment for iVillage's
performance under this Agreement; and
(ii) if iVillage's Market Reach has increased to [*]% or greater,
$[*] (1/4 of an "Annual Minimum" of $[*]) as a non-refundable, minimum payment
for iVillage's performance under this Agreement.
Where "Market Reach" means the percentage of unduplicated World Wide Web users
that visit iVillage at least once per month "from home" and excludes the reach
that iVillage receives from within AOL or any other proprietary online service,
as measured by Media Metrix as of the date that is 45 days proceeding the
beginning of the second Contract Year (or if Media Metrics no longer provides
such statistics, some other mutually agreed upon industry leading traffic
measurement authority).
3.3 Bounties. As full compensation for each Delivered Customer who
signs up for the Promoted AT&T Services on the iVillage Sites, iVillage will
accrue quarterly bounties ("Accrued Quarterly Bounties") for Delivered Customers
in accordance with the bounty schedule in Exhibit A. iVillage will "earn out"
the Quarterly Minimum Payments against the Accrued Quarterly Bounties as
follows: At the end of each Contract Quarter, if the total Accrued Quarterly
Bounties in such Contract Year are greater than the Quarterly Minimum Payments
to date in such Contract Year, AT&T will pay iVillage the difference between the
Accrued
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Quarterly Bounties due in such Contract Quarter and the Quarterly Minimum
Payment for such Contract Quarter. However, if the Accrued Quarterly Bounties to
date in such Contract Year are less than the Quarterly Minimum Payments to date
in such Contract Year, no payment shall be due iVillage for any bounties in such
Contract Quarter.
3.4 Shortfalls. (a) If at the end of the first Contract Year, iVillage
has not provided AT&T with a minimum of [*] Clickthrus (as audited by a third
party in accordance with Section 3.7) during the first Contract Year ("Clickthru
Shortfall") then iVillage will continue to perform under this Agreement (without
any change to Anchor Positions, Guaranteed Impression Levels, etc.) during a
"Make Good Period" not to exceed 3 months, provided AT&T has not exercised its
termination right under Section 10.3. AT&T shall have no obligation to make any
Quarterly Minimum Payments or other payments during the Make Good Period unless
and until the Clickthru Shortfall is covered. If AT&T does not exercise its
termination right under Section 10.3, regardless of whether or not the Clickthru
Shortfall has been covered in such 3 month period Make Good Period, AT&T will
resume making Quarterly Minimum Payments as of the next following Contract
Quarter.
(b) If there is a Clickthru Shortfall at the end of the second Contract
Year (meaning that iVillage has not delivered at least [*] Clickthrus in the
case that the Annual Minimum for the second Contract Year is $[*]; and [*]
Clickthrus during the second Contract Year in the case that the Annual Minimum
for the second Contract Year is $[*]), iVillage shall have the option of either
(a) requesting payment of the final Quarterly Minimum Payment, pro rated to
cover the shortfall or (b) providing a make good period, for up to 6 months,
and, at any time during such 6 month period, requesting payment of the final pro
rated Quarterly Minimum Payment. iVillage will continue during any such make
good period to perform under this Agreement (without any change to Anchor
Positions, Guaranteed Impression Levels, etc.)
3.5 Advertising. iVillage shall pay AT&T an amount equal to [*]%
multiplied by the Net Advertising Revenues generated on each page of the
Co-Branded AnyWho. iVillage will furnish AT&T with a current version of
iVillage's advertising rate card for each such iVillage Site and the parties
shall mutually agree on financial terms of the rate card (and any changes
thereto) for the Co-Branded AnyWho, from which iVillage will not, on average for
any month, deviate by more than [*]% without AT&T's approval.
3.6 Payments. Quarterly Minimum Payments will be due 45 days following
the end of the applicable Contract Quarter and bounty payments in excess of the
Quarterly Minimum Payment will be due within 45 days after the end of the
applicable Contract Quarter, provided that (a) AT&T will pay iVillage $[*]
within two weeks of the Effective Date and (b) the final Quarterly Minimum
Payment in the second Contract Year, which will be due 45 days after the date
determined pursuant to the last sentence in Section 3.4 or pursuant to 10.6, as
the case may be. iVillage's payments to AT&T for advertising revenues on the
Co-Branded AnyWho will be due within 45 days after the applicable Contract
Quarter.
3.7 Reports.
3.7.1 AT&T Reports. AT&T will provide iVillage with monthly reports
containing the following: (1) the number of Delivered Customers during such
month for each
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Promoted AT&T Service (2) the bounties due iVillage for such Delivered
Customers, (3) information concerning the results of the AIC Trial, as set forth
in the AIC Trial Plan.
3.7.2 iVillage Reports. iVillage will provide AT&T with monthly
reports containing the following: (1) the number of impressions and the amount
of gross and Net Advertising Revenues on a per ad basis for advertisements on
all pages of the Co-Branded AnyWho, the % of Unsold Inventory on the Co-Branded
AnyWho, and the number of impressions (on a per ad basis) of advertisements
placed in all Unsold Inventory allocated to AT&T, (2) the locations, number of
Page Views and Clickthru rates for all Anchor Positions and Promotional
Positions on the iVillage Sites, and (3) reports concerning the results of the
AIC Trial on the iVillage Sites, as set forth in the AIC Trial Plan.
3.7.3 Third Party Reports. All user-viewed impressions and
Clickthrus related to AT&T products and services on the iVillage Sites will be
audited on a monthly basis by Coopers & Lybrand IPRO, Netcount, or Interse, as
the parties shall agree, or by another third party auditing firm to be mutually
approved by the parties, at iVillage's sole expense, and iVillage shall furnish
copies of such reports to AT&T within 5 days following receipt by iVillage. Such
reports shall include the total number of viewed impressions and Clickthrus of
each individual advertisement that appears during the monthly reporting period
on each page of the iVillage Sites and other Information as AT&T shall
reasonably require.
3.8 Taxes. Each party will bear all taxes for which it is legally
liable in connection with this Agreement. If one party is obligated to collect
or remit any taxes for which the other is liable, the party that is liable will
reimburse the other party upon request and submission of reasonable proof that
the taxes were paid.
4. INTERNATIONAL AFFILIATES
iVillage shall use commercially reasonable efforts to (provided that it fits in
with iVillage's strategic objectives for its affiliates operating outside of the
United States) promote on its Web sites outside the United States any
Telecommunication Services that AT&T offers in any such country on terms
substantially similar to the terms of this Agreement; provided that iVillage
shall, upon 90 days' notice to AT&T, have no such obligation in the event that
the AT&T offer in such country is not competitive (taking into account price and
quality) with a local offer of a third party.
5. PUBLICITY; BRANDING
5.1 AT&T and iVillage will communicate and cooperate with respect to
advertising and publicity regarding this Agreement and their relationship, and
will obtain the written consent of the other in each instance before publishing
or releasing any advertising or publicity.
5.2 If iVillage is required under applicable securities laws to
publicly disclose the fact that iVillage has signed this Agreement, iVillage
shall provide AT&T with prompt written notice so that AT&T can work with
iVillage to limit the disclosure to the greatest extent possible consistent with
legal obligations.
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5.3 The parties agree that all AT&T's Telecommunication Services
offered an or through the iVillage Sites shall be branded using the AT&T Marks
as mutually agreed by the parties, provided that with respect to the trial of
the AIC Services, AT&T may determine, in its discretion, to offer one or more of
services on an unbranded or private label basis.
6. USER CONSIDERATIONS
6.1 Editorial Standards. The content at the iVillage Sites shall at all
times during the Term conform with the Editorial Standards (attached as Exhibit
D).
6.2 Minimum Specifications. iVillage's server on which the AT&T
Communications Center, iVillage Online, and the interface page of the Co-Branded
AnyWho will be hosted will have download times at least as fast as, and
availability rates at least as high as, other "key areas" on the iVillage Sites.
AT&T's servers on which the Co-Branded AnyWho (or the Yellow Pages, if and when
available under Section 2.5) will be hosted will, on average, have download
times at least as fast as, and availability rates at least as high as, other
comparable areas (e.g., search results pages) on the iVillage Sites.
6.3 Customer Care. iVillage shall use commercially reasonable efforts
to perform customer care obligations as promptly as possible and, at a minimum,
within the following parameters: (a) forward any electronic mail inquiries
regarding any AT&T Telecommunication Services (additional requirements for the
AIC Services, which is covered in the AIC Trial Plan) to AT&T as soon as
possible (and within 24-hour target turn-around time) following receipt; (b)
electronically notify AT&T of any problems preventing users from linking to
AT&T's online registration site as soon as possible (by putting AT&T on a
"priority list" of contacts maintained by its web hosting operators) of
iVillage's becoming aware of its occurrence (except for the AIC Services, which
will be covered in the AIC Trial Plan); (d) give AT&T at least 24 hours notice
of any scheduled down time of any area of the iVillage Sites that will affect
AT&T products and services, and (d) serve as Tier 1 Customer Support for the AIC
Services as provided in the AIC Trial Plan. "Tier 1 Customer Support" means
acting as the initial point of contact with the customers using AIC Services on
the iVillage Sites and referring user questions, as appropriate, to AT&T by
either email or through a FAQ link.
6.4 Security Standards. iVillage shall provide secure connections,
Secure Sockets Layer ("SSL"), to the iVillage Sites for the transfer of
information in connection with any electronic transaction involving any of
AT&T's Telecommunication Services or in connection with the trial of the AIC
Services. iVillage shall provide and maintain the necessary hardware and
software to support SSL, version 2, at a minimum, at its sole expense. iVillage
agrees to store all user-identifiable information off-line either behind a
secure firewall or on a system that is not directly or indirectly connected to
the Internet.
6.5 User Privacy. (a) Without the customer's affirmative and specific
consent to the particular use (and without limiting any of rights under Section
6.6), iVillage agrees that it will not sell, lease, barter, give away or
disclose to third parties any customer-identifiable information concerning users
on the iVillage Sites, including without limitation name, telephone number,
e-mail address, residential address, office address and/or fax number.
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(b) iVillage further agrees that it will not send unsolicited e-mail
messages or other unsolicited communications to users that reference any AT&T
mark or any AT&T Telecommunications Service; provided that iVillage may send
e-mail to users so long as such users have been given the option (and continue
to have the option at all times) to elect not to receive such e-mail and in the
case of e-mail referencing AT&T or an AT&T Mark, AT&T has approved such email in
advance, which approval shall not be unreasonably withheld or delayed.
6.6 User Data. (a) All data or other information collected by iVillage
from users of the iVillage Sites independent of the relationships, activities or
offers covered by this Agreement and without referencing or solicited in
connection with any AT&T Mark or any AT&T product or service ("iVillage User
Data"), is the proprietary and Confidential Information of iVillage; provided
that, during the Term, iVillage agrees it shall not use any iVillage User Data
in connection with the marketing, promotion, or distribution of any
Telecommunication Services, except Telecommunications Services offered by AT&T
and Unavailable Telecommunication Services (as defined in Section 2).
(b) All data or other information, no matter how collected, concerning
any of AT&T's products or services, concerning users' use of or interest in any
AT&T product or service, or derived from or obtained during the use, promotion,
marketing or other activities related to any AT&T's products and services
(including, without limitation, the Promoted AT&T Services and the AIC Trial),
whether such data or information is obtained on the iVillage Sites or otherwise,
is the proprietary and Confidential Information of AT&T, including, without
limitation, information (individually, in the aggregate, or otherwise),
identifying AT&T customers, their usage patterns, their product preferences,
etc. ("AT&T User Data"). iVillage may not use any AT&T User Data, except in
connection with the promotion of AT&T's products and services in accordance with
this Agreement.
7. CONFIDENTIALITY
The parties agree and acknowledge that, as a result of negotiating, entering
into and performing this Agreement, each party has and will have access to
certain of the other party's Confidential Information. Each party also
understands and agrees that misuse and/or disclosure of that information could
adversely affect the other party's business. Accordingly, the parties agree that
each party shall use and reproduce the other party's Confidential Information
only for purposes of this Agreement and only to the extent necessary for such
purpose and shall restrict disclosure of the other party's Confidential
Information to its employees, consultants or independent contractors with a need
to know and shall not disclose the other party's Confidential Information to any
third party without the prior written approval of the other party. "Consultants"
includes legal counsel, accountants, banks and other financing sources and their
advisors who are hired by a party under confidentiality obligations at least as
stringent as those set forth in this Agreement. Notwithstanding the foregoing,
it shall not be a breach of this Agreement for either party to disclose
Confidential Information of the other party if compelled to do so under law, in
a judicial or other governmental investigation or proceeding, provided the other
party has been given prior notice to permit such other party a reasonable
opportunity to object to the judicial or governmental requirement to disclose.
The provisions of this Section shall apply for the duration of the Term of this
Agreement and for three (3) years after the expiration or termination of this
Agreement.
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8. LICENSE GRANTS
8.1 AT&T Marks. AT&T hereby grants to iVillage during the Term a
worldwide, nonexclusive. nontransferable, nonassignable right to use the AT&T
Marks on the iVillage Sites solely in accordance with this Agreement. All such
use of the AT&T Marks shall inure to the benefit of AT&T. Nothing in this
Agreement shall create any rights, title or interest for iVillage in the AT&T
Marks (except to the extent provided in the first sentence of this Section) or
in any of AT&T's other names, trademarks, service marks, design marks, symbols
and for other indicia of origin and no use of such will be made by iVillage for
any purpose without the prior written approval of AT&T. iVillage shall use the
AT&T Marks in accordance with such reasonable guidelines as AT&T may provide to
iVillage from time to time. iVillage agrees to cooperate with AT&T in
facilitating AT&T's monitoring and control of the use of the AT&T Marks, and to
supply AT&T with samples of use of such icons upon request. Except as set forth
in the first sentence of this Section, all uses of the AT&T Marks shall be
subject to AT&T's prior approval. iVillage shall not modify any aspect of any
AT&T Mark as provided by AT&T to iVillage without AT&T's prior written approval.
iVillage shall not use the letters "att", any of AT&T's other names or marks, or
any name or mark confusingly similar to an AT&T name or mark as pad of any
domain name (e.g., iVillage will not use a domain name such as
"att.iVillage.com", but may use, during the Term of this Agreement, a URL such
as "iVillage.com/att" with AT&T's prior consent.).
8.2 iVillage Marks. iVillage hereby grants to AT&T during the Term a
worldwide, nonexclusive, nontransferable, nonassignable right to use the
iVillage Marks on promotional and other materials in accordance with this
Agreement and as mutually agreed by the parties. All such use of the iVillage
Marks shall inure to the benefit of iVillage. Nothing in this Agreement shall
create any rights, title or interest for AT&T in the iVillage Marks (except to
the extent provided in the first sentence of this Section) or in any of
iVillage's other names, trademarks, service marks, design marks, symbols and/or
other indicia of origin and no use of such will be made by AT&T for any purpose
without the prior written approval of iVillage. AT&T shall use the iVillage
Marks in accordance with such reasonable guidelines as iVillage may provide to
AT&T from time to time. AT&T agrees to cooperate with iVillage in facilitating
iVillage's monitoring and control of the use of the iVillage Marks, and to
supply iVillage with samples of use of such icons upon request. Except as set
forth in the first sentence of this Section, all uses of the iVillage Marks
shall be subject to iVillage's prior approval. AT&T shall not modify any aspect
of any iVillage Mark as provided by iVillage to AT&T without iVillage's prior
written approval. AT&T shall not use the word "iVillage", any of iVillage's
other names or marks, or any name or mark confusingly similar to an iVillage
name or mark as part of any domain name (e.g., AT&T will not use a domain name
such as "iVillage.att.com" but may use, during the Term of this Agreement, a URL
such as "att.com/iVillage" with iVillage's prior consent).
8.3 AT&T Licensed I.P. AT&T grants to iVillage a personal, revocable,
nonexclusive, nontransferable right to use the AT&T Licensed I.P. solely under
the terms and conditions stated in this Agreement, solely for the purpose of
conducting and only for so long as the AIC Trial and solely in accordance with
documentation for the AT&T Licensed I.P. and in accordance with the AIC Trial
Plan as set forth in Exhibit C ("Permitted Uses"). iVillage may make copies of
modified or unmodified AT&T Licensed I.P. only to the extent necessary ,to
support the Permitted Uses, but not in any event more than 5 copies. iVillage
shall not make any
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other use of, commercial or otherwise, market, sell, or otherwise distribute, in
any form, any AT&T Licensed I.P. iVillage agrees that the licenses received from
AT&T for the AT&T Licensed I.P. may not be used to design or develop products
for itself or any third party or to market and distribute any products designed
or developed by any third party. iVillage may use AT&T Licensed I.P., and all
copies thereof only at the location or locations specified in the AIC Trial
Plan. iVillage may not assign. sublease, sublicense, lease, or in any other way
transfer any rights under any AT&T Licensed I.P. to any third party.
8.4 Except as expressly granted in this Section, no license or right is
granted to either party, under the Intellectual Property of the other party,
whether directly or by implication, estoppel, or otherwise.
9. INTELLECTUAL PROPERTY
9.1 As between the parties, each party shall exclusively own all
Intellectual Property that it developed or acquired before the Effective Date
and all such Intellectual Property shall remain the sole property of that party.
AT&T shall own any Intellectual Property, no matter how developed (whether
independently or jointly with AT&T or with some other third party) that is
derivative of the AIC Services or the AT&T Licensed I.P. (an "AIC Development").
9.2 Without AT&T's written consent, iVillage shall not use, or disclose
to any third party, any AIC Development except in connection with the AIC
Services in accordance with this Agreement.
9.3 iVillage will reproduce all copyright, proprietary information
notices, and other notices appearing in AT&T Licensed I.P. on all copies
iVillage makes of AT&T Licensed I.P. under Section 8.3. iVillage shall not
disassemble, decompile, or reverse engineer any AT&T Licensed I.P. or other of
AT&T's Intellectual Property.
9.4 iVillage may use third party consultants or subcontractors
("Subcontractor") to perform development work as provided in the AIC Trial Plan,
provided iVillage (1) informs AT&T as to the identity of such Subcontractor, (2)
obtains a written confidentiality agreement from the Subcontractor that contains
conditions and obligations no less restrictive that those set forth in this
Agreement and which is directly enforceable by AT&T, (3) ensures that its legal
relationship with the Subcontractors allows iVillage to meet its obligations in
this Agreement, and (4) iVillage remains directly liable to AT&T for the
obligations of such Subcontractor.
10. TERM AND TERMINATION
10.1 The term of this Agreement (the "Term") shall begin on the
Effective Date and end 2 calendar years following the Deployment Date, unless
terminated earlier pursuant to this Section 10 or extended in writing by
authorized representatives of the parties or, at AT&T's discretion, pursuant to
the last sentence of Section 3.4. The "Deployment Date" means the date that one
or more of the Anchor Positions and Promotional Positions set forth in Exhibit B
or in Exhibit C are first made available on the Service, which the parties
currently project will be November, 1998 or such other date as mutually agreed
upon by the parties. Either party shall have the right to delay the Deployment
Date by up to 45 days upon 10 days notice to the other party. The Deployment
Date will be memorialized in a written document signed by both parties.
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10.2 If either party has materially breached this Agreement, the other
party may terminate this Agreement 30 days after giving a written notice to the
breaching party that describes the breach in reasonable detail, unless the
breaching party has cured the breach before the end of that 30 day period.
Without limitation, it shall be a material breach if iVillage fails to deliver
the agreed upon number of impressions at the end of each Contract Quarter.
Either party may terminate this Agreement immediately if the other party ceases
normal operations or becomes Insolvent.
10.3 AT&T shall have the right to terminate this Agreement upon notice
to iVillage at least 15 days prior to the end of the first Contract Year if
there is a Clickthru Shortfall under Section 3.4 as measured using the first [*]
months of the Contract Year (i.e., if iVillage has delivered less than [*]
Clickthrus during the first [*] months).
10.4 AT&T shall have the right to terminate this Agreement at any time
during the Term with 30 days' written notice if AT&T ceases or substantially
ceases its ordering process for its products and services via the Internet.
10.5 AT&T shall have the right to terminate this Agreement at any time
during the Term with 30 days' written notice if iVillage is subject to a Change
in Control by an entity whose "primary business" is a provider of
Telecommunication Services or an Affiliate of an entity whose primary business
is a provider of Telecommunication Services.
10.6 If AT&T terminates this Agreement pursuant to Section 10.2,
Section 10.4, or Section 10.5, then AT&T shall be relieved of any obligation to
pay any Quarterly Minimum Payments as of the date of such breach, change in
control or notice of termination as the case may be and any partial Quarterly
Minimum Payments accrued prior to such date shall be pro rated and paid in
accordance with Section 3.6. in all other cases of termination, each party shall
be responsible to the other party for amounts accruing prior to the effective
date of any termination and such amounts shall be paid in accordance with
Section 3.
10.7 If at any time AT&T believes that the AIC Trial is no longer
feasible because of (i) substantial changes in the market for the AIC Services,
or (ii) substantial technical issues that cannot be resolved within the
timeframes contemplated in the AIC Trial Plan schedule, then AT&T may terminate
the AIC Trial, but not the remainder of this Agreement, with no further
liability or obligation to the other, on written notice to iVillage after (a)
giving iVillage a written notice that specifies in reasonable detail the reasons
for its beliefs, and (b) at iVillage's request, negotiating in good faith for a
period of up to 15 days to continue the AIC Trial on the same or different
terms, although the terminating party is not obligated to agree to any such
continuation.
10.8 If this Agreement terminates for any reason or if iVillage no
longer makes the AIC Services available on the iVillage Sites, iVillage will, at
AT&T's option and within 10 working days following termination or at AT&T's
request, either return to AT&T or destroy the original and all copies of AT&T
Licensed I.P. and any of AT&T's proprietary or Confidential Information, and
certify to AT&T that they have been destroyed. The licenses granted in Section
8.3 of this Agreement shall immediately terminate if the AIC Services are no
longer made available on the iVillage Sites.
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10.9 Termination by either party under this Section 10 does not waive
any rights or remedies it may have under this Agreement.
10.10 Provisions of this Agreement that by their nature continue beyond
the expiration or termination of this Agreement, and those provisions that are
expressly stated to survive termination, shall survive the termination or
expiration of this Agreement, including, without limitation, Section 7
(Confidentiality), Section 9 (Intellectual Property), Section 11 (for the
purposes of Section 12.4 and to the extent of any breach of a representation or
warranty prior to the effective date of termination), Section 12 (Risk
Allocation), Section 13 (Notices), Section 15.1 (Disputes).
11. REPRESENTATIONS AND WARRANTIES
11.1 Each party represents and warrants that: (a) it has the right to
enter into this Agreement and to grant the rights and licenses granted herein;
and (b) it shall comply with all applicable laws, statutes, ordinances, rules
and regulations of each county, state and city or other political entity with
respect to the provision of the Telecommunication Services, in the case of AT&T,
and the products and services on the iVillage Sites in the case of iVillage.
11.2 AT&T represents that the AT&T Marks and any other content provided
to iVillage by AT&T for use under this Agreement does not infringe or violate
any third party's copyright, trade secret, local, state or federal U.S.
trademark, right of publicity or right of privacy, or contain any defamatory
content.
11.3 iVillage represents that the iVillage Marks and any other content
provided to AT&T by iVillage for use under this Agreement does not infringe or
violate any third party's copyright, trade secret, local, state or federal U.S.
trademark, right of publicity or right of privacy, or contain any defamatory
content.
12. RISK ALLOCATION
12.1 Trial Nature of AIC Services
iVillage acknowledges that AT&T may in its discretion and without
liability of any kind to iVillage elect not to make one or all of the AIC
Services commercially available, or may delay the commercial availability of the
AIC Services for an indeterminate period of time, or may make the AIC Services
commercially available with features and functions that are substantially
different than the features and functions of the AIC Services offered in
connection with the AIC Trial.
12.2 Disclaimer of Representations and Warranties
EACH PARTY ACKNOWLEDGES THAT THE AIC TRIAL IS EXPERIMENTAL IN NATURE
AND IS CONDUCTED ON AN "AS IS" BASIS. EXCEPT AS EXPRESSLY SPECIFIED IN THIS
AGREEMENT, EACH PARTY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS AND
IMPLIED, CONCERNING OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, AIC
TRIAL OR THE TECHNOLOGY OR OTHER HARDWARE, SOFTWARE, SERVICES, OR INFORMATION
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PROVIDED OR USED IN CONNECTION THEREWITH, INCLUDING ANY REPRESENTATIONS OR
WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
THAT THE USE OF THE TECHNOLOGY OR OTHER HARDWARE, SOFTWARE, SERVICES, OR
INFORMATION WILL NOT INFRINGE ANY INTELLECTUAL PROPERTY RIGHT OF A THIRD PARTY,
OR THAT ANY HARDWARE, SOFTWARE, AND SERVICES WILL PERFORM IN THE MANNER EXPECTED
OR WITHOUT INTERRUPTION OR ERROR. This disclaimer does not affect the
indemnification obligations under Section 12.4.
12.3 Limitations of Liability
Each party's liability to the other for any loss, cost, claim, injury,
liability, or expense, including reasonable attorney's fees, relating to or
arising out of any negligent act or omission in its performance of or under the
terms of this Agreement shall be limited to the amount of direct damages
incurred up to an aggregate of US$[*]; provided that with respect to breaches of
Section 8 (Licenses), Section 9 (Intellectual Property), Section 7
(Confidentiality) and 12.4 (Third Party Claims) a cap of US [*] shall apply. IN
ANY EVENT, NEITHER AT&T NOR IVILLAGE WILL BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, INCLUDING LOSS OF
PROFITS OR REVENUES OR LOSS OF PROSPECTIVE BUSINESS ADVANTAGE, REGARDLESS OF
WHETHER THAT LIABILITY ARISES IN CONTRACT, TORT, STRICT LIABILITY, BREACH OF
WARRANTY, OR OTHERWISE.
12.4 Third Party Claims
Each party ("Indemnitor") will defend, at its expense, and will pay the
cost and Damages of a settlement or award resulting from any claim brought
against the other ("Respondent) by any third party in connection with (a) a
breach of representation or a warranty, (b) an independent business relationship
that Indemnitor may have with the claimant, or (c) infringement of any United
States patent, trademark, copyright or trade secret that relates solely to (i) a
component of an AIC Service performed by the Indemnitor pursuant to this
Agreement, (ii) Intellectual Property received from the Indemnitor under this
Agreement, or (iii) the Indemnitor's web sites or the content thereon covered
under this Agreement; except where, in each case (i) through (iii), the claim
arises out of or results from modifications made by, or combinations with
content, products or services provided by, Respondent or others that are not
authorized in writing by the Indemnitor, or, use of the content, AIC Service or
Intellectual Property in violation of this Agreement. In each case (a) through
(c), the Respondent shall (i) promptly notify the Indemnitor in writing of the
claim; (ii) give Indemnitor all requested information that the Respondent has
concerning the claim; (iii) reasonably cooperate with and assist the Indemnitor
in defending the claim, at the Indemnitor's expense, and (iv) give the
Indemnitor sole authority to defend or settle the claim (however, Indemnitor
will not have authority to obligate the Respondent in any way or to compromise
any of Respondent's rights in connection with the defense or settlement).
Respondent may participate in the defense of the claim at its expense through
counsel of its choosing.
12.5 Advertising Insertion Orders
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The indemnification and warranty provisions of the advertising
insertion order form agreement to be used by iVillage in connection with
advertising placed on the Co-Branded AnyWho or any other co-branded page of the
iVillage Sites (which shall not include the Promotional Positions or other
standard banner ads), for which AT&T receives compensation for ads, shall
benefit AT&T.
12.6 Limitation of Actions
No action or proceeding against a party may be begun more than one year
after the termination of this Agreement. This Section will not apply to disputes
under Section 7 (Confidentiality), Section 8 (Licenses), Section 9 (Intellectual
Property), or Section 12.4 (Third Party Claims).
12.7 Force Majeure
Neither party will be liable to the other for delays in the performance
of this Agreement if the delay is caused by shortage of labor, strike, default
or failure of suppliers, riot, war, government action, law, or regulation, act
of God, fire, flood, or other cause beyond the party's reasonable control.
13. NOTICES AND REQUESTS
All notices and requests required under this Agreement will be in writing and
will reference this Agreement. Notice will be deemed given upon delivery or
receipt of registered or certified mail, postage prepaid, return receipt
requested, to the addresses listed below:
Notices to iVillage will be sent to:
iVillage, lnc., 170 Fifth Avenue, New York, NY 10010,
Vice President Finances/Legal Affairs.
Notices to AT&T will be sent to:
AT&T Corp.: 295 N. Maple Avenue; Basking Ridge, N.J.
07920; Attn: Marlene Beeler (or such other individual as
AT&T may designate from time to time), AT&T Interactive
Group; with a copy to the "General Attorney, AT&T
Interactive Group," at the same address.
14. ASSIGNMENT
14.1 No Assignment. Except as expressly provided in this Section,
neither party may assign this Agreement without the prior written consent of the
other party; except that no such consent will be required with a sale of all, or
substantially all, of such party's assets, provided that in the case of
iVillage, such sale does not involve an entity whose "primary business" is a
provider of Telecommunication Services or whose Affiliate is an entity whose
"primary business" is a provider of Telecommunication Services. Such consent
shall be in the sole discretion of the party requested to give consent. Any
attempt to sublicense, assign or transfer
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(except as expressly provided herein) any of the rights, duties or obligations
under this Agreement in derogation hereof shall be null and void.
14.2 AT&T Restructuring. By the provision of notice in accordance with
this Agreement, AT&T shall have the right to assign this Agreement and to assign
its rights and delegate its obligations and liabilities under this Agreement,
either in whole or in part (an "Assignment") to (i) any entity that is, or that
was immediately preceding such Assignment: a current or former subsidiary,
business unit, or division of AT&T; or (ii) an entity in which AT&T has an
ownership interest and that is licensed to promote and market the Promoted AT&T
Services using the AT&T brand. The notice of Assignment shall state the
effective date thereof. Upon the effective date and to the extent of the
Assignment, AT&T shall be released and discharged from all obligations and
liabilities under this Agreement. Such Assignment, release and discharge shall
be complete and shall not be altered by the termination of the affiliation
between AT&T and the entity assigned rights or delegated obligations and
liabilities under this Agreement.
15. GENERAL
15.1 This Agreement will be governed by the laws of the State of New
York, regardless of what laws might otherwise apply under applicable choice of
law rules. In the event of a dispute arising out of or relating to any matter
under this Agreement that cannot be resolved by the parties, the dispute shall
be referred to a Vice President of AT&T and an Officer of iVillage, who will
attempt to resolve the dispute within 10 business days of such referral date. If
such officers are unable to resolve the dispute within such 10 business day
period, then either party may immediately seek to resolve the dispute pursuant
to arbitration as set forth below. All disputes hereunder which cannot be
amicably resolved by the parties as described above, except those solely
concerned with AT&T's Intellectual Property or iVillage's Intellectual Property,
shall be settled exclusively by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in New York City, New York and shall be conducted by a
single arbitrator who shall be a lawyer familiar with Internet business. The
decision of the arbitrator shall be final and binding upon the parties and may
be enforced by either party in any court of competent jurisdiction. Each party
shall bear the cost of preparing and presenting its case. The costs of the
arbitration, including the fees and expenses of the arbitrator, will be shared
equally by the parties unless the award otherwise provides. This provision shall
not be construed to prohibit either party from seeking preliminary or permanent
injunctive relief in any court of competent jurisdiction to the extent not
prohibited by this Agreement.
15.2 AT&T Licensed I.P. may be controlled for export purposes by the
U.S. Government. iVillage will not export, either directly or indirectly, AT&T
Licensed I.P. without AT&T's prior consent and without first obtaining any
required license or other approval from the U.S. Department of Commerce or any
other agency or department of the United States Government as required.
15.3 This is the entire agreement between AT&T and relating to the
subject matter hereof and supersede all previous communications, representations
or understandings, either oral or written, between the parties relating to the
subject matter hereof. No amendments will be
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effective unless in a writing signed by both parties. AT&T and iVillage may from
time to time amend the AIC Trial Plan or the Promotion Plan upon mutual
agreement signed by both parties.
15.4 A waiver of a breach of any term of this Agreement will not be
construed as a waiver of any succeeding breach of that term or as a waiver of
the term itself. A party's performance after the other's breach will not be
construed as a waiver of that breach.
15.5 iVillage acknowledges that any disclosure, commercialization, or
public use of the AT&T Licensed I.P. would cause irreparable injury to AT&T and
AT&T may seek the grant of an injunction by any court of competent jurisdiction
in the event of a threatened or actual breach.
15.6 This Agreement may be executed in counterparts, each of which will
be deemed an original and together will serve to evidence the parties' binding
agreement.
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EXHIBIT A
PROMOTED AT&T SERVICES
- --------------------------------------------------------------------------------
Service Bounty Criteria for Delivered Customers/
Other Compensation
- --------------------------------------------------------------------------------
One Rate Online o $[*] for each new Approved LD Account,
plus $[*] for each new Approved LD
Account active for at least 6 months,
plus $[*] if such new Approved LD
Account generates > $[*] of LD Revenue
(excludes taxes, refunds, etc.) on
average per month over such [*] month
period.
o $[*] for each existing AT&T LD
customer who switches to One Rate
Online and is active for at least [*]
months.
- --------------------------------------------------------------------------------
Pre-Paid Calls [*]% of the retail value of cards
sold.
- --------------------------------------------------------------------------------
AT&T Wireless $[*] for each new Approved Delivered
Wireless Customer, whose account is
active for at least [*] months, and who
did not terminate a separate wireless
services account with AWS at any time [*]
months prior to activation.
- --------------------------------------------------------------------------------
AIC Services Bounty specifics to be agreed upon for
Controlled Introduction and General
Availability phases of the project and
will be based on learning from Market
Trial. Bounties will not be paid in the
Market Trial
- --------------------------------------------------------------------------------
Co-Branded AnyWho Net Ad Revenues split [*]% to iVillage
and [*]% to AT&T, based on mutually
agreed upon rate cards. AT&T will receive
all Unsold Inventory in the Co-Branded
AnyWho.
- --------------------------------------------------------------------------------
AT&T WorldNet(R) Service o $[*] for each Delivered Customer, plus
$[*] for each Delivered Customer that
remains with the service for [*]
months.
- --------------------------------------------------------------------------------
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EXHIBIT B
PROMOTION PLAN
o iVillage will provide the following minimum "Anchor Positions":
o iVillage will provide an above the fold, persistent graphical,
AT&T-branded, promotional service area for the Promoted AT&T Services on
the following channel pages of the iVillage Sites.
- --------------------------------------------------------------------------------
iVillage Channel Placement within Channel
- --------------------------------------------------------------------------------
Parents Soup Sponsor Specials
Parents of Teens
Parents of School Age Children
Expecting Parents
- --------------------------------------------------------------------------------
Parents Place Sponsor Specials
- --------------------------------------------------------------------------------
Career Front Page
Job Listings
- --------------------------------------------------------------------------------
Member Center Front Page
E-Mail Main Page
Instant Messenger
- --------------------------------------------------------------------------------
Money Channel Main page - below the fold
- --------------------------------------------------------------------------------
o iVillage will provide AT&T with an above the fold, persistent top level
home page graphical promotion lasting for one week, at least once per
Contract Quarter.
o AT&T will also have at least 100% of the top level, standard-size, banner
space on all search result pages from all Key Words (defined in Exhibit F)
input by users on iVillage Sites.
o Prominent, above the fold placement for an exclusive AT&T Communications
Area for Telecommunications Services in the iVillage Chat area.
o On the "top level" home page of the Work From Home and Shopping Channels
(and other areas to be mutually agreed) on the on the iVillage Sites as
follows: (a) an above the fold, graphical, category exclusive, AT&T
branded link for the Co-branded Communications Center.
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o The graphical representation of the Click2Dial icons and other icons for
the AIC Services to be developed by AT&T and provided to iVillage will be
placed in the following locations: in the AT&T Communications Area (as
provided above), in the Co-Branded Communications Center, in prominent
locations, above the fold in the instant messaging and chat areas of the
iVillage Sites (specifically Parents Soup, Parents Place, Career, Work
from Home, and Relationships) and in other areas to be jointly determined
by AT&T and iVillage. AT&T shall have the right to recommend certain
positioning based on its own learnings regarding the AIC Services and to
target specific customer segments, and iVillage shall implement such
positioning provided shall recommendation is reasonable and consistent
with this Agreement.
o A link for the Co-Branded AnyWho labeled "Find a Person" or another name
that is mutually agreed to, will be present, (a) on the Co-Branded
Communications Center and (b) in the Tools section of the Relationship
Channel and in the Quick Click tool (above the fold within the scroll box)
on the top level home page of the iVillage Sites. On any intermediate page
between the main directory link and the Co-Branded AnyWho, AT&T will have
a brand presence on such page and the search form for the Co-Branded
AnyWho will reside on that page. In accordance with the AIC Trial Plan,
iVillage will integrate the Clickable Directory feature into the
Co-Branded AnyWho. Links to AnyWho will not be counted towards the
Guaranteed Impression levels below.
o If and when AT&T makes a yellow page service available to iVillage in
accordance with Section 2.5, a co-branded "yellow pages" will be directly
linked from the top level home pages of each of the iVillage Sites. If
iVillage implements a query page which incorporates both the White and
Yellow pages then only one link will be required.
o iVillage will provide "Promotional Positions" for AT&T's Telecommunication
Services at locations mutually determined by iVillage and AT&T based on the
results of the learnings derived from marketing the Promoted AT&T Services on
the iVillage Sites during the Term.
o iVillage will integrate AT&T marketing messages in its newsletters and email
campaigns at a minimum of once per month during the Term. The details of such
campaigns shall be worked out jointly by the parties and approved by each
party.
o iVillage will develop and implement, at its sole expense, at least [*]
AT&T-specific promotions per Contract Year. The details of such promotions
shall be worked out jointly by the parties and approved by each party.
o Except as provided in the following paragraph, iVillage guarantees [*] Pages
Views for combined Anchor Positions and Promotional Positions in the each
Contract Year ("Guaranteed Impression Levels"). The following shall not be
counted towards these Guaranteed Impression Levels: (1) promotion of the AT&T
sweepstakes pursuant to Section 1.4, (2) promotion of AnyWho White and Yellow
pages, (3) promotions of and links to the Co-Branded Communications Center.
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o If iVillage does not achieve [*] Clickthrus during the first Contract Year or
the Make Good Period, then the Guaranteed Impression Levels will be increased
in the second Contract Year based on the following schedule:
- --------------------------------------------------------------------------------
Year Two Guaranteed Year Two Guaranteed
Impressions Levels Impressions Levels
if Annual Minimum is if Annual Minimum is
Year One Clickthrus $[*] under Section 3.2 $[*] under Section 3.2
- --------------------------------------------------------------------------------
[*] [*] [*]
- --------------------------------------------------------------------------------
[*] [*] [*]
- --------------------------------------------------------------------------------
[*] [*] [*]
- --------------------------------------------------------------------------------
o iVillage will provide AT&T with specifications (i.e., pixel size and byte
size) for all Promotional Positions, Anchor Positions; and other uses of the
AT&T Marks on the iVillage Sites; provided that, unless the parties agree
otherwise, (1) no graphical representation of an AT&T Mark shall be less than
22 pixel height by 20 pixel width (if vertical) and 45 pixel width by 20
pixel height (if horizontal) and no text representation of an AT&T Mark shall
be smaller than the surrounding text for similar content and/or offers on the
page (and in no event less than 16 pixels)and (ii) all representations of the
AT&T Marks shall otherwise conform to the reasonable AT&T Marcom Guidelines
as provided to iVillage by AT&T from time to time.
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EXHIBIT C
AIC TRIAL PLAN
1. The following trial plan, as amended from time to time by mutual
agreement of the parties ("AIC Trial Plan") sets forth additional terms under
which AT&T and iVillage will cooperate in a trial (the "AIC Trial") whose goals
are to integrate, test and promote on the iVillage Sites certain existing and
future AT&T services, such as "AT&T Click2Dial", "AT&T Chat 'N Talk" and "AT&T
Click2Dial Directories" (or their successors) that combine web-based services,
with both traditional and non-traditional (e.g., Internet Protocol )
communication services ("AIC Services").
2. Introduction of AIC Services on the iVillage Site will be
facilitated through a joint learning and highly controlled trial environment
involving a targeted and limited number of users at the iVillage Sites. The
Parties will work together to control access to these AIC Services during all
Trial phases based upon the usage projections/results and capacity limitations
of the AIC Services.
3. AT&T will accept iVillage, and iVillage agrees to participate as, a
Market Trial participant for AT&T Chat 'N Talk, AT&T Click2Dial, and AT&T
Click2Dial Directories that is expected to commence during the fourth quarter of
1998.
4. In addition to its commitments in the Promotion Plan in Exhibit B,
iVillage will provide the following in conjunction with the AIC Services:
o iVillage will integrate AT&T's Chat 'N Talk functionality within the
iVillage chat service.
o Placement of Click2Dial icons at prominent locations, above the
fold, on the iVillage Sites and other areas to be jointly determined
by AT&T and iVillage.
o iVillage will integrate the Click2Dial feature within all applicable
iVillage directories used to display telephone numbers, including
Yellow Pages and White Pages.
o The Click2Dial Icons and Chat 'N Talk Icons that iVillage displays
on the iVillage Site shall be at least 120WX60H pixel size. AT&T
shall provide the banner ad or button in a "jpeg" or "gif" file
ready for posting.
o iVillage will, at its expense, develop code to embed AT&T's
Click2Dial functionality in the iVillage Instant Messenger, when
available, or in other locations on the iVillage site to be jointly
determined by AT&T and iVillage.
5. AIC may, at its discretion, provide AT&T AIC software on the AT&T
WorldNet Gold master disk for manufacture and distribution by iVillage.
6. iVillage will serve as Tier 1 customer support via email for AIC
Services on the iVillage Sites, with a maximum response time of 24 hours. The
parties will work together to
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develop a customer care program that provides response times and other customer
care support that is "best in class", considering both the type of AIC Service
involved, the nature of the iVillage Site and both parties' concerns over
protecting their respective brands.
7. iVillage will provide relevant monthly usage reports for the AIC
Services on the iVillage Sites. Reports from iVillage will include information
on (i) the page from which the use of the AIC Service originated, (ii) which
feature on the page was used, (iii) the number of impressions on that page, (iv)
notice of any schedule downtime of the AIC Services on the iVillage Sites, and
(V) other information reasonably requested by AT&T. AT&T shall provide iVillage
with information at "a summary level" concerning the number of customers who
signed up for each AIC Service and the usage patterns of such customers.
8. Locations for iVillage's Use of Licensed AT&T I.P. are: New York or
other locations as mutually agreed to by the parties.
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EXHIBIT D
EDITORIAL STANDARDS
Subject to the last sentence of this Exhibit, neither the iVillage
Sites nor any product or service offered at the iVillage Sites shall contain:
1. Any matter which is libelous, defamatory or which discloses private
or personal matters concerning any person, including home phone numbers and
addresses, credit card information, and/or user account information.
2. Any messages, data, images, programs, or other matter which are
obscene or which contain racial, ethnic or religious slurs or similar epithets,
or advocating violence, hate or other language that is deeply and widely
offensive.
3. Any messages, data, images, programs, or other matter that would
violate the property fights of others, including unauthorized copyrighted text,
images or programs, trade secrets or other confidential proprietary information
or trademarks or service marks used in an infringing fashion.
The foregoing shall not apply to third party information or materials
that may be located through end user queries on the iVillage Sites or materials
posted on the iVillage Sites (including without limitation chat and bulletin
board areas of the iVillage Sites) by third parties for which iVillage receives
no consideration.
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EXHIBIT E
DEFINITIONS
Capitalized terms used and not defined in the body of the Agreement
shall have the following meaning:
"Affiliate" means a corporation or other entity that controls, is
controlled by or is under common control with another corporation or entity,
where "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise. In the case of AT&T,
Affiliates shall include any venture in which AT&T has an equity stake or any
other contractual venture formed for the purpose of offering an AT&T product or
service covered under this Agreement.
"AIC Trial" is defined in Exhibit C.
"AIC Trial Plan" is defined in Exhibit C.
"AIC Services" is defined In Exhibit C.
"Anchor Positions" is defined in Exhibit B.
"AT&T Licensed I.P." means (1) Intellectual Property embodied in AT&T's
CallBroker client libraries and APIs, including the modules and specifications
that: (i) define the basic programming interface exposed to CallBroker clients
and provides for control of voice calls from a client via a Java APIs and/or
HTTP APIs; (ii) implement the authentication methods used by CallBroker (CB)
clients; and (iii) provide support for the ASCII message protocol used for CB
client to CB server communications; and (2) documentation (including information
provided orally or in other intangible forms) related to the Call Broker client
libraries, including: API definitions; and software installation and
administration guides; and (3) any derivative works (including Object Code
derived from modified or unmodified Source Code), modifications or improvements
of any of the above provided by AT&T to iVillage from time to time.
"AT&T Marks" means the names, trademarks. services marks, text, logos
or other insignia of AT&T and its Affiliates that iVillage uses on the iVillage
Sites in accordance with Section 8.1.
"Change in Control" means the direct or indirect acquisition of 25% or
more of the outstanding voting shares of iVillage or the acquisition of the
ability, by contract or otherwise, to direct or control the management of
iVillage.
"Clickthrus" means that a user has clicked on an AT&T Anchor or
Promotional Position and received a full Page View from an AT&T Site. The
following shall not be counted as Clickthrus: (1) promotion of the AT&T
sweepstakes pursuant to Section 1.4, (2) promotion of AnyWho White and Yellow
pages, and (3) promotions of and links to the Co-Branded Communications Center.
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"Co-Branded AnyWho" is defined in Section 1.3.
"Co-Branded Communications Center" is defined in Section 1.2.
"Confidential Information" means (a) the terms and conditions of this
Agreement; (b) each party's trade secrets, business plans, strategies, methods
and/or practices; (c) any and all information governed by any now-existing or
future non-disclosure agreement between the parties; and (d) any other
information relating to either party that is not generally known to the public,
including information about either party's personnel, products, customers,
marketing strategies, services or future business plans and any learning
concerning the other party's customers, products or services generated as a
result of the promotional activities on the iVillage Sites or the AIC Trial.
Notwithstanding the foregoing, the term "Confidential Information" specifically
excludes (i) information that is now in the public domain or subsequently enters
the public domain by publication or otherwise through no action or fault of the
other party; (ii) information that is known to either party without restriction,
prior to receipt from the other party under this Agreement, from its own
independent sources and which was not acquired from the other party or as a
result of the activities under this Agreement; (iii) information that either
party receives from any third party having a legal right to transmit such
information, and not under any obligation to keep such information confidential;
and (iv) information independently developed by either party's employees or
agents provided that either party can show that those same employees or agents
had no access to the Confidential Information received hereunder.
"Contract Quarter" means, for the first Contract Quarter, the calendar
quarter beginning on the Deployment Date and ending 3 calendar months following
the Deployment Date (on the same day of the month as the Deployment Date); each
subsequent Contract Quarter shall end on that same day of the month in the
subsequent calendar quarter, adjusted as required pursuant to Section 3.4 and
adjustments to the Contract Year.
"Contract Year" means, for the first Contract Year, the calendar year
beginning on the Deployment Date and ending on the one year anniversary of the
Deployment Date (on the same day of the month as the Deployment Date). If there
is a Make Good Period in accordance with Section 3.4, the second Contract Year
shall begin on the expiration or termination, as the case may be, of the Make
Good Period and shall end on the 1 year anniversary thereof or as extended
pursuant to Section 3.4. If there is no Make Good Period in the first Contract
Year, then the second Contract Year shall begin on the 1 year anniversary of the
Deployment Date and shall end on the 1 year anniversary thereof or as extended
pursuant to Section 3.4.
"Damages" means any loss, debt, liability, damage, obligation, claim,
demand, judgment or settlement of any nature or kind, known or unknown,
liquidated or unliquidated, including without limitation all reasonable costs
and expenses incurred (legal, accounting or otherwise).
"Delivered Customer" means an approved AT&T customer (a) who
electronically links directly from the tracking URLs established for the Anchor
Positions and Promotional Positions on the iVillage Sites to an AT&T website (b)
who electronically registers to become a customer of the Promoted AT&T Services
on such AT&T website (c) whose order is processed and accepted by AT&T and (d)
who meets the relevant criteria established in Exhibit A. In the event of a
dispute as to whether an AT&T customer meets the conditions of the preceding
sentence and
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of Exhibit A or was the result of another marketing effort, the confirmed
customer enrollment that Is first in time to be received by AT&T shall determine
the eligibility for compensation. For purposes of bounties for AT&T WorldNet
Service, "Delivered Customer" means, in addition to the above, a person or
entity who (I) has registered, and has been billed, for iVillage Online; and
(II) has paid at least [*] of Subscriber Revenue to AT&T using the iVillage
Online during the first three months after registration. "Subscriber Revenue"
means any revenue derived from iVillage Online that is received by AT&T from a
Delivered Customer, less rebates and refunds, and less any federal, state or
local taxes based on such fees (except taxes based an AT&T's net income). In no
event shall Subscriber Revenue be deemed to Include unbundled charges for
transport, tarriffed services not bundled with iVillage Online, or value added
Internet-related services (e.g., hosting, security, directory, content services,
products, etc.). No bounties shall be payable for subscribers to iVillage Online
who register for the service through AT&T WorldNet Alliance Marketing Program.
"Delivered Wireless Customer" means a customer who meets the definition
of a Delivered Customer and (i) who places an order with AT&T Wireless Services
for Service on an authorized rate plan in an area served by AT&T Wireless
Services, (ii) who is accepted by AT&T Wireless Services, (iii) for whom
wireless voice service is activated and a wireless telephone number assigned,
(iv) whose wireless voice service has not been terminated prior to [*] months
after such subscribers activation date and whose account has remained in good
standing throughout this period, and (v) who did not terminate a separate
wireless services account with AT&T Wireless Services at any time within [*]
days prior to such subscriber's activation date, when an individual or entity
places more than one order and each order is for a different wireless telephone
number to be assigned to a separate wireless telephone and electronic; serial
number, each order will be treated as a separate Delivered Wireless Customer.
"Deployment Date" is defined in Section 1 0.
"Guaranteed Impressions Levels" is defined in Exhibit B.
"Insolvent" means a party is unable to pay its debts as they become
due, files or has filed against it a petition under any bankruptcy law (which.
if involuntary, is not dismissed within 60 calendar days), proposes any
dissolution, liquidation, composition, financial reorganization, or
recapitalization with creditors, makes an assignment or trust mortgage for the
benefit of creditors, or that a receiver, manager trustee, custodian, or similar
agent is appointed or takes possession with respect to any major property or
business of that party.
"Intellectual Property" means all intellectual property protectible by
law throughout the world, including all copyrights (including the exclusive
right to reproduce, distribute copies of, display, and perform the copyrighted
work and to prepare derivative works), copyright registrations and applications,
trademark rights (including trade dress), trademark registrations and
applications. patent rights (including the right to apply therefor), patent
applications therefor (including the right to claim priority under applicable
international conventions) and all patents issuing thereon, and inventions,
whether or not patentable, together with all utility and design, know-how,
specifications, trade names, mask-work rights, trade secrets, moral rights,
author's rights, algorithms, rights In packaging, goodwill, and other
intellectual property rights, as may exist now and hereafter come into
existence, and all renewals and extensions thereof, regardless
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of whether any of such rights arise under the laws of the United States or of
any other state, country, or jurisdiction.
"iVillage Sites" is defined in Recital B.
"iVillage Marks" means the names, trademarks, services marks, text,
logos or other insignia of iVillage and its Affiliates that iVillage provides to
AT&T for use in accordance with Section 8.2
"Key Words" are attached as Exhibit F.
"Net Advertising Revenues" means gross consideration actually received
by iVillage derived from advertising, which consideration is paid or credited at
any time to iVillage or to any Affiliate of iVillage, without deductions except
reasonable and actual commissions for which iVillage has satisfactory
documentation and which shall not exceed 20 percent of such gross consideration.
"Page View" means a full page viewed by a user, Multiple AT&T Marks on
a page shall count as one Page View. Cached pages shall not count as Page Views.
"Promotional Positions" is defined In Exhibit B.
"Telecommunication Service(s)" means [*].
"Unsold Inventory" means all inventory for advertisement or promotional
space other than inventory that iVillage sells to third parties.
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EXHIBIT F
KEY WORDS
[*]
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SPONSORSHIP AGREEMENT
This Sponsorship Agreement ("Agreement") is entered into as of December
18, 1998, by and between Ford Motor Media, a division of J. Walter Thompson
("FMM") with offices at 300 Renaissance Center, Detroit, Michigan 48243 and
iVillage, Inc., ("iVillage") with offices at 170 Fifth Avenue, New York, New
York 10010. FMM and iVillage may be referred to generically as a "Party", or
collectively as "Parties".
WHEREAS, iVillage operates a site on the World Wide Web and America
Online (the "Network"), which contains channels including Parent Soup,
ParentsPlace, Better Health and Armchair Millionaire as well as career, fitness
& beauty, relationships, work from home, travel, money and food channels.
WHEREAS, FMM seeks to promote the sale of its automotive products
across the Network.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, iVillage and FMM hereby agree as
follows:
1. Term and Termination.
A. Term. The initial production period shall be for a period of two (2)
months to commence on November 4, 1998 (the "Production Period"), and the
remaining term of this Agreement shall be for a period of twenty four (24)
months to commence on the tentative launch date of January 4, 1999, unless
terminated earlier as provided herein (the "Promotion Period"), (The Production
Period and the Promotion Period shall be collectively referred to as the
"Initial Term"). The Parties agree that prior to July 1, 2000, iVillage will
provide FMM with the opportunity to renew this Agreement (the "Renewal Term") on
terms set forth in a proposal (the "Proposal) to be presented to FMM. FMM shall
indicate its acceptance or rejection of the Proposal no later than August 31,
2000. If iVillage does not receive FMM's acceptance or rejection of the Proposal
by August 31, 2000, iVillage may interpret FMM's non response as a rejection of
the Proposal. The Proposal shall include maximum payment fees by FMM with
respect to the Renewal Term.
B. Termination. In the event of a material breach by either Party of
any term of this Agreement, the non-breaching Party may terminate this Agreement
by written notice to the breaching Party if the breaching Party fails to cure
such material breach within thirty (30) days of receipt of written notice
thereof. In addition, either Party may terminate this Agreement effective upon
written notice stating its intention to terminate in the event the other Party
(i) ceases to function as a going concern or to conduct operations in the normal
course of business, or (ii) has a petition filed by or against it under any
state or federal bankruptcy or insolvency law which petition has not been
dismissed or set aside within sixty (60) days of its filing. In addition to the
foregoing, if on or after January 31, 2000, either Party determines, based upon
reasonable and mutually agreed upon measurable standards, that (x) the other
Party has materially underperformed its obligations pursuant to this Agreement
or (y) the expectations of such Party have been materially unfulfilled, such
Party may terminate this Agreement upon ninety (90) days written notice to the
other Party. Additionally, in the event of a prolonged and/or substantial
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strike which materially and adversely affects Ford's ability to produce and sell
cars, the Parties will work together in good faith to amend or terminate this
Agreement.
2. Promotion.
A. During the Production Period, iVillage will design, develop,
construct and host a Ford bridge site (the "Bridge Site") which shall include
approximately [*] pages of content and other interactive material such as a
travel planner or a car design feature. During the Promotion Period, iVillage
will continue to host, maintain and update the Bridge Site. Upon receipt from
iVillage of the proposed Bridge Site design and content, FMM shall have no more
than five (5) business days in which to provide iVillage with its acceptance or
rejection of the design and content. If iVillage does not receive FMM's
acceptance or rejection of such within the allotted time, iVillage shall deem
FMM's silence as acceptance. The Parties shall work together to determine the
content mix and delivery deadlines in order to maximize the effectiveness of the
sponsorship campaign.
B. During the Initial Term, iVillage will design, create and deliver
[*] Ford-branded advertising units. The advertising units shall be subject to
FMM's final approval. iVillage will deliver approximately [*] new advertising
units each during the Promotion Period. For purposes of this Agreement, an
advertising unit can include but shall not be limited to banners in the form of
rich media, java-based, animated, daughter and/or pull-down banners, or a
combination of appropriate technologies, and which shall represent and be
defined by industry standards.
C.
(i) During the Promotion Period, iVillage will deliver a
minimum of [*] advertising impressions, in an equal proportion each
month. Subject to reasonable written notice to iVillage, FMM may
request a reasonable reallocation of impressions as determined by FMM.
The advertising units of Ford Division and other Ford Motor Company
entities shall be served by a third party advertisement server, which
shall be compliant with Net gravity, or Doubleclick or other compatible
technology.
(ii) During the Promotion Period, iVillage traffic shall be
audited by a third party traffic auditor listed on Exhibit A and
iVillage shall provide FMM with relevant reports on a biweekly basis.
iVillage will provide ongoing marketing, creative, technical and
editorial consultation to FMM.
(iii) In the event that iVillage fails to deliver the
advertising impressions during the Promotion Period, FMM shall have the
option of either (a) extending the Initial Term of this Agreement for
an additional three (3) month period to "make good" the undelivered
impressions or (b) requiring iVillage to refund to FMM an amount equal
to [*] for each [*] impressions which were not delivered.
(iv) However, if iVillage falls to deliver the advertising
impressions during the Promotion Period and FMM desires that iVillage
"make good" the undelivered impressions and extend the Initial Term
pursuant to option (a) set forth in Section 2.C.(iii), if the Parties
have decided not to renew the Initial Term and iVillage desires to
enter into an agreement with an entity whose business(es) would pose a
conflict to FMM
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or Ford Motor Credit, then iVillage, at iVillage's option, may refund
the remaining impression deficiency to FMM, and immediately upon
pavement of such, the "make good" obligation shall terminate.
D. During the Initial Term, iVillage will design and administer, (i) a
minimum of [*] online conferences which shall include live chats and the
archiving of conference transcripts (dates of such conferences shall be
determined by FMM and shall occur approximately once every two months, but not
earlier than March 1, 1999 and FMM shall provide iVillage with not less than
forty five (45) days advance notice of any conference); (ii) a minimum of [*]
online polls; (iii) a minimum of [*] sixty-second surveys; (iv) a minimum of [*]
online focus groups; and (v) a minimum of [*] customized turn-key Network
sweepstakes (iVillage shall be responsible for all aspects of the sweepstakes
other than the prize(s) which shall be provided by Ford Motor Company ("FMC")).
FMM and FMC's respective advertising agencies shall be free to provide input
with respect to the aforementioned promotional efforts set forth in this section
and shall have the opportunity to reasonably approve such efforts.
E. During the Initial Term, iVillage will develop and administer [*]
message boards pertaining to topics mutually determined by the Parties. The
first message board shall be live on or about January 4, 1999, or in conjunction
with the launch of the Bridge Site.
F. During the Promotional Period, iVillage will place special
Ford-branded text links, newsletter mentions, hotlinks and taglines throughout
the Network. FMC shall have prior approval over all iVillage uses of any, Ford
Mark, as defined below. In the event that any of the Ford-branded links and/or
mentions set forth in this Section 2.F. are, in FMC's reasonable judgment,
materially injurious to FMC. FMC shall provide written notice of such offense to
iVillage. iVillage shall then have one (1) business day in which to cure said
offense.
3. Reporting. During the Promotion Period, iVillage agrees to provide FMM
with biweekly reports in connection with the promotional obligations set forth
in this Agreement in addition to semi-annual executive reviews with iVillage
management. All traffic reports shall be audited by the third party traffic
auditor selected pursuant to Section 2.C.(ii). iVillage shall also provide, on a
timely basis, impression tracking reports from a third party tracking system,
confirming guaranteed impression delivery.
4. Exclusivity. For the Initial Term of this Agreement, iVillage agrees
that Ford shall be the exclusive automobile manufacturer sponsor and advertiser
throughout the Network, with respect to entities whose primary business is that
of an automotive manufacturer and/or retailer. For purposes of this Agreement,
the term "retailer" shall refer to an entity which sells new and/or used
vehicles. In addition, in the event that iVillage desires to form a sponsorship
relationship with an automobile rental company during the term of this
Agreement, iVillage shall notify Hertz and provide Hertz with an opportunity to
enter into such a relationship with iVillage, on not less favorable terms than
those offered to any other automobile rental company. Once presented with an
opportunity, Hertz shall have five (5) business days in which to accept or
reject such terms. If iVillage does not receive Hertz's acceptance or rejection
of such within the allotted time, iVillage shall deem Hertz's silence as
rejection. The terms of any such relationship shall be mutually determined by
the Parties. Notwithstanding the foregoing, FMC shall, on a non-exclusive basis,
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be permitted to offer Ford Motor Credit car financing products related to the
purchase of Ford vehicles.
5. Fee.
A. FMC agrees to pay iVillage, upon signing of this Agreement, an
upfront, non-refundable, non-recoupable production and set up fee in the amount
of [*]. In addition, FMM shall pay iVillage [*] in equal quarterly payments of
[*] each, within ten (10) days after the end of each calendar quarter during
1999.
B. In addition, FMM agrees to pay iVillage, [*] in equal quarterly
payments of [*] each, within ten (10) days after the end of each calendar
quarter during the year 2000.
6. Representations and Warranties. Each Party hereby represents and
warrants that: (a) it is a corporation duly organized and validly existing and
in good standing under the laws of the state of incorporation; (b) it has full
power and authority to enter into this Agreement and to perform its obligations
hereunder; (c) it has obtained all permits, licenses, and other governmental
authorizations and approvals required for its performance under this Agreement,
and (d) the services to be rendered and the materials provided by each Party
under this Agreement neither infringe nor violate any patent, copyright, trade
secret, trademark, or other proprietary right of any third party.
7. Proprietary Rights. Upon execution and delivery of this Agreement,
iVillage assigns to FMC all right, title and interest in and to the content,
design and intellectual property, rights created specifically for and unique to
the Bridge Site, advertising units, and other promotional elements set forth in
this Agreement (collectively, the "Materials"). Notwithstanding the foregoing,
iVillage expressly retains all right, title and interest in and to the programs
and software that are used in connection with the creation and operation of, but
are not created specifically, for and unique to the Materials (the "iVillage
Proprietary Materials"). FMC acknowledges and agrees that the iVillage
Proprietary Materials are used by iVillage in creating and developing Web sites
for itself and other parties. FMC further acknowledges and agrees that iVillage
will be using certain licensed programs and software owned by third parties for
portions of the development and creation of the Materials and that FMC will not
acquire any right in or to those copyrighted materials. iVillage agrees to
execute any and all necessary further documents that FMC may reasonably request
to fully vest the intellectual property rights related to the Materials in FMC
and, if requested, to reasonable assist FMC in registering such rights in the
name of FMC.
8. Publicity. iVillage, FMC and FMM agree to collaborate on a joint press
release ("Press Release") to include information regarding the subject matter of
this Agreement and quotes from iVillage, FMC and FMM sources. The distribution
list shall be approved by both Parties no less than five (5) business days prior
to the release date. The Press Release and any quotes from either Party's
sources must be approved by the other Party's public relations department, which
also must be made aware of any pre-briefings with outside parties at least five
(5) days in advance of any pre-briefing. In addition, the iVillage and FMM
public relations department, FMC and FMM must be informed, no less than five (5)
days before the release date, of any third party who expresses interest in the
Press Release.
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9. Licenses. FMM grants to iVillage, during the Initial Term of this
Agreement, a royalty-free, non-exclusive, worldwide license to use, reproduce
and display Ford's tradenames, trademarks, service marks and logos
(collectively, the "Marks") in connection with this Agreement. No right, title,
license, or interest in any Marks owned by Ford or any of its affiliates is
intended to be given to or acquired by iVillage by the execution of or the
performance of this Agreement. iVillage shall not use the Marks for any purpose
or activity except as expressly authorized or contemplated herein;
10. Confidentiality. Except as expressly set forth herein, iVillage and FMM
shall maintain in confidence the terms of this Agreement. It is expected that,
pursuant to discussions to date and to this Agreement, the Parties may disclose
to one another certain information ("Confidential Information"), as defined
herein, which is considered by the disclosing Party to be proprietary or
confidential information. Confidential Information is defined as any,
information, communication or data, in any form, including, but not limited to
oral, written, graphic or electromagnetic forms, models or samples, which the
disclosing Party desires to protect against unrestricted disclosure or use,
including without limitation, business information, financial data and marketing
data. All Confidential Information shall remain the sole property, of the
disclosing Party and its confidentiality shall be maintained and protected by
the receiving Party with the same degree of care as the receiving Party uses for
its own confidential and proprietary information and the receiving Party shall
not disclose such Confidential Information to any third party. The restrictions
of the use or disclosure of any Confidential Information shall not apply to any
Confidential Information: (i) after it has become generally available to the
public without breach of this Agreement by the receiving Party; (ii) is
rightfully in the receiving Party's possession prior to disclosure to it by the
disclosing Party; (iii) is independently developed by the receiving Party; (iv)
is rightfully received by the receiving Party from a third party, without a duty
of confidentiality; or (v) is required to be disclosed under operation of law.
11. LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE ANY LIABILITY
HEREUNDER FOR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFIT OR BUSINESS OPPORTUNITIES, WHETHER
OR NOT THE PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY, AND EACH
PARTY HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE SERVICES CONTEMPLATED BY THIS AGREEMENT, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
IMPLIED WARRANTIES AFJSING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
12. Indemnification.
A. iVillage agrees to indemnify, defend and hold harmless FMM and its
client Ford Motor Company and their respective parents, subsidiaries,
affiliates, successors and assigns from any and all third party losses,
liabilities, damages, actions, claims, expenses and costs (including reasonable
attorneys' fees) which result or arise out of or in connection with the breach
of this
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Agreement by iVillage or which result or arise out of or in connection with any
material supplied by iVillage pursuant to this Agreement.
B. FMM agrees to indemnify, defend and hold harmless iVillage and its
parent, subsidiaries, affiliates, successors and assigns from any and all third
party, losses, liabilities, damages, actions, claims, expenses and costs
(including reasonable attorneys' fees) which result or arise out of or in
connection with the breach of this Agreement by FMM or which result or arise out
of or in connection with any material supplied by FMM or its client Ford Motor
Company pursuant to this Agreement.
13. General Provisions.
A. Relationship of the Parties. Nothing contained herein shall imply
any partnership, joint venture or agency relationship between the Parties and
neither Party shall have the power to obligate or bind the other in any manner
whatsoever, except to the extent herein provided.
B. Severability. If any provision of this Agreement shall be declared
by any court of competent Jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
C. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
D. Notices. All notices, requests, demands, payments and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
telecopied or sent by nationally recognized overnight carrier, or mailed by
certified mail, postage prepaid, return receipt requested, as follows:
If to FMM:
Ford Motor Media
500 Woodward Avenue
Detroit, Michigan 48226-3428
Attention: Carol Wright
Tel: (313) 964-2954
Fax: (313) 964-2315
If to iVillage:
iVillage, Inc.
170 Fifth Avenue
New York, New York 10010
Attention: Vice President Business/Legal Affairs
Tel: (212) 206-3106
Fax: (212) 604-9133
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E. Force Majeur. Except as otherwise expressly provided in this Agreement,
neither Party shall be liable for any breach of this Agreement for any delay or
failure of performance resulting from any cause beyond such Party's reasonable
control, including but not limited to the weather, strikes or labor disputes
(other than as set forth in Section 1.B), war, terrorist acts, riots or civil
disturbances, government regulations, acts of civil or military authorities, or
acts of God provided the Party affected takes all reasonably necessary steps to
resume full performance. In the event that the Network or the Bridge Site are
unavailable for a substantial period of time due an event of force majeur or
otherwise, iVillage agrees to use commercially reasonable efforts to "make good"
any impressions lost as a result of such circumstance.
F. Entire Agreement. This Agreement (i) constitutes the binding agreement
between the Parties, (ii) represents the entire agreement between the Parties
and supersedes all prior agreements relating to the subject matter contained
herein and (iii) may not be modified or amended except in writing signed by the
Parties.
G. Survival. The following sections shall survive any termination or
expiration of this Agreement: 6, 7, 10, 11, 12 and 13.
H. Governing Law. Agreement shall be governed by, and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
I. Assignment. Neither Party shall sell, transfer or assign this Agreement
or the rights or obligations hereunder, without the prior written consent of the
other Party, such consent not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, upon prior written notice by Ford Motor Company
to iVillage, this Agreement may be assigned by FMM to another advertising
agency, and in such event, FMM will be released from all financial and other
obligations under this Agreement.
J. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only.
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
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FOR FORD CENTRAL MEDIA FOR iVILLAGE, INC.
/s/ Mark A. Kaline /s/ Steven Elkes
- -------------------------------------- ---------------------------------------
(Name) (Name
Media Manager Vice President Business/]Legal Affairs
- -------------------------------------- ---------------------------------------
(Title) (Title)
1/12/99 12/18/98
- -------------------------------------- ---------------------------------------
(Date) (Date)
/s/ Mark A. Kaline /s/ Steven Elkes
- -------------------------------------- ---------------------------------------
(Signature) (Signature)
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EXHIBIT A
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Third Party Traffic Auditors
ABC
I/PRO
PWC
DoubleClick
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SPONSORSHIP AGREEMENT
This Sponsorship Agreement ("Agreement") is entered into as of
October 30, 1998 (the "Effective Date") by and between Ralston Purina Company, a
Missouri corporation ("Ralston") with offices at Checkerboard Square, St. Louis,
MO 63164 and iVillage, Inc., a Delaware corporation, ("iVillage") with offices
at 170 Fifth Avenue, New York, New York 10010. Ralston and iVillage may be
referred to generically as a "Party", or collectively as "Parties".
WHEREAS, iVillage operates a site on the World Wide Web and America
OnLine (the "Network"), which contains channels including Parent Soup,
ParentsPlace, Better Health and Armchair Millionaire as well as career, fitness
& beauty, food, relationships and work from home channels and plans to develop
an area devoted to pets and to provide its users with an opportunity to purchase
pet related products.
WHEREAS, Ralston seeks to enhance the brand awareness and brand
affinity of its products to the demographic population of iVillage: The Women's
Network and to provide pet-related content to iVillage.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, iVillage and Ralston hereby agree
as follows:
1. Term and Termination.
---------------------
A. Term. The term of this Agreement shall be for a period of two (2)
years to commence on the Effective Date (the "Initial Term"), unless terminated
earlier as provided herein. Prior to the expiration of the Initial Term, the
Parties agree to discuss in good faith, an extension of the Initial Term for an
additional two (2) year period (the "Renewal Term"). If, prior to sixty (60) but
no more than ninety (90) days before the expiration of the Initial Term,
iVillage receives a bona fide offer from a third party to be the exclusive
sponsor of cat and dog foods, cat and dog treats, litter box filters and related
products on financial terms more advantageous to iVillage than those stated in
Section 4 herein and provides Ralston with notice of such offer, Ralston must
notify iVillage in writing within thirty (30) days of receiving such notice
whether it is willing to amend the Agreement to match the financial terms
offered by such third party for the Renewal Term. If Ralston does not notify
iVillage that it is willing to amend the financial terms of the Agreement for
the Renewal Term within thirty (30) days of receiving such notice, then iVillage
shall have fifteen (15) days thereafter to give Ralston written notice to
terminate this Agreement at the end of the Initial Term and may then enter into
an agreement with such third party on the amended terms offered to Ralston.
B. Termination. In the event of a material breach by either Party of
any term of this Agreement, the non-breaching Party may terminate this Agreement
by written notice to the breaching Party if the breaching Party fails to cure
such material breach within thirty (30) days of receipt of written notice
thereof. In addition, either Party may terminate this Agreement effective upon
written notice stating its intention to terminate in the event the other Party
(i) ceases to function as a going concern or to conduct operations in the normal
course of business, or (ii) has a petition filed by or against it under any
state or federal bankruptcy or insolvency law which petition has not been
dismissed or set aside within sixty (60) days of its filing. In the event that
<PAGE>
Ralston does not provide substantially all of the Ralston Content set forth in
Section 3. within sixty (60) days after the Effective Date, iVillage may
terminate this Agreement upon written notice to Ralston.
2. iVillage's Obligations.
-----------------------
A. iVillage agrees to design, develop, host and operate an area within
the Network initially to be devoted to the subject matter of cats and dogs
("Pets") which may include the following material and community tools as
provided by iVillage or licensed from a third party:
(i) Pet Name Finder
(ii) gift reminder service
(iii) gift recommender tool
(iv) Pet care taker instruction
(v) message boards on Pet related topics
(vi) daily polls on Pet related topics
(vii) Pet home pages
(viii) featured pet story of the week with possible
celebrity pet featured
(ix) Pet pictures
(x) products/Pet food reviews by iVillage members
B. iVillage will also design, develop, host and operate a free-standing
online pet store (the "Pet Store") which may provide iVillage users with an
opportunity to purchase Pet products online and which shall include the
following material and community tools as provided by iVillage or licensed from
a third party:
(i) products/Pet food reviews by iVillage members
(ii) puppy/kitten starter kits
(iii) sampling
(iv) products such as: Pet food, cat litter, Pet treats
and snacks, Pet accessories, gift packages for
holidays and events, and other products as determined
mutually by iVillage and Ralston
(v) additional marketing and communications efforts
specific to the Pet Store such as links with content
and community Web sites, manufacturers and other
commerce sites.
C. In addition, iVillage may provide the following marketing efforts:
(i) Pet related newsletters
(ii) Pet Store promotion throughout the Network
(iii) online distribution and "key word" buys
D. iVillage shall maintain full editorial control over the Pet Area and
the Pet Store, and iVillage and Ralston will mutually agree to the content and
look and feel of the Pet Area and Pet Store. iVillage agrees that it will not
take any action or display any materials or information which will, in the
reasonable judgment of Ralston, adversely affect the name, reputation or
goodwill of Ralston and/or its products in any way. In the event Ralston
reasonably determines that iVillage has violated the foregoing obligation, and
if iVillage does not remove or replace
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such violating material within one (1) business day of receiving notice from
Ralston of such violation, Ralston may immediately terminate this Agreement upon
written notice to iVillage.
3. Ralston's Obligations.
----------------------
A. Ralston agrees to provide all mutually agreed upon content, experts
and customer service (collectively the "Ralston Content") found within the
Ralston Web sites ("Ralston Web Sites") to iVillage, including, but not limited
to the following material for use within the Pet Area:
(i) general Pet care and feeding information
(ii) frequently asked questions regarding Pet care
(iii) puppy/kitten starter check lists
(iv) food selector based on Pet type, age, etc.
(v) veterinary/Pet health experts
(vi) Pet care technology experts
B. Marketing:
----------
(i) Ralston will provide links, in a form to be
determined by the Parties, from the Ralston Web Sites
to the Network and to other Web sites as determined
by the Parties
(ii) Ralston will make good faith efforts to communicate
information about the Pet Area and Pet Store on
iVillage to Ralston's web site guest registrants and
to Ralston associates, as mutually agreed upon with
iVillage and within Ralston's privacy guidelines with
respect to the Pet Registry on purina.com. iVillage
will make good faith efforts to communicate
information about purina.com and related sites to
iVillage's members and associates, as mutually agreed
upon with Ralston and within iVillage's privacy
guidelines for membership.
(iii) Ralston agrees to make available to iVillage, for use
on the iVillage Network, new tools and new Ralston
Content which may be developed for the purina.com and
related sites, to the extent that Ralston shall have
the rights to do so.
C. Ralston will assist iVillage in the marketing, distribution and
fulfillment of Ralston products as displayed within the Pet Store and will
assist iVillage with the overall marketing and content of the Pet Store and will
provide iVillage with the following:
(i) introduction to iVillage to Ralston's distributors
(ii) assistance to iVillage in creating additional Pet
area and Pet Commerce Site sponsorship relationships
(iii) product and Pet food reviews
(iv) puppy and kitten starter kits
<PAGE>
4. Compensation.
-------------
A. Ralston shall pay iVillage [*] ($[*]) according to the following
schedule, namely: (i) [*] ($[*]) within fifteen (15) days after signing this
Agreement; (ii) [*] ($ [*]) on March 30, 1999; and (iii) [*] ($[*]) on July 30,
1999 which shall represent the sponsorship during the first twelve (12) months
of this Agreement.
B. Ralston shall pay iVillage an additional [*] ($[*]) according to the
following schedule, namely: (i) [*] ($[*]) on November 1, 1999; (ii) [*] ($[*])
on March 30, 2000; and (iii) [*] ($[*]) on July 28, 2000 which shall represent
the sponsorship during the second twelve (12) months of this Agreement.
5. Exclusivity . During the term of this Agreement and any subsequent
renewal thereto, iVillage agrees that Ralston shall be the exclusive sponsor of
cat or dog foods, cat and dog treats, litter box filter and related products on
the Pet Area and the Pet Store with respect to entities whose business is that
of manufacturing or distributing cat and dog foods, cat and dog treats, litter
box filler and related products, and iVillage will not display any advertising,
links, promotional information or marketing materials for ' any other
individual, entity or Web site whose business is that of manufacturing or
distributing cat and dog foods, cat and dog treats, litter box filler and
related products, where such advertising, links, promotional information or
marketing materials make reference to cat or dog foods, cat and dog treats,
litter box filler or related products, except with the written permission of
Ralston.
6. Representations and Warranties. Each Party hereby represents and
warrants that: (a) it is a corporation duly organized and validly existing and
in good standing under the laws of the state of its incorporation, (b) it has
full power and authority to enter into this Agreement and to perform its
obligations hereunder; (c) it has obtained all permits, licenses, and other
governmental authorizations and approvals required for its performance under
this Agreement; and (d) to the best of its knowledge and belief, the services to
be rendered and the materials provided by each Party under this Agreement
neither infringe nor violate any patent, copyright, trade secret, trademark, or
other proprietary right of any third party.
7. Customer Data. On a quarterly basis, iVillage will use its good
faith efforts to provide Ralston with mutually agreed upon data concerning
iVillage users. Ralston shall treat such data in the same manner as it treats
its own Confidential Information and will not use it except in accordance with
reasonable guidelines to be agreed upon by the Parties. Notwithstanding anything
contained in this Section, iVillage will not be required to deliver to Ralston
any user data in violation of its policies regarding the protection of user
information.
8. Proprietary Rights. All intellectual or proprietary property and
information, supplied or developed by either Party shall be and remain the sole
and exclusive property of the Party who supplied or developed same. Upon
termination of this Agreement and upon written request, the Party in receipt of
the requesting Party's intellectual or proprietary property and/or information
pursuant to this Agreement shall return such information to the requesting
Party. Intellectual and
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proprietary property and information jointly developed by the Parties pursuant
to this agreement shall be the joint property of the Parties.
9. Publicity. iVillage and Ralston agree to collaborate on a joint
press release ("Press Release") to include information regarding the subject
matter of this Agreement and quotes from iVillage sources. The distribution list
shall be approved by both Parties no less than five (5) business days prior to
the release date. The Press Release and any quotes from iVillage sources must be
approved by the iVillage public relations department, which also must be made
aware of any pre-briefings with outside parties at least five (5) days in
advance of any pre-briefing. In addition, the iVillage public relations
department must be informed, no less than five (5) days before the release date,
of any third party who expresses interest in the Press Release.
10. Intentionally Omitted.
11. Confidentiality. Except as expressly set forth herein, iVillage and
Ralston shall maintain in confidence the terms of this Agreement. It is expected
that, pursuant to discussions to date and to this Agreement, the Parties may
disclose to one another certain information ("Information"), as defined herein,
which is considered by the disclosing Party to be proprietary or confidential
information. Information is defined as any information, communication or data,
in any form, including, but not limited to oral, written, graphic or
electromagnetic forms, models or samples, which the disclosing Party desires to
protect against unrestricted disclosure or use, including without limitation,
business information, financial data and marketing data. All Information shall
remain the sole property of the disclosing Party and its confidentiality shall
be maintained and protected by the receiving Party with the same degree of care
as the receiving Party uses for its own confidential and proprietary information
and the receiving Party shall not disclose such Information to any third party.
The restrictions of the use or disclosure of any Information shall not apply to
any Information: (i) after it has become generally available to the public
without breach of this Agreement by the receiving Party; (ii) is rightfully in
the receiving Party's possession prior to disclosure to it by the disclosing
Party; (iii) is independently developed by the receiving Party; (iv) is
rightfully received by the receiving Party from a third party without a duty of
confidentiality; or (v) is required to be disclosed under operation of law.
12. LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE ANY LIABILITY
HEREUNDER FOR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFIT OR BUSINESS OPPORTUNITIES, WHETHER
OR NOT THE PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY, AND EACH
PARTY HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE PRODUCTS AND SERVICES CONTEMPLATED BY TIES AGREEMENT,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
PERFORMANCE.
13. Indemnification. Both Parties agree to indemnify, defend and hold
harmless the other Party and its parent, subsidiaries, affiliates, successors
and assigns from any and all third party
<PAGE>
losses, liabilities, damages, actions, claims, expenses and costs (including
reasonable attorneys' fees) which result or arise from the breach of this
Agreement by the indemnifying Party.
14. General Provisions.
A. Relationship of the Parties. Nothing contained herein shall imply
any partnership, joint venture or agency relationship between the Parties and
neither Party shall have the power to obligate or bind the other in any manner
whatsoever, except to the extent herein provided.
B. Severability. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
C. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
D. Notices. All notices, requests, demands, payments and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
telecopied or sent by nationally recognized overnight carrier, or mailed by
certified mail, postage prepaid, return receipt requested, as follows:
If to Ralston:
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164-0001
Attn: Michael D. Moore-8T
cc: Patricia A. Wharton-9T
Thomas Nutter-9T
Tel: (314) 982-2847
Fax: (314) 982-4274
If to iVillage: iVillage, Inc.
170 Fifth Avenue
New York, New York 100 10
Attention: Vice President Business/Legal Affairs
Tel: (212) 206-3106
Fax: (212) 604-9133
E. Force Majeur. Except as otherwise expressly provided in this
Agreement, neither Party shall be liable for any breach of this Agreement for
any delay or failure of performance resulting from any cause beyond such Party's
reasonable control, including but not limited to the weather, strikes or labor
disputes, war, terrorist acts, riots or civil disturbances, government
regulations, acts of civil or military authorities, or acts of God provided the
Party affected takes all reasonably necessary steps to resume full performance.
<PAGE>
F. Entire Agreement. This Agreement (i) constitutes the binding
agreement between the Parties; (ii) represents the entire agreement between the
Parties and supersedes all prior agreements relating to the subject matter
contained herein and (iii) may not be modified or amended except in writing
signed by the Parties.
G. Survival. The following sections shall survive any termination or
expiration of this Agreement: 6, 8, 11, 12, 13 and 14.
H. Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
I. Assignment. Neither Party shall sell, transfer or assign this
Agreement or the rights or obligations hereunder, without the prior written
consent of the other Party, such consent not to be unreasonably withheld or
delayed,
J. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only.
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
For Ralston Purina Company For iVillage, Inc.
Terrence E. Block Steven Elkes
- ----------------------------------- -------------------------------------
(Name) (Name)
Executive Vice President Vice President Business/Legal Affairs
- ----------------------------------- -------------------------------------
(Title) (Title)
/s/ Terrence E. Block /s/ Steven Elkes
- ----------------------------------- -------------------------------------
(Name) (Name)
<PAGE>
June 4, 1998
Mr. Craig T. Monaghan
146 Armand Road
Ridgefield, CT 06877
Dear Craig:
This letter confirms our offer to you as Chief Financial Officer for iVillage.
Your date of hire will be Wednesday, June 17, 1998.
You will receive a semi-monthly salary of $7,291.67 (which is an annual salary
of $175,000). In addition, you will receive an option to purchase 460,000
iVillage shares (1% post series D) at a strike price of $2.00 per option. The
options will vest over a period of four (4) years at 25% per annum, starting on
your date of hire. You retain the right to elect non-qualified options. The
iVillage Stock Option Plan is incorporated by reference in this offer. In the
event your position is eliminated or you are terminated as a direct result of a
change of control, your stock options will accelerate and vest immediately.
You are also eligible for the iVillage Bonus Plan. Your bonus target is 60% of
your annual salary. The iVillage Bonus Plan is based on semi-annual financial
targets determined by the CEO and Board and paid out in semi-annual bonus
periods. The first bonus period from January 1 through June 30 consists of
one-half of the bonus target (30% of annual salary). The second bonus period
from July 1 through December 31 consists of the other half of the bonus target
(remaining 30% of annual salary). For 1998, the financial targets are revenue
numbers used in our financing. This year, you are eligible for the second bonus
period from July l through December 31. The revenue target for this second bonus
period is 20 million dollars. The company must reach a minimum of 80% of its
semi-annual financial target (16 million dollars) for you to be entitled to a
minimum bonus of 80% of your semi-annual bonus target.
As of your date of hire, you and your family will receive medical benefits
through an Oxford plan and dental benefits through a First Fortis plan. iVillage
does not require employees to contribute to these plans, however, iVillage
reserves the right to institute a small co-payment for health insurance in the
future, if necessary. You are also eligible to participate in iVillage's 401-k
plan, which is not company matched, as of your date of hire.
You may expense up to $1500 per month to be applied toward rent for a New York
apartment and monthly parking expenses for a period of 24 months. This subsidy
will commence with the start of your lease.
<PAGE>
If, for any reason, iVillage terminates your employment without cause (for cause
means gross negligence, criminal actions, gross insubordination and drug or
alcohol abuse), you will receive a severance package equal to one year's base
salary to be paid monthly commencing upon execution of appropriate termination
and release agreements. Severance will end with start date of employment or
consulting arrangement with a new company.
This letter and all of the exhibits attached hereto contain all of your terms of
employment with the Company and supercedes any prior representation or
agreements, whether oral or written, between you and the Company.
We are excited about having you on our team and know that your background,
experience and expertise will be a tremendous asset here at iVillage.
If you have any questions, please feel free to call me at 212-206-3110 or
Candice Carpenter at 212-206-3103 or 212-628-4368.
Sincerely,
/s/ Serina Pak
Serina Pak
Director, Human Resources
cc: C. Carpenter
ACCEPTED AND AGREED BY:
/s/ Craig Monaghan 6/4/98
- -------------------------------------- ---------------------------
Craig Monaghan Date
<PAGE>
Health ResponseAbility Systems, Inc.
ParentsPlace.com, Inc.
iBaby, Inc.
Knowledge Web, Inc. d/b/a/ Astrology.Net
<PAGE>
After the approval by the Board of Directors of the one-for-three reverse
stock split discussed in Note 13 to the consolidated financial statements of
iVillage Inc. and Subsidiaries, we expect to be in a position to render the
following consent.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
February 19, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on form S-1 of
our report dated February 4, 1999, on our audits of the consolidated financial
statements of iVillage Inc. and Subsidiaries as of December 31, 1998 and 1997
and for the three years in the period ended December 31, 1998. We also consent
to the reference to our firm under the caption "Experts."
New York, New York
, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on form S-1 of
our report dated December 23, 1998, on our audits of the financial statements of
Health ResponseAbility Systems, Inc. as of December 31, 1995 and 1996 for the
two years in the period ended December 31, 1996. We also consent to the
reference to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
February 19, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 30,825
<SECURITIES> 0
<RECEIVABLES> 3,894
<ALLOWANCES> 746
<INVENTORY> 0
<CURRENT-ASSETS> 34,688
<PP&E> 7,380
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,791
<CURRENT-LIABILITIES> 14,769
<BONDS> 0
0
22
<COMMON> 21
<OTHER-SE> 31,979
<TOTAL-LIABILITY-AND-EQUITY> 46,791
<SALES> 0
<TOTAL-REVENUES> 15,012
<CGS> 0
<TOTAL-COSTS> 59,339
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (44,328)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,654)
<EPS-PRIMARY> (21.10)
<EPS-DILUTED> (21.10)
</TABLE>
