<PAGE>
As filed with the Securities and Exchange Commission on August 17, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
iVILLAGE INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 7375 13-3845162
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
170 Fifth Avenue
New York, New York 10010
(212) 206-3100
(Address, telephone number, including area code,
of registrant's principal executive offices)
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Candice Carpenter
Co-Chairperson of the Board and Chief Executive Officer
iVillage Inc.
170 Fifth Avenue
New York, New York 10010
(212) 206-3100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Richard V. Smith, Esq.
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111
(415) 392-1122
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or a continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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 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,
check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered Share (1) Price Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 2,676,364 shares $29.6875 $79,454,556 $22,088
===================================================================================================================================
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee and based
on the average of the high and low prices of the common stock on the Nasdaq
National Market on August 11, 1999.
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 this 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 prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated August 17, 1999
2,676,364 Shares
iVillage Inc.
Common Stock
The selling stockholders identified in this prospectus are offering up
to 2,676,364 shares of iVillage's common stock. iVillage's common stock is
traded on the Nasdaq National Market under the symbol "IVIL." The last reported
sale price for the common stock on the Nasdaq National Market on August 16, 1999
was $44.25 per share.
We will not receive any of the proceeds from the sale of shares by the
selling stockholders and we are not offering any shares for sale under this
prospectus. See "Selling Stockholders" and "Plan of Distribution" for a
description of sales of the shares by the selling stockholders.
----------
Please see "Risk Factors" beginning on page 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________, 1999
<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
Page
PROSPECTUS SUMMARY............................................................2
THE OFFERING..................................................................5
RISK FACTORS..................................................................8
FORWARD-LOOKING STATEMENTS...................................................20
USE OF PROCEEDS..............................................................22
DIVIDEND POLICY..............................................................22
PRICE RANGE OF COMMON STOCK..................................................22
CAPITALIZATION...............................................................23
SELECTED CONSOLIDATED FINANCIAL DATA.........................................24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................................26
BUSINESS.....................................................................43
MANAGEMENT...................................................................66
CERTAIN TRANSACTIONS.........................................................76
PRINCIPAL STOCKHOLDERS.......................................................80
SELLING STOCKHOLDERS.........................................................82
PLAN OF DISTRIBUTION.........................................................84
DESCRIPTION OF CAPITAL STOCK.................................................86
SHARES ELIGIBLE FOR FUTURE SALE..............................................89
LEGAL MATTERS................................................................90
EXPERTS......................................................................90
AVAILABLE INFORMATION........................................................91
INDEX TO FINANCIAL STATEMENTS...............................................F-1
-i-
<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.
iVillage Inc.
Our Business
iVillage Inc., The Women's Network, is a leading online network for
women 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 54. We
provide advertisers and merchants with targeted access to women using the Web.
Our network of sites consists of 16 channels organized by subject
matter. The channels cover leading topics of interest to women online, such as
family, health, work, money, food, computers, 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. Although some features of our Web sites are restricted to members,
membership in iVillage.com is free.
As of June 30, 1999, iVillage's membership and its core audience was
approximately 82% female and consisted of approximately 2.1 million unique
members, up from approximately 170,000 unique members as of January 31, 1998.
Unique members refers to the actual number of individual iVillage.com members
after the exclusion of any multiple membership accounts opened by those members.
For the quarter ended June 30, 1999, iVillage.com averaged approximately 102
million page views. Page views are the total number of complete pages retrieved
and viewed by visitors to the iVillage network. For the month of June 1999,
iVillage estimates it had 6 million unique visitors. A unique visitor or person
is an individual visitor to the iVillage network.
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.
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<PAGE>
Our Market Opportunity
We believe that women are one of the principal driving forces behind
the growth of the Internet. As of January 1999, women made up 47.5% of the
online population according to Jupiter Communications. 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
majority of our revenues.
We generate e-commerce revenues from sales through iBaby, Inc., an
online retailer of baby gifts and products, iMaternity, an online retailer of
maternity clothing, Knowledge Web, Inc. d/b/a Astrology.Net, an Internet content
provider, and agreements with leading online merchants.
Our Strategy
Our objective is to be the leading online network for women. Our
strategy includes:
o building strong brand recognition;
o aggressively growing membership and usage;
o enhancing and expanding our 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 agreements with AOL,
NBC and AT&T to provide both online and offline advertising.
3
<PAGE>
Recent Developments
On June 30, 1999, iVillage acquired OnLine Psychological Services, Inc.
and Code Stone Technologies, Inc. OnLine Psych operates a Web site focusing on
mental health issues, while Code Stone provides much of the interactive
technology used on OnLine Psych's Web site. The aggregate purchase price paid to
acquire OnLine Psych and Code Stone consisted of $1.5 million cash and
approximately 571,000 shares of iVillage common stock valued at approximately
$30.0 million under the purchase method of accounting.
On July 13, 1999, iVillage entered into an agreement to acquire all of
the outstanding stock of Lamaze Publishing Company, Inc., a multimedia provider
of education information to expectant and new mothers. The total purchase price
consisted of 1,748,791 shares of iVillage common stock, subject to certain
adjustments, and approximately $5 million to repay debt. The closing of the
transaction is subject to customary closing conditions and the filing of a
registration statement with the Securities and Exchange Commission covering the
resale of the issued shares, of which this prospectus is a part. Lamaze
Publishing is the exclusive licensee of the LAMAZE mark for use in connection
with consumer publications and other communications, which include print, audio,
visual and other consumer oriented media, that are commercial in nature. Lamaze
Publishing is also the exclusive marketing agent for Lamaze International, Inc.,
the owner of the Lamaze family of marks.
Through our proposed acquisition of Lamaze Publishing, we intend to
further extend our brand offline which we believe will lead to increased traffic
to iVillage.com. Lamaze Publishing currently estimates that it reaches more than
75% of all women giving birth in the United States through its magazines, videos
and the Newborn Channel, its satellite television network broadcasting in over
800 hospitals in the United States. This presents attractive opportunities for
advertisers to have access, across multiple platforms, to the majority of U.S.
parents and prospective parents through one single source. In addition, we
expect to offer Lamaze-licensed products through iBaby and other retailers,
further enhancing our commerce business.
Our Offices
Our executive offices are located at 170 Fifth Avenue, New York, New
York 10010. Our telephone number at that location is (212) 206-3100 and our
Internet address is www.ivillage.com.
4
<PAGE>
THE OFFERING
Common stock to be offered by the selling stockholders.... 2,676,364 Shares
Common stock to be outstanding after the offering (1)..... 26,119,690 Shares
Use of proceeds........................................... We will not receive
any proceeds from the
sales of the common
stock by the selling
stockholders. See
"Use of Proceeds".
Nasdaq National Market symbol............................. IVIL
- -----------
(1) Based on the number of shares actually outstanding on August 13, 1999 plus
the shares to be issued in connection with the proposed acquisition of
Lamaze Publishing.
5
<PAGE>
Summary Consolidated Financial Data
The following table summarizes the financial data for our business.
iVillage acquired ParentsPlace.com, Inc. in December 1996, Health
ResponseAbility Systems, Inc. in May 1997, the majority interest and remaining
minority interest in iBaby in April 1998 and March 1999, respectively, and
Astrology.Net in February 1999. 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
(inception)
to
December 31, Six Months
1995 Year Ended December 31, Ended June 30,
------------ ---------------------------------------- -------------------------------
1996 1997 1998 1998 1998 1999 1999
------- -------- -------- -------- -------- -------- --------
Pro Pro
Actual forma(1) Actual forma(1)
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues ................................. $ -- $ 732 $6,019 $ 15,012 $ 27,072 $ 4,838 $ 14,572 $ 21,165
-------- ------- -------- -------- -------- -------- -------- --------
Cost of revenues ......................... 568 3,905 6,265 13,532 19,224 5,437 9,112 12,629
-------- ------- -------- -------- -------- -------- -------- --------
Gross margin ............................. (568) (3,173) (246) 1,480 7,848 (599) 5,460 8,536
-------- ------- -------- -------- -------- -------- -------- --------
Operating expenses:
Product development and technology ....... 61 616 1,341 989 989 986 3,038 3,038
Sales and marketing ...................... 329 2,709 8,771 28,523 31,316 12,054 23,206 24,562
General and administrative ............... 656 3,104 7,841 10,612 13,961 4,206 7,872 9,397
Depreciation and amortization ............ 17 109 2,886 5,683 27,356 2,658 7,519 14,349
-------- ------- -------- -------- -------- -------- -------- --------
Total operating expenses ............ 1,063 6,538 20,839 45,807 73,622 19,904 41,635 51,346
-------- ------- -------- -------- -------- -------- -------- --------
Loss from operations ..................... (1,631) (9,711) (21,085) (44,327) (65,774) (20,503) (36,175) (42,810)
Interest (expense) income, net ........... (7) 28 (216) 591 591 237 1,513 1,510
Loss on sale of Web site ................. -- -- -- (504) (504) -- -- --
Minority interest ........................ -- -- -- 586 -- -- -- --
-------- ------- -------- -------- -------- -------- -------- --------
Net loss ................................. (1,638) (9,683) (21,301) (43,654) (65,687) (20,266) (34,662) (41,300)
Preferred stock deemed dividend .......... -- -- -- -- -- -- (23,612) (23,612)
-------- ------- -------- -------- -------- -------- -------- --------
Net loss attributable to common
stockholders .......................... $ (1,638) $(9,683) $(21,301) $(43,654) $(65,687) $(20,266) (58,274) $(64,912)
======== ======= ======== ======== ======== ======== ======== ========
Basic and diluted net loss per ........ $ (1.51) $ (8.90) $ (13.65) $ (21.10) $ (3.28) $ (3.98)
======== ======= ======== ======== ======== ========
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 6,179 14,656
======== ======= ======== ======== ======== ========
Pro forma basic and diluted net loss
per share(2)........................... $ (2.59) $ (3.10) $ (2.77) $ (2.75)
======== ======== ======== ========
Shares of common stock used in
computing pro forma basic and
diluted net loss per share............ 16,854 21,160 21,027 23,644
======== ======== ======== ========
</TABLE>
- ----------
(1) Pro forma giving effect to:
o the proposed acquisition of Lamaze Publishing;
o the acquisition of Astrology.Net; and
o the purchase of the minority interest in iBaby.
(2) Pro forma basic and diluted net loss per share is calculated assuming the
conversion of all outstanding preferred stock as of the beginning of each
respective period.
6
<PAGE>
The following table indicates a summary of our balance sheet at June 30, 1999;
o on an actual basis; and
o on a pro forma basis giving effect to the proposed acquisition of Lamaze
Publishing.
June 30, 1999
Actual Pro forma
-------- --------
Consolidated Balance Sheet Data:
Cash and cash equivalents...................... $ 85,279 $ 80,644
Working capital................................ 76,504 69,303
Total assets................................... 158,072 262,078
Stockholders' equity........................... 145,292 241,895
iVillage(R); the iVillage logo(Registered); Parent Soup(Registered);
Astrozine(Registered); iVillage.com; Real Solutions For Women; The Woman's
Network; The double oval design; Click!; Community Challenges; Community
Challenge; Armchair Millionaire; Never Say Diet; All Health; Parentsplace; and
Parentsplace.com are marks of iVillage, Inc. iBaby(Registered); Internetbaby
and iMaternity are marks of iBaby, Inc. KnowledgeWeb(Registered);
Astrology.Net(Registered); Astrozine(Registered); Kelli Fox, and the Kelli Fox
Likeness are trademarks of KnowledgeWeb, Inc. OnLine Psych is a mark of OnLine
Psychological Services, Inc. The Newborn Channel is a mark of Lamaze Publishing
Company, Inc. Lamaze(Registered) and Lamaze.com are marks of Lamaze
International, Inc., exclusively licensed to Lamaze Publishing Company, Inc. for
use in connection with consumer publications and other communications, which
include print, audio, visual and other consumer oriented media, that are
commercial in nature. All other trademarks and service marks in this prospectus
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 excludes as of July 31, 1999:
o 3,934,201 shares issuable upon the exercise of outstanding
options and warrants; and
o 72,691 shares reserved for future issuance under our stock option
and stock purchase plans.
7
<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 and may face difficulties encountered by
early stage companies in new and rapidly evolving markets
We have a limited operating history and face many of 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, $43.7 million for the year
ended December 31, 1998 and $34.7 million for the six months ended June 30,
1999. As of June 30, 1999 and December 31, 1998, our accumulated deficit was
$134.5 million and $76.3 million, respectively. 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
guarantee that we will achieve sufficient revenues for profitability. Even if we
do achieve profitability, we cannot guarantee that we can sustain or increase
profitability on a quarterly or annual basis in the future. If
8
<PAGE>
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.
Because our strategy includes acquisitions of other businesses, acquisition
expenses and any cash used to make these acquisitions will reduce our available
cash. Please see "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
We are dependent on barter transactions which do not generate cash revenue
Revenues from barter transactions represented approximately 20% and 12%
of total revenues for the year ended December 31, 1998 and the six months ended
June 30, 1999, respectively. Barter revenues may continue to represent a
significant portion of our total revenues in future periods. Barter transactions
do not generate any cash revenues and are entered into by us to promote our
brand and generate traffic to our Web sites, without any expenditure of our cash
resources. 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 and future
acquisitions
As part of our business strategy, we have completed and expect to enter
into additional business combinations and acquisitions, such as our February
1999 acquisition of Astrology.Net and June 1999 acquisitions of Online
Psychological Services, Inc. and Code Stone Technologies, Inc., as well as our
proposed acquisition of Lamaze Publishing.
Acquisition transactions are accompanied by a number of risks,
including, among other things:
o the difficulty of assimilating the operations and personnel of
the acquired companies;
o the potential disruption of our ongoing business;
o the inability of management to maximize the financial and
strategic position of iVillage through the successful
incorporation of acquired technology or content and rights into
our products and media properties;
o expenses associated with the transactions;
o additional expenses associated with amortization of acquired
intangible assets;
o the difficulty of maintenance of uniform standards, controls,
procedures and policies;
o the impairment of relationships with employees and customers as a
result of any integration of new management personnel; and
o the potential unknown liabilities associated with acquired
businesses.
9
<PAGE>
Our failure to adequately address these issues could have a material
adverse effect on our business, results of operations and financial condition.
Our proposed acquisition of Lamaze Publishing poses a number of risks that could
materially adversely affect our business strategy
The proposed acquisition of Lamaze Publishing is our first acquisition
of a non-Internet company. There are a number of risks in operating Lamaze
Publishing, including:
o competitiveness of the media and publishing industry;
o our inexperience in operating a multi-media publishing company;
o our ability to sell advertising and sponsorships on our Web sites
and in Lamaze Publishing's magazines, videos and the Newborn
Channel;
o our ability to commercialize and protect the Lamaze mark; and
o our ability to build and market Lamaze.com.
Our quarterly revenues and operating results are not indicative of future
performance and are difficult to forecast
As a result of our limited operating history, we do not have historical
financial data for a significant number of periods upon which to forecast
quarterly revenues and results of operations. We do not believe that
period-to-period comparisons of our operating results are necessarily meaningful
nor should they be relied upon as reliable indicators of future performance. In
one or more future quarters our results of operations may fall below the
expectations of securities analysts and investors. In such event, the trading
price of our common stock would likely be materially adversely affected. Please
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations Quarterly Results of Operations".
Our revenues for the foreseeable future will remain dependent on user
traffic levels and advertising activity on our Web sites. 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
10
<PAGE>
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 and 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" for detailed information on our quarterly operating results.
The market for Internet advertising is uncertain
We continue to derive a substantial portion of our revenues from
sponsorships and advertising for the foreseeable future, and demand and market
acceptance for Internet advertising solutions are 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
and it is difficult to predict which, if any, of the models 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 measure the demographics of our user base and
delivery of advertisements on our web sites
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. 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 until
we replace these services. We are currently implementing additional systems
designed to record demographic data related to 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
11
<PAGE>
our Web sites or may pay less for advertising if they perceive our demographic
measurements are not reliable.
We are currently experiencing a period of significant growth which is placing a
significant strain on our resources
If we are unable to manage our growth effectively, our business could
be adversely affected. We have experienced and continue to experience
significant growth, both internally and through acquisitions. 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 senior management have only recently joined iVillage
Several members of our senior management joined us in 1998 and 1999 and
have not previously worked together. As a result, our senior managers are
becoming integrated as a management team and 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 currently
carries additional competing Web 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 the agreement. If the carrying
of our channels on AOL is discontinued, our business, results of operations and
financial condition would be materially adversely affected.
AOL investments may result in conflicts of interest for AOL that are adverse to
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, acquired 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.
In addition, other principal investors in iVillage may have similar conflicts of
interests by virtue of their other investments. Please see "Certain
Transactions".
When we assume inventory and storage responsibilities for iBaby in November 1999
we will face inventory risk between the time we order products and the date of
receipt.
Starting in November 1999, we will begin handling inventory and
fulfillment for iBaby. As a result, changing trends in consumer tastes in
baby-related products will subject us to inventory
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risks. It is important to our success that we accurately identify and predict
these trends and do not overstock unpopular products. The demand for specific
products can change between the time the products are ordered and the date of
receipt.
If products do not achieve sufficient consumer acceptance, we may be
required to take inventory markdowns, which could reduce our sales and gross
margins. We believe that this risk will increase as we open new departments or
enter new product categories due to our lack of experience in purchasing
products for these categories. In addition, to the extent that demand for iBaby
products increases over time, we may be forced to increase inventory levels.
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 depend on a limited number of customers for a significant portion of
our revenues. Consequently, the loss of even a small number of these customers
at any one time may adversely affect our business, financial condition and
results of operations. Although no advertiser accounted for more than 10% of
total revenues for the year ended December 31, 1998 or the six months ended June
30, 1999, our five largest advertisers accounted for 17% and 22% of total
revenues, respectively. At December 31, 1998, one advertiser accounted for 11%
of net accounts receivable.
Lamaze Publishing also depends on a limited number of customers for a
significant part of its revenues. As of December 31, 1998 and June 30, 1999, one
advertiser accounted for approximately 17% of Lamaze Publishing's total
revenues. Additionally, revenues from Lamaze Publishing's ten largest
advertisers accounted for approximately 63% and 65% of Lamaze Publishing's total
revenues for the year ended December 31, 1998 and the six months ended June 30,
1999, respectively.
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 find sufficient acquisition candidates to implement our business
strategy.
As part of our business strategy, we have completed and expect to enter
into additional business combinations and acquisitions. We compete for
acquisition candidates with other entities, some of which have greater financial
resources than we have. Increased competition for acquisition candidates may
make fewer acquisition opportunities available to us and may cause acquisitions
to be made on less attractive terms, such as higher purchase prices. Acquisition
costs may increase to levels that are beyond our financial capability or that
would adversely affect our results of operations and financial condition. Our
ability to make acquisitions will depend in part on the relative attractiveness
of shares of iVillage common stock as consideration for potential acquisition
candidates. This attractiveness may depend largely on the relative market price
and capital appreciation prospects of iVillage common stock compared to that of
other bidders. If the
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market price of iVillage common stock were to decline materially over a
prolonged period of time, our acquisition program could be materially adversely
affected.
We may be sued for information retrieved from the web
We may be subject 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 and
iMaternity sites, 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 these 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 and 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 among Internet-based businesses and publishing
companies focused on women
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. Our Web sites 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 and Oxygen Media's Web sites;
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.;
o e-commerce companies such as eToys, Inc. and its wholly-owned
subsidiary, BabyCenter, Inc.; and
o publishers and distributors of traditional media, such as
television, radio and print.
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Increased competition could result in price reductions, reduced margins
or loss of market share, any of which could adversely affect our business,
results of operations and financial condition.
Lamaze Publishing's magazines are in direct competition with publishers
of pre and postnatal publications such as Gruner and Jahr, Primedia and Time
Warner. These publishers have substantially greater marketing, research and
financial resources than Lamaze Publishing. Increased competition may result in
less advertising in Lamaze Publishing's magazines and a decline in Lamaze
Publishing's advertising rates, which could adversely affect its business,
results of operations and financial condition.
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 advertisers' and sponsors' budgetary constraints;
o advertisers' and sponsors' 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. We have no
employment agreements with either of these executives and we do not maintain
"key person" life insurance for any of our personnel, other than Ms. Carpenter.
The loss of the services of Mdmes. Carpenter or Evans, or other key employees,
would likely have a significantly detrimental effect on our business.
Competition for personnel in the Internet 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 as a result of our rapid growth and expansion. In addition, there
is significant competition for qualified employees in the Internet industry. As
a
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<PAGE>
result, we incurred increased salaries, benefits and recruiting expenses during
1998 and 1999. 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;
o lack of availability of cost-effective, high-speed service; and
o consumers returning to traditional or alternative sources for
information, shopping and services.
If Internet usage continues to grow significantly, 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 and delays
frequently occur in the future, Internet usage, as well as the usage of our Web
sites, could grow more slowly or decline.
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 services 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
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<PAGE>
address issues such as user privacy, pricing, content, copyrights, distribution,
antitrust matters and the characteristics and quality of products and services.
For example, the Telecommunications Act sought to prohibit transmitting various
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, obscenity, libel and personal privacy are
applicable to the Internet or the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business. Any new laws or
regulations relating to the Internet could adversely affect our business.
In addition, it has been reported that the Labor Department has
recently begun an investigation of the use of volunteers on Web sites. We
utilize volunteers as Web site community leaders and there can be no assurance
that new government regulations will not require us to cease using volunteers
or, alternatively, treat them as employees.
Due to the global nature of the Internet, it is possible that, although
our transmissions over the Internet originate primarily in New York, the
governments of other states and foreign countries might attempt to regulate our
business activities. In addition, because our service is available over the
Internet in multiple states and foreign countries, these jurisdictions may
require us to qualify to do business as a foreign corporation in each of these
states or foreign countries, which could subject us to taxes and other
regulations.
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 some of our other
computer hardware operations are located at Exodus Communications, Inc.'s
facilities in Jersey City, New Jersey and Verio, Inc.'s and AT&T CERFnet's
facilities in California. 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 experienced
slower response times or decreased traffic for a variety of reasons. These
occurrences have not had a material impact on our business. These types of
occurrences in the future 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.
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<PAGE>
We may not be able to deliver various services if third parties fail to provide
reliable software, systems and related services to us
We are dependent on various third parties for software, systems and
related services. For example, we rely on Doubleclick Inc.'s software for the
placement of advertisements and WhoWhere? Inc. for personal home pages and
e-mail. Several of the third parties that provide software and services to us
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 failure of these third parties to provide reliable software, systems and
related services to us.
We may be liable if third parties misappropriate our users' personal information
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 arising from claims related to,
among other things, unauthorized purchases with credit card information,
impersonation or other similar fraud claims or other misuse of personal
information, such as for unauthorized marketing purposes. In addition, the
Federal Trade Commission and state agencies have been investigating various
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.
Satellite transmissions over the Newborn Channel may be interrupted.
Lamaze Publishing is the operator of the Newborn Channel, a satellite
television network broadcast in over 800 hospitals in the United States. There
is a risk that the satellite from which the transmission is sent may
malfunction, interrupting Lamaze Publishing's broadcasts. In the event this
occurs, there may be a period of time before Lamaze Publishing can transmit to
and from another satellite. Any interruption in Lamaze Publishing's ability to
transmit the Newborn Channel could have an adverse impact on its business. In
addition, extreme adverse weather could damage receivers and transmitters on the
ground, thereby hindering transmissions.
Consumer protection privacy regulations could impair our ability to obtain
information about our users
Our network captures information regarding our members in order to
tailor content to them and assist advertisers in targeting their advertising
campaigns to particular demographic groups. However, privacy concerns may cause
users to resist providing the personal data necessary to support this tailoring
capability. Even the perception of security and privacy concerns, whether or not
valid, may indirectly inhibit market acceptance of our network. In addition,
legislative or
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regulatory requirements may heighten these concerns if businesses must notify
Internet users that the data may be used by marketing entities to direct product
promotion and advertising to the user. Other countries and political entities,
such as the European Economic Community, have adopted such legislation or
regulatory requirements. If consumer privacy concerns are not adequately
addressed, our business, financial condition and results of operations could be
materially harmed.
Our network currently uses cookies to track demographic information and
user preferences. A cookie is information keyed to a specific server, file
pathway or directory location that is stored on a user's hard drive, possibly
without the user's knowledge, but is generally removable by the user. Germany
has imposed laws limiting the use of cookies, and a number of Internet
commentators, advocates and governmental bodies in the United States and other
countries have urged the passage of laws limiting or abolishing the use of
cookies. If such laws are passed, our business, financial condition and results
of operations could be materially harmed.
Possible infringement of intellectual property rights could harm our business
We cannot be certain that the steps we have taken to protect our
intellectual property rights will be adequate or that third parties will not
infringe or misappropriate our proprietary rights. Any such infringement or
misappropriation could have a material adverse effect on our future financial
results. In addition, we may from time to time become involved in intellectual
property disputes with third parties which may not result in a favorable outcome
for us.
We could be subject to possible infringement actions based upon our use of
domain names, our content and content licensed from others
We have invested resources in acquiring domain names for existing and
potential future use. We cannot guarantee that we will be entitled to use such
names under applicable trademark and similar laws or that other desired domain
names will be available. Furthermore, enforcing our intellectual property rights
could entail significant expense and could prove difficult or impossible. In
addition, third parties could assert claims of patent, trademark or copyright
infringement or misappropriation of creative ideas or formats against us with
respect to our use of domain names, our content, Web page formats, Web business
methods or any third-party content carried by us. We expect that participants in
our markets increasingly will be subject to infringement claims as the number of
services and competitors in our industry segment grows. Any such claims, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using important technologies, ideas or
formats, any of which could materially harm our business, financial condition or
results of operations.
We are involved in litigation with a former employee which may be costly and
divert the efforts and attention of our management
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 was subsequently amended to withdraw all claims
against two of those 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
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complaint seeks an award of options to purchase 100,000 shares of common stock.
In addition, there is pending a motion by the plaintiff for leave to add as new
plaintiffs two former executives who allege that iVillage breached certain
obligations to them and seek an award of 560,000 stock options in the aggregate.
We believe that the suit and the proposed new claims are without merit and 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.
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. 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. Please see "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Compliance".
Shares eligible for public sale after this offering could adversely affect our
stock price
Sales of a substantial number of shares of common stock in the public
market, or the perception that sales could occur, could adversely affect the
market price for our common stock. As of August 13, 1999, there were 26,119,690
shares of our common stock outstanding including the 1,748,791 shares to be
issued in connection with the proposed acquisition of Lamaze Publishing. Of
these shares, 4,197,500 shares are freely tradeable except for any shares held
by our "affiliates" as defined in Rule 144 under the Securities Act. The
remaining 21,922,190 shares of common stock are "restricted securities" and may
be sold only if registered or if eligible for sale under Rule 144 under the
Securities Act. Of these restricted shares, the 2,676,364 shares offered by this
prospectus have been registered under the Securities Act. Of such shares,
927,753 shares offered by this prospectus are subject to lock-up agreements with
the underwriters of our public offering and are eligible for resale on September
18, 1999. In addition, 12,059,700 shares subject to lock-up agreements will
become eligible for resale under Rule 144 on September 18, 1999.
FORWARD-LOOKING STATEMENTS
iVillage has included in this filing certain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 concerning iVillage's business, operations and financial condition. The
words or phrases "can be", "expects", "may affect", "may depend",
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"believes", "estimate", "project", and similar words and phrases are intended to
identify such forward-looking statements. Such forward-looking statements are
subject to various known and unknown risks and uncertainties and iVillage
cautions you that any forward-looking information provided by or on behalf of
iVillage is not a guarantee of future performance. iVillage's actual results
could differ materially from those anticipated by such forward-looking
statements due to a number of factors, some of which are beyond iVillage's
control, including (i) the volatile and competitive nature of the Internet
industry, (ii) changes in domestic and foreign economic and market conditions,
(iii) the effect of federal, state and foreign regulation on iVillage's
business, (iv) failure of iVillage, its vendors or other third parties to
achieve Year 2000 compliance, (v) the impact of recent and future acquisitions
on iVillage's business and financial condition, (vi) intellectual property and
other claims and (vii) the impact on iVillage of its branding strategy and other
factors discussed under "Risk Factors" and elsewhere in this prospectus. All
such forward-looking statements are current only as of the date on which such
statements were made. iVillage does not undertake any obligation to publicly
update any forward-looking statement to reflect events or circumstances after
the date on which any such statement is made or to reflect the occurrence of
unanticipated events.
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USE OF PROCEEDS
We will not receive any proceeds from the sales of common stock by the
selling stockholders pursuant to this prospectus.
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.
PRICE RANGE OF COMMON STOCK
Our common stock has been traded on the Nasdaq National Market since
March 19, 1999 and trades under the symbol "IVIL". Prior to that time, there was
no public market for the common stock of iVillage. The following table sets
forth, for the periods indicated, the high and low prices per share of the
common stock as reported on the Nasdaq National Market.
1999 High Low
---- ---- ---
First Quarter (from March 19, 1999)........... $109.69 $64.38
Second Quarter................................ $130.00 $31.25
Third Quarter (through August 16, 1999)....... $ 67.88 $25.50
On August 16, 1999, the closing sales price of our common stock was
$44.25 per share. There were 170 holders of record as of August 13, 1999.
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CAPITALIZATION
The following table sets forth iVillage's capitalization as of June 30,
1999:
o on an actual basis; and
o on a pro forma basis to reflect the acquisition of Lamaze
Publishing.
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>
June 30, 1999
---------------------------------
Actual Pro forma
--------------- ----------------
(in thousands, except share data)
<S> <C> <C>
Long-term liabilities................................ $ -- $ --
Stockholders' equity:
Preferred stock, par value $.01; 5,000,000
shares authorized, no shares issued or
outstanding, actual and pro forma................. -- --
Common stock, par value $.01;
65,000,000 shares authorized, 24,324,218
and 26,073,009 shares issued and outstanding,
actual and pro forma, respectively................ 243 260
Additional paid-in capital........................ 302,430 399,016
Accumulated deficit............................... (134,549) (134,549)
Stockholders notes receivable..................... (14,681) (14,681)
Unearned compensation and deferred advertising.... (8,151) (8,151)
-------- -------
Total stockholders' equity........................ 145,292 241,895
-------- -------
Total capitalization.............................. $145,292 $241,895
======== ========
</TABLE>
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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 statement
of operations data for the six months ended June 30, 1999 and 1998 and the
consolidated balance sheet data as of June 30, 1999 are derived from the
unaudited consolidated financial statements of iVillage which are 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 in this prospectus. The results of
interim periods are not necessarily indicative of results for the full year.
Moreover, the historical annual results presented here are not necessarily
indicative of future results.
<TABLE>
<CAPTION>
July 1, 1995 Six Months
(inception) to Year Ended December 31, Ended June 30,
December 31, ------------------------------------ ----------------------
1995 1996 1997 1998 1998 1999
----------- --------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues........................................... $ -- $ 732 $ 6,019 $ 15,012 $ 4,838 $ 14,572
------- ------- -------- -------- -------- --------
Cost of revenues................................... 568 3,905 6,265 13,532 5,437 9,112
------- ------- -------- -------- -------- --------
Gross margin....................................... (568) (3,173) (246) 1,480 (599) 5,460
------- ------- -------- -------- -------- --------
Operating expenses:
Product development and technology.............. 61 616 1,341 989 986 3,038
Sales and marketing............................. 329 2,709 8,771 28,523 12,054 23,206
General and administrative...................... 656 3,104 7,841 10,612 4,206 7,872
Depreciation and amortization................... 17 109 2,886 5,683 2,658 7,519
------- ------- -------- -------- -------- --------
Total operating expenses...................... 1,063 6,538 20,839 45,807 19,904 41,635
------- ------- -------- -------- -------- --------
Loss from operations............................... (1,631) (9,711) (21,085) (44,327) (20,503) (36,175)
Interest (expense) income, net..................... (7) 28 (216) 591 237 1,513
Loss on sale of Web site(1)........................ -- -- -- (504) -- --
Minority interest.................................. -- -- -- 586 -- --
------- ------- -------- -------- -------- --------
Net loss........................................... (1,638) (9,683) (21,301) (43,654) (20,266) (34,662)
Preferred stock deemed dividend.................... -- -- -- -- -- (23,612)
Net loss attributable to common stockholders....... $(1,638) $(9,683) $(21,301) $(43,654) $(20,266) $(58,274)
======= ======= ======== ======== ======== ========
Basic and diluted net loss per share............... $ (1.51) $ (8.90) $ (13.65) $ (21.10) $ (3.28) $ (3.98)
======= ======= ======== ======== ======== ========
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 6,179 14,656
======= ======= ======== ======== ======== ========
Pro forma basic and diluted net loss per share(2).. $ (2.59) $ (2.77)
======== ========
Shares of common stock used in computing pro
forma basic and diluted net loss per share(2)... 16,854 21,027
======== ========
</TABLE>
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<TABLE>
<CAPTION>
December 31, June 30,
------------------------------------- --------
1995 1996 1997 1998 1999
------ ------ ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents.`............... $ 162 $2,102 $ 4,335 $30,825 $ 85,279
Working capital (deficit)................. (715) 1,006 1,114 19,919 76,504
Total assets.............................. 275 4,997 16,236 46,791 158,072
Long-term liabilities..................... -- -- 139 -- --
Stockholders' equity (deficit)............ (629) 3,259 10,522 32,022 145,292
</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.
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 16 channels organized by
subject matter. The channels cover leading topics of interest to women online,
such as family, health, work, money, food, computers, 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 83% and 73% of total revenues for the year ended December 31, 1998
and the six months ended June 30, 1999, respectively.
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 on iVillage's Web sites
and the design and development of customized sites that enhance the promotional
objectives of the sponsor. An impression is the viewing of promotional material
on a Web page, which may include banner advertisements, links, buttons or other
text or images. The portion of sponsorship revenues related to the delivery of
impressions is 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.
Accordingly, to the extent that minimum guaranteed impressions are not met,
iVillage defers recognition of the corresponding revenues until the guaranteed
impressions are met. 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
26
<PAGE>
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.
Sponsorship and advertising revenues also include barter revenues,
which represent exchanges 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
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 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. iVillage does not receive
cash for the advertisements delivered, nor do we pay for the advertisements
received. Typically, these barter transactions have no impact on iVillage's cash
flows and results of operations. Barter transactions enable iVillage to continue
to build strong brand recognition as part of its overall business strategy
without expending cash resources. Please see "Business - Business Strategy".
Commerce revenues are derived principally from sales through iBaby,
iMaternity (a new commerce channel launched during the second quarter of 1999)
and Astrology.Net. Commerce revenues received from iBaby consist of the sale of
baby-related products, including strollers, high chairs, bedding, toys and
accessories. iBaby takes all orders for iBaby products, collects the payment and
ships the items to the customer. Kid's Warehouse, iVillage's former joint
venture partner in iBaby, presently handles inventory and fulfillment for iBaby.
Effective November 1, 1999, the inventory and services agreement between iBaby
and Kid's Warehouse will be terminated and iBaby will become responsible for all
inventory and order fulfillment functions. In order to fulfill these functions,
iVillage recently signed a two year lease for approximately 40,000 square feet
of warehouse space for iBaby at a facility located in San Diego, California. The
failure of iVillage to assume effectively and in a timely manner the
merchandising, inventory management and order fulfillment functions currently
being performed by Kid's Warehouse could result in the disruption of the
operations of iBaby, including shipment delays.
Commerce revenues received from iMaternity consist of the sale of
maternity clothing and products through its Web site. All orders for iMaternity
products are taken through its channel on the iBaby Web site, and iBaby collects
the payment for product sales. The fulfillment of all product orders for
iMaternity is handled by Dan Howard, Inc. Revenues from Astrology.Net consist of
the sale of astrological charts and other related products to visitors to the
Astrology.Net Web site. iVillage recognizes revenues from iBaby, iMaternity and
Astrology.Net product sales, net of any discounts, when products are shipped to
customers and the collection of the receivable is reasonably assured.
With the acquisition of Lamaze Publishing, iVillage will generate
additional revenues principally through advertising placements in its
publications, videos and Newborn Channel satellite broadcasts. In addition,
revenues are expected to be generated through a sampling and coupon program
which offers advertisers the ability to distribute samples, coupons and
promotional literature to new and expectant mothers.
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<PAGE>
Results of Operations
The following table sets forth the results of operations for iVillage
expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, ----------------
--------------------------------------- June 30
1996 1997 1998 1998 1999
------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues ................................ 100% 100% 100% 100% 100%
------ ---- ---- ---- ----
Cost of revenues ........................ 533 104 90 112 63
------ ---- ---- ---- ----
Gross margin ......................... (433) (4) 10 (12) 37
------ ---- ---- ---- ----
Operating expenses:
Product development and technology 84 22 7 20 21
Sales and marketing .................. 370 146 190 249 159
General and administrative ........... 424 130 71 87 54
Depreciation and amortization ........ 15 48 38 55 52
------ ---- ---- ---- ----
Total operating expenses ............. 893 346 305 411 286
------ ---- ---- ---- ----
Loss from operations .................... (1,327) (350) (295) (424) (248)
====== ==== ==== ==== ====
Net loss ................................ (1,323)% (354)% (291)% (419)% (238)%
====== ==== ==== ==== ====
</TABLE>
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<PAGE>
Comparison of Six Months Ended June 30, 1999 and June 30, 1998
Revenues
Revenues were $14.6 million for the six months ended June 30, 1999,
which represented an increase of 201%, when compared with the corresponding
period in 1998. The increase in revenues was primarily due to iVillage's ability
to generate significantly higher sponsorship and advertising revenues during the
1999 period, as well as the development of its commerce strategy through its
investments in iBaby and Astrology.Net. Sponsorship, advertising and other
revenues were $10.7 million for the six months ended June 30, 1999, compared to
$4.3 million for the corresponding period in 1998. The increase in sponsorship,
advertising and other revenues was primarily due to an increase in the number of
impressions sold and an increase in the number of sponsors advertising on
iVillage's Web sites during the 1999 period. Sponsorship, advertising and other
revenues accounted for approximately 73% of total revenues for the six months
ended June 30, 1999. Commerce revenues accounted for $3.9 million, or 27% of
total revenues, for the six months ended June 30, 1999, compared to $0.5
million, or 11% of total revenues, for the six-month period in 1998.
Although no one advertiser accounted for greater than 10% of total
revenues for the six months ended June 30, 1999, iVillage's five largest
advertisers accounted for 22% of total revenues.
Included in sponsorship and advertising revenues are barter
transactions which accounted for approximately 12% of total revenues for the six
months ended June 30, 1999, compared to 25% for the comparable period in 1998.
Cost of Revenues
The principal elements of cost of advertising, sponsorship and other
revenues for iVillage's Internet operations are content costs, payroll and
related expenses for the editorial staff, Web site design and production staff
and the cost of communications and related expenses necessary to support
iVillage's Web sites. Cost of commerce revenues consist primarily of the cost of
products sold to customers and outbound and inbound shipping and handling costs.
Cost of advertising, sponsorship and other revenues was $6.1 million, or 57% of
advertising, sponsorship and other revenues, for the six months ended June 30,
1999. Cost of advertising, sponsorship and other revenues was $5.0 million, or
116% of advertising, sponsorship and other revenues, for the comparable period
in the prior year. Cost of advertising, sponsorship and other revenues, as a
percentage of these revenues, decreased during the six months ended June 30,
1999 due to the significant growth in advertising and sponsorship revenues over
the prior period. Cost of commerce revenues was $3.0 million, or 78% of commerce
revenues, for the six months ended June 30, 1999, compared to $0.4 million, or
85% of commerce revenues, for the corresponding period in 1998.
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<PAGE>
Operating Expenses
Product Development and Technology. Product development and technology
expenses consist primarily of salaries, payroll taxes and benefits and related
expenditures for support, technology, software development and operations
personnel. Product development and technology expenses for the six months ended
June 30, 1999 was approximately $3.0 million, or 21% of total revenues. Product
development and technology expenses was $1.0 million, or 20% of total revenues,
for the corresponding period in 1998. The increase was primarily attributable to
additional personnel costs related to creating and testing new channel concepts
and tools to be used throughout iVillage's network of Web sites.
Sales and Marketing. Sales and marketing expenses consist primarily of
costs related to distribution agreements, salaries, payroll taxes and benefits
for sales and marketing personnel, commissions, advertising and other
marketing-related expenses and distribution facility expenses related to the
iBaby operations. Distribution expenses consist primarily of payroll and related
expenses for personnel engaged in marketing, customer service and distribution
activities as well as equipment and supplies. Sales and marketing expenses for
the six months ended June 30, 1999 were approximately $23.2 million, or 159% of
total revenues. Sales and marketing expenses were $12.1 million, or 249% of
total revenues, for the comparable period in 1998. The dollar increase in sales
and marketing expenses between the 1998 and 1999 periods was primarily
attributable to iVillage's advertising campaign on the Internet and television
in accordance with its agreement with NBC. Sales and marketing expenses as a
percentage of revenues decreased between the 1998 and 1999 periods as result of
the growth in revenues.
Included in sales and marketing are barter transactions which amounted
to approximately 12% of total revenues during the six months ended June 30,
1999, compared to 25% of total revenues during the comparable period in 1998.
General and Administrative. General and administrative expenses consist
primarily of salaries, payroll taxes and benefits and related costs for general
corporate overhead, including executive management, finance, facilities, and
legal and other professional fees. General and administrative expenses for the
six months ended June 30, 1999 were $7.9 million, or 54% of total revenues. For
the comparable period in 1998, general and administrative expenses were $4.2
million, or 87% of total revenues. The increase in general and administrative
expenses between the 1998 and 1999 periods 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 to support the growth of iVillage's
business. General and administrative expenses decreased as a percentage of total
revenues as a result of the growth in revenues in the six months ended June 30,
1999 compared to the comparable period in 1998.
Depreciation and Amortization. Depreciation and amortization expenses
for the six months ended June 30, 1999 were $7.5 million, or 52% of total
revenues. For the comparable period in 1998, depreciation and amortization
expenses were $2.7 million, or 55% of total revenues. The dollar increase
between the 1998 and 1999 periods was primarily attributable to increased
amortization expense resulting from iVillage's acquisitions of iBaby and
Astrology.Net, as well as depreciation on a greater base of fixed assets owned
by iVillage during the 1999 period.
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Interest Income, Net. Interest income, net includes interest income
from iVillage's cash balances and interest expenses related to iVillage's
financing obligations. Interest income, net for the six months ended June 30,
1999 was $1.5 million, or 10% of total revenues. For the comparable period in
1998, interest income, net was $0.3 million, or 5% of total revenues. The
increase between the 1998 and 1999 periods was primarily due to higher average
net cash and cash equivalents balances resulting primarily from the cash
received from iVillage's initial public offering of common stock in March 1999.
Net Loss. iVillage recorded a net loss of $34.7 million, or $3.98 per
share, for the six months ended June 30, 1999. The net loss per share for the
six months ended June 30, 1999 includes a deemed dividend of $23.6 million
incurred as a result of the difference between the purchase price of the series
E convertible preferred stock sold to NBC during the first quarter of 1999, and
the fair market value on the date of issuance. For the comparable period in
1998, the Company recorded a net loss of $20.3 million.
Comparison of Years Ended December 31, 1998 and 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.
Although no one advertiser accounted for greater than 10% of total
revenues for the year 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 due to a significant
invoice billed close to year-end. A large portion of the invoice was recorded as
deferred revenue and recognized as revenue in 1998, when the services were
provided. Included in sponsorship and advertising revenues are barter
transactions which accounted for approximately 20% and 10% of total 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.
Cost of Revenues
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Cost of advertising, sponsorship and other revenues were $11.3 million
and $6.3 million, or 91% and 104% of advertising, sponsorship and other
revenues, for the years ended December 31, 1998 and 1997, respectively. Cost of
advertising, sponsorship and other revenues, as a percentage of these revenues,
decreased during the year ended December 31, 1998 when compared to the year
ended December 31, 1997 due to the significant growth in advertising and
sponsorship revenues over the prior period. Cost of commerce revenues were $2.2
million or 85% of commerce revenues, for the year ended December 31, 1998. There
were no cost of commerce revenues for the year ended December 31, 1997. Cost of
commerce revenues, as a percentage of these revenues, increased during the year
ended December 31, 1998 when compared to the year ended December 31, 1997 due to
the joint venture between iVillage and iBaby in 1998.
Operating Expenses
Product Development and Technology. Product development and technology
expenses for the years ended December 31, 1998 and 1997, were approximately $1.0
million, or 7% of total revenues, and $1.3 million, or 22% of total revenues,
respectively. The decrease in product development and technology relates to
numerous channels that were in the development and pre-launch stages in the year
ended December 31, 1997.
Sales and Marketing. 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 on
the Internet, television and in print and higher advertising and sales personnel
expenses of about $3.0 million. iVillage invested heavily in distribution
arrangements during the year ended December 31, 1998. These distribution
agreements, with major Web search and retrieval and other online service
companies, generally range from one to two years and include the placement of
promotional features or textual links to iVillage sites. Sales and marketing
expenses as a percentage of revenues increased due to iVillage's branding
campaign, increased distribution agreements and additional personnel in our
sales department. 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
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 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.
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<PAGE>
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 1998.
Minority Interest
Minority interest represents the portion of the net loss of iBaby
attributable to minority stockholders. On March 25, 1999, iVillage completed its
purchase of all of the outstanding shares of iBaby held by the minority
stockholders of iBaby.
Income Taxes
As of December 31, 1998, iVillage had approximately $69.9 million of
net operating loss carryforwards for federal 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.
33
<PAGE>
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,
respectively. 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.
Cost of Revenues
Cost of advertising, sponsorship and other revenues were $6.3 million
and $3.9 million, or 104% and 533% of advertising, sponsorship and other
revenues, for the years ended December 31, 1997 and 1996, respectively. Cost of
advertising, sponsorship and other revenues as a percentage of these revenues,
decreased during the year ended December 31, 1997 when compared to the year
ended December 31, 1996 due to the significant growth in advertising and
sponsorship revenues over the prior period. There were no cost of commerce
revenues for years ended December 31, 1997 and 1996.
Operating Expenses
Product Development and Technology. Product development and technology
expenses for the years ended December 31, 1997 and 1996, were approximately $1.3
million, or 22% of total revenues, and $0.6 million, or 84% of total revenues,
respectively. The increase was primarily attributable to additional personnel
costs related to creating and testing new channel concepts and tools to be used
throughout iVillage's network of Web sites.
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 decreased because of the growth in revenues.
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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 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), 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 $334,000.
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Recent Events
Lamaze Publishing. On July 13, 1999, iVillage entered into an agreement
to acquire all of the outstanding stock of Lamaze Publishing, a multimedia
provider of education information to expectant and new mothers. The total
purchase price consisted of 1,748,791 shares of iVillage common stock, subject
to certain adjustments, and approximately $5 million to repay debt. The
difference between the purchase price of $102.3 million as calculated according
to generally accepted accounting principles and the fair value of the acquired
net assets of Lamaze Publishing will be recorded as goodwill and amortized over
the period of expected benefit which is estimated at ten years.
The closing of the transaction is subject to customary closing
conditions and the filing of a registration statement with the SEC covering the
resale of the issued shares of which this prospectus is a part.
According to the terms of the agreement, iVillage will direct a portion
of the common stock it issues in the transaction to redeem certain stock
appreciation units of Lamaze Publishing, to pay the fees and expenses of Lamaze
Publishing's investment banker, Brown Brothers Harriman & Co., and to pay
certain fees to Lamaze International, Inc. iVillage will also direct a portion
of the shares into an escrow account as security for the indemnification
obligations of the selling shareholders of Lamaze Publishing. The holders of the
stock appreciation units of Lamaze Publishing will receive their shares after
the closing of the transaction and immediately prior to the effectiveness of the
registration statement. iVillage will put a portion of their shares into the
indemnification escrow account, and another portion is expected to be sold to
cover applicable withholding taxes.
Lamaze Publishing will survive as a wholly-owned subsidiary of
iVillage, and certain key employees of Lamaze Publishing will continue as
employees.
OnLine Psych. On June 30, 1999, iVillage acquired OnLine Psychological
Services, Inc. and Code Stone Technologies, Inc. As a result of the acquisition,
OnLine Psych and Code Stone became wholly-owned subsidiaries of iVillage. OnLine
Psych operates a Web site focusing on mental health issues while Code Stone
provides much of the interactive technology used on OnLine Psych's Web site.
The aggregate purchase price paid to acquire OnLine Psych and Code
Stone consisted of $1.5 million cash and approximately 577,000 shares of
iVillage common stock valued at approximately $30.0 million under purchase
accounting rules. The difference between the purchase price and the fair value
of the acquired net assets of OnLine Psych and Code Stone has been recorded as
goodwill and is being amortized over the period of expected benefit which is
estimated to be three years.
iVillage also issued to certain stockholders of OnLine Psych options to
purchase shares of iVillage common stock under its Acquisition Stock Option Plan
and Employee Stock Option Plan. Each of these options, which are contingent upon
continued employment with OnLine Psych, vest over a period of seven years, with
accelerated vesting dependent on OnLine Psych meeting certain revenue and other
performance targets. iVillage also granted to the founding stockholders of
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OnLine Psych, subject to its existing registration rights agreements, piggyback
registration rights in connection with the shares.
We have been approached by a potential purchaser for the assets
associated with Armchair Millionaire, a site located on our Money channel, and
have begun negotiations. We do not believe that the sale of the Armchair
Millionaire assets would have a material adverse impact on our business, results
of operations or financial condition.
Quarterly Results Of Operations
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 acquisitions or other business combinations;
o technical difficulties or system downtime affecting the
Internet generally or the operation of our Web sites;
o the dilutive effect of acquisitions; 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.
The following table sets forth unaudited quarterly consolidated
statement of operations data for each of the eight quarters during the years
ended December 31, 1997 and 1998 and for the first and second quarters ended
March 31, 1999 and June 30, 1999, respectively. In the opinion of
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<PAGE>
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 and unaudited
financial statements for the six months ended June 30, 1999 of iVillage and the
notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Three Months Ended
March June 30, September December March June September
31, 30, 31, 31, 30, 30,
1997 1997 1997 1997 1998 1998 1998
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $891 $ 1,253 $ 1,518 $ 2,357 $ 2,200 $ 2,638 $ 4,288
Cost of revenues........ 1,267 1,450 1,563 1,985 2,175 3,262 3,982
------ ------- ------- ------- ------- ------- ---------
Gross margin............ (376) (197) (45) 372 25 (624) 306
Product development and
technology............ 240 295 342 464 482 504 3
Sales and marketing..... 1,507 1,957 1,935 3,372 4,870 7,184 7,877
General and
administrative.......... 996 2,216 1,967 2,662 2,004 2,202 3,606
Depreciation and
amortization.......... 510 687 1,034 655 1,261 1,397 1,386
------- ------- ------- ------- ------- -------- --------
Total operating
expenses................ 3,253 5,155 5,278 7,153 8,617 11,287 12,872
------- ------- ------- ------- ------- -------- --------
Loss from operations.... $(3,629) $(5,352) $(5,323) $(6,781) $(8,592) $(11,911) $(12,566)
======== ======== ======== ======= ======= ======== ========
<CAPTION>
Three Months Ended
December March June
31, 31, 30,
1998 1999 1999
--------- -------- --------
<S> <C> <C> <C>
Revenues................ $ 5,886 $ 6,464 $ 8,108
Cost of revenues........ 4,113 4,902 4,210
--------- -------- --------
Gross margin............ 1,773 1,562 3,898
Product development and
technology............ - 1,685 1,353
Sales and marketing..... 8,592 10,888 12,318
General and
administrative.......... 2,800 4,025 3,847
Depreciation and
amortization.......... 1,639 2,854 4,665
--------- -------- --------
Total operating
expenses................ 13,031 19,452 22,183
--------- -------- --------
Loss from operations.... $(11,258) $(17,890) $(18,285)
========= ======== ========
</TABLE>
Liquidity and Capital Resources
Until its initial public offering in March 1999, which raised net
proceeds of $91.4 million, iVillage financed its operations primarily through
the private placement of its convertible preferred stock. As of June 30, 1999,
iVillage had approximately $85.3 million in cash and cash equivalents.
Management believes its existing cash balances are sufficient to enable iVillage
to meet its obligations through at least the next 12 months.
Net cash used in operating activities increased to $26.2 million for
the six months ended June 30, 1999 from $17.0 million for the six months ended
June 30, 1998. The increase in net cash used in operating activities resulted
primarily from increased net losses and the payment of accrued liabilities. The
increased net loss was primarily due to the continued investment in establishing
the iVillage brand on the Internet through further investment in content and
technology. Net cash used in operating activities amounted to $32.3 million for
the year ended December 31, 1998, $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 was $12.5 million in the six
months ended June 30, 1999. This compares to net cash used in investing
activities of $2.7 million for the six months ended June 30, 1998. The increase
in net cash used in investing activities resulted primarily from the
acquisitions of iBaby and Astrology.Net in the first quarter of 1999 and the
acquisitions of
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OnLine Psychological Services, Inc and Code Stone Technologies, Inc. during the
second quarter of 1999. 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 amounted to $93.2 million for
the six months ended June 30, 1999, compared to $32.8 million for the six months
ended June 30, 1998. The increase was primarily due to the receipt of $91.4
million of net proceeds from the Company's initial public offering in March
1999. 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.
The Company has recently signed a two year lease for approximately
40,000 sq. ft. of warehouse space for iBaby at a facility located in San Diego,
California. The Company has begun the build-out of the warehouse in anticipation
of the termination of the Company's inventory and fulfillment relationship with
Kid's Warehouse, which is effective November 1, 1999.
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, including acquisition of other entities;
o the resources iVillage devotes to marketing;
o the resources iVillage devotes to selling its services and
brand promotions; and
o other factors.
iVillage has experienced a substantial increase in its expenditures
since its inception. The increase in expenditures is consistent with the growth
in iVillage's operations and staffing. iVillage anticipates it will continue to
evaluate possible investments in businesses, products and technologies, and
continue to expand its sales and marketing programs and conduct more aggressive
brand promotions, any of which could reduce its liquidity.
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
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software development or obtained for internal use including the requirement to
capitalize specified costs and amortization of such costs. This standard did not
have a significant 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 did not 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 derivative instruments embedded
in other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters beginning fiscal
year 2001. 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 Year 2000 requirements or risk system failure
or miscalculations causing disruptions of normal business activities.
State of Readiness
iVillage is engaged in an ongoing 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 and replacement requirements;
o implementing repair or replacement;
o implementation; and
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o if deemed necessary or appropriate, creating contingency plans
in the event of Year 2000 failures.
iVillage has engaged Keane, Inc., a consulting firm with Year 2000
experience, to assist it with its Year 2000 compliance program.
iVillage's Year 2000 task force has conducted an inventory of and
developed 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 iVillage uses, a significant part of
this effort will be to ensure that these third-party systems are Year 2000
compliant. iVillage plans 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
Through June 30, 1999, iVillage has spent approximately $215,000 on
Year 2000 compliance issues but expects to incur an additional $85,000 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
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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, The Women's Network, is a leading online network for women
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 54. We provide
advertisers and merchants with targeted access to women using the Web.
iVillage's network of sites consists of 16 channels organized by
subject matter. The channels cover leading topics of interest to women online,
such as family, health, work, money, food, computers, 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 June 30, 1999, iVillage's membership and its core audience was
approximately 82% female and consisted of approximately 2.1 million unique
members as compared to approximately 170,000 unique members as of January 31,
1998. For the quarter ended June 30, 1999, iVillage.com averaged approximately
102 million page views. For the month of June 1999, iVillage estimates that it
had 6 million unique visitors.
iVillage values its membership because members typically spend more
time on the network as evidenced by greater page views and repeat visits than
non-members. Furthermore, based upon iVillage surveys, members have a higher
opinion of iVillage.com than non-members and are more likely to think that the
network delivers advertising relevant to them. In addition, members tend to
contribute more content to the network.
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 will 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 in 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.
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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 Communications, 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.
Need for a Network Directed to Women
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. We believe 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.
Lamaze Publishing and the Young Family Market
The acquisition of Lamaze Publishing by iVillage will add the Internet
as a critical component of the Lamaze Publishing communications program,
bringing the benefits of community and interactivity to new families and the
advertisers who want to reach them.
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The birth of a child signals not only a lifestyle transition for new
parents, but also a major change in spending patterns and brand preferences. The
Juvenile Products Manufacturers Association and U.S. Department of Commerce
estimate expenditures for juvenile furniture and nursery accessories, baby food,
baby care items and infant apparel at $19.5 billion per year.
Young families making purchase decisions in all these areas typically
lack both preconceived brand preferences and product knowledge, and at the same
time, are anxious to learn about childbirth, infant care and the many important
health issues that confront them. Lamaze Publishing publications and the Newborn
Channel strive to fulfill these critical educational roles for both advertisers
and new parents.
Childbirth educators, maternity nurses and hospitals can use Lamaze
Publishing products and the Newborn Channel as teaching tools, and parents often
view them as credible, trusted sources of information. Advertisers can benefit
by reaching parents prior to and immediately after the birth of a child when
many purchase decisions are being made and brand preferences are being formed
that will last for years.
As media usage patterns and demographics have changed, Lamaze
Publishing has changed with them, adding video instructional products,
in-hospital broadcasting and Spanish-language teaching materials to the
magazines with which the company began.
The iVillage Solution
iVillage.com is one of the largest online networks for women 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 54. 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:
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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;
o ask a health expert questions regarding 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. iVillage.com also
offers daily polls, message boards and chat 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. As of June 30, 1999,
iVillage.com's home page on both the Internet and AOL provided users with links
each week to approximately 76 experts, 1,053 chats and 1,797 message boards.
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 1,600 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 8.0 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:
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o banner advertising;
o sponsorship;
o production;
o e-commerce;
o with the proposed acquisition of Lamaze Publishing, satellite
television through the Newborn Channel;
o print media;
o direct mail;
o video production; and
o sampling.
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. In addition, we have pursued acquisitions which, among
other things, give us new vehicles to reach and capture our target audience,
provide new solutions for advertisers and add to our ability to grow our overall
business. 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 also uses
barter transactions as a significant component of its online marketing efforts.
iVillage expects barter transactions to continue to be an important part of its
business strategy. 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
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
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syndicated column with Copley News Services based upon iVillage content and has
arranged to publish four books under the Parent Soup brand in order to reach
offline audiences.
The acquisition of Lamaze Publishing also is expected to build brand
recognition for iVillage. Lamaze Publishing currently estimates that it reaches
more than 75% of all women giving birth in the United States through its
magazines, videos and the Newborn Channel, its satellite television network
broadcasting in over 800 hospitals in the United States. Lamaze Publishing
presents attractive opportunities for advertisers to have access to the majority
of U.S. parents and prospective parents through one single source.
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 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.
Our recent acquisition of OnLine Psych and our proposed acquisition of Lamaze
Publishing allows us to expand our network through a strong brand, expert
content, and audio and video content which increases our online content to
women.
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. Through its proposed acquisition of Lamaze Publishing,
iVillage will also offer advertising
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opportunities in addition to its network over multiple platforms such as
satellite television, video and print. iVillage has recently increased the size
of 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 or complement a current 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. 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 and
two shopping 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 August 16, 1999:
Channel Description
astrology A site providing users with
horoscopes, celebrity profiles, romance charts,
monthly guidance and the ability to purchase
astrology reports.
baby shop A shopping destination offering users access to all
of their retail baby needs featuring iBaby
and iMaternity.
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.
The site also includes Online Psych which hosts
the largest online bulletin board system on mental
health issues and the largest online database of
mental health treatment providers.
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.
click! where A site offering users information on computers,
computers including experts, tools, message boards and chats.
make sense
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 which includes Food Experts
and Cooking Basics.
moneylife A financial planning site providing users with
information on savings and investment strategies
focusing on key life stages of women.
parent soup A parenting site providing users with a branded
online community where parents share parenting
solutions, talk with experts and find answers and
support.
parentsplace 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.
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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.
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
Amazon.com, Planet Rx, Walmart, Lands End, iBaby and
iMaternity.
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.
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 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,
1997 and 1998 and the six months ended June 30, 1999, sponsorship and
advertising revenues represented 93%, 80% and 73%, 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 and online research. 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 allows 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 can be exclusive
and generally are for a period of one to three years.
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iVillage also derives a smaller 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 believes that it has CPMs significantly above the
industry average, and above the reported average for other women's sites.
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. During the six months ended June 30, 1999,
iVillage's five largest advertisers accounted for 22% of total revenue. No
advertiser accounted for more than 10% of iVillage's revenues during either year
or six-month period. As of December 31, 1998 and June 30, 1999, one advertiser
accounted for approximately 17% of the total revenues of Lamaze Publishing.
Additionally, revenues from Lamaze Publishing's ten largest advertisers
accounted for approximately 63% and 65% of its total revenues for the year ended
December 31, 1998 and for the six months ended June 30, 1999, respectively.
Membership
iVillage believes a large and active membership base is critical to its
success. Some features of iVillage's Web sites are restricted to members.
Membership is free and available to iVillage.com visitors who disclose their
names, e-mail addresses, zip codes, ages 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.
E-mail, instant messaging, community challenges, message boards and
chats are examples of members-only benefits. In addition, within the Health
channel, the personal health report is restricted to members and within the
Parent Soup channel, the pregnancy calendar is restricted to 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. 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 some
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 particular region or target
advertisements to all users who frequent a specific area of the site.
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E-Commerce
Overview
iVillage has identified the opportunity to generate new commerce
revenues by selling products or services that have a high degree of relevance to
its members and fit within a content area or provide an opportunity for future
content development.
iBaby
iBaby offers more than 5,000 products from over 400 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 57 full-time employees as of June 30, 1999.
iBaby targets parents through newsletters, message boards, content
integration and banner ads. iBaby has distribution agreements with online
services such as AOL and Yahoo!. iBaby has also initiated a substantial print
advertising campaign in various magazines to increase sales and build brand
awareness.
Online orders are taken 24 hours a day, seven days per week and
products are shipped 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. As of November 1, 1999, the agreement between Kid's Warehouse
and iBaby will be terminated and iBaby will become responsible for inventory and
storage.
During the second quarter of 1999, iBaby launched an additional
commerce channel, iMaternity. iMaternity sells iMaternity brand clothing and
products. All product orders and fulfillment are currently handled by Dan
Howard, Inc. All orders for iMaternity are taken through its channel on the
iBaby Web site, and iBaby collects the payment for product sales.
Lamaze-licensed products will also be offered through iBaby.
Astrology.Net
Astrology.Net is a leading destination for women seeking daily
horoscopes, astrology content and personalized forecasts online. 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 strong 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
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instantaneous, digital astrology reports. The system consists of software which
operates the Web site and is capable of generating customized astrology reports
based on input from 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 has begun 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 advertising and promotional
agreement with NBC pursuant to which NBC promotes iVillage.com on television,
primarily during prime-time programs, as well as through its Web sites. In March
1999, iVillage and NBC amended their November 1998 agreement to provide for the
purchase by iVillage, for cash, of $13.5 million of advertising and promotional
spots during 1999 and $8.5 million per year during 2000 and 2001. In addition,
iVillage issued 4,889,030 shares of series E convertible preferred stock
(converted into 1,629,676 shares of common stock upon the initial public
offering) and warrants 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 quarterly in twelve equal installments beginning April 1, 1999.
Sponsorship Arrangements
In October 1998, iVillage entered into a two-year agreement with AT&T
under which iVillage promotes and markets specified AT&T telecommunication
services in exchange for minimum payments based upon delivered impressions. In
return, AT&T displays a text link for iVillage.com on the AT&T WorldNet Service
and promotes and markets iVillage.com through AT&T mass media marketing.
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. The agreement's term is for a period of
three years; however, Schwab may terminate the agreement by providing notice to
iVillage at least ninety days prior to each one-year anniversary of the
agreement.
In December 1998, iVillage entered into a sponsorship agreement with
Ford Motor Media under which Ford Motor Media promotes the sale of its
automotive products across the iVillage Web sites. The agreement is for a term
of two years and provides for advertising and consumer research on behalf of
Ford Motor Media.
In October 1998, iVillage entered into an agreement with Ralston Purina
under which the two parties agreed to create a pet channel. Ralston Purina
agreed to provide content, experts, customer service and distribution for the
pet channel. The agreement's term is for a period of two years.
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In March 1999, iVillage entered into an agreement with Warner Lambert
under which iVillage will promote and market a range of products. iVillage will
also create, in conjunction with Warner Lambert, a range of mini-sites and
promotions relating to the agreement. The agreement will expire no later than
the second quarter of 2000, subject to renewal.
In March 1999, iVillage entered into a seven-month agreement with
Bozell Worldwide, Inc. acting as agent for the International Dairy Foods
Association, which in turn is the agent for the National Fluid Milk Processor
Promotion Board, under which iVillage and the Board will create a co-branded
mini-site. As part of the agreement, iVillage will also create an interactive
tool, host online conferences as well as administer a community workshop
relating to the healthy consumption of calcium.
In April 1999, iVillage entered into an agreement ending on December
31, 1999 with Glaxo Wellcome Inc., under which Glaxo has been granted the
exclusive sponsorship for certain disease categories throughout the iVillage
network. As part of the agreement, iVillage will create resource centers for
certain disease categories to reside on the health channel of the iVillage
network
In June 1999, iVillage entered into a two-year agreement with Fuji
Photo Film USA, Inc., under which Fuji has been granted the exclusive
sponsorship for the photographic film, disposable camera and digital camera
categories throughout the iVillage network. As part of this agreement, iVillage
and Fuji will build a Photo Center on the network which shall be promoted
through the delivery of advertising impressions.
In July 1999, iVillage entered into a nine-month agreement with GE
Appliances, an operating component of the General Electric Company, under which
GE Appliances was granted an exclusive sponsorship of the speed cooking ovens
category throughout the iVillage network. As part of the agreement, iVillage and
GE will create a marketing area for the "Advantium" product line on the iVillage
network that will be promoted through the delivery of advertising impressions.
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.com 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.
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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. We believe such agreements provide iVillage with a
cost-effective means of acquiring content and provide 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.
Lamaze Publishing
Lamaze Publishing produces advertising-supported educational materials
for expectant and new parents. Lamaze Publishing is the exclusive licensee of
the LAMAZE mark for use in connection with consumer publications and other
communications, which include print, audio, visual and other consumer oriented
media, that are commercial in nature. Lamaze Publishing is also the exclusive
marketing agent for Lamaze International, Inc., the owner of the LAMAZE family
of marks.
Lamaze is a method of childbirth preparation based on the Lamaze
philosophy of birth. The Lamaze philosophy of birth states that birth is
"normal, natural and healthy," and "childbirth education empowers women to make
informed choices in healthcare, to assume responsibility for their health and
trust their inner wisdom".
Lamaze International was founded by interested parents, childbirth
educators and healthcare providers in 1960 to promulgate these ideas. Lamaze
Publishing was established as a for-profit company in 1990 to provide childbirth
and infant care educational materials.
During a pregnancy and immediately after the birth of a child, new
parents spend substantial amounts of time with childbirth educators and
maternity nurses seeking information on healthcare issues, the birth process and
infant care. These busy healthcare professionals typically
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have neither the time nor the resources to create the consumer publications or
communications that would assist this process and allow parents to absorb this
material at home.
The Lamaze Publishing business strategy is to provide these consumer
publications or communications to childbirth educators and maternity nurses free
of charge, and offset the expense incurred by selling print advertising and
commercial messages to advertisers who target the young family market.
Lamaze Publishing publications, used and distributed to parents by
childbirth educators and maternity nurses nationwide, include:
o Lamaze Parents, a prenatal publication used in childbirth
education. Topics include prenatal nutrition, the role of the
childbirth partner, and the physical and emotional challenges
of pregnancy. Childbirth educators distribute Lamaze Parents
to expectant parents on the first night of class. This
publication reaches an estimated 75% of all non-Hispanic women
giving birth in the U.S. Lamaze Parents had an average annual
circulation of approximately 2,400,000 for 1998.
o Lamaze Baby, a parenting guide for mothers from the time a
child is born through twelve months of life written entirely
by healthcare professionals. Lamaze Baby is delivered by
maternity nurses to new mothers at the hospital bedside
shortly after childbirth. The magazine covers topics that
hospital nurses review with new mothers prior to discharge
serving as a helpful and time saving tool for nurses in
educating mothers about infant care. Lamaze Baby had an
average annual circulation of approximately 3,000,000 for
1998.
o Revista Lamaze para Padres, a Spanish-language prenatal
magazine which reaches more expectant Hispanic mothers than
any other title. Childbirth educators distribute Revista
Lamaze para Padres to expectant parents on the first night of
class. This publication reaches an estimated 85% of Hispanic
woman giving birth. Revista Lamaze para Padres had an average
annual circulation of approximately 575,000 for 1998.
o "Lamaze You and Your Baby", a 90 minute video textbook
providing expectant parents with important instruction on
infant care. Childbirth educators distribute to expectant
parents the video, which is later returned. The video is
distributed yearly to childbirth educators, typically during
the first four months of the year. As of April 1999,
approximately 7,600 childbirth educators had ordered
approximately 160,000 videos from Lamaze Publishing.
o "Lo Mejor para Su Bebe", a 60 minute Spanish-language video
textbook that provides expectant parents with important
instruction on infant care. This video is modeled after
"Lamaze You and Your Baby". The video is distributed yearly to
childbirth educators, typically during the first four months
of the year. As of April 1999, approximately 4,300 childbirth
educators ordered approximately 40,000 videos from Lamaze
Publishing.
o Lamaze Special Delivery, a program offering advertisers the
ability to distribute
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coupons, samples and promotional literature to expectant and
new parents. Information to be distributed is polybagged with
Lamaze Parents, Lamaze Baby and Revista Lamaze para Padres.
Lamaze Publishing also owns the Newborn Channel, a satellite television
network that instructs mothers in their hospital rooms following birth in over
800 hospitals nationwide and, as of June 30, 1999, reached approximately
2,000,000 new mothers.
Sales, Marketing and Public Relations
Sales
As of June 30, 1999, iVillage had a direct sales organization,
consisting of 10 sales professionals with an average of 14 years of experience,
and 31 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. iVillage generally seeks to hire individuals
with significant experience in selling advertising and preexisting relationships
with advertisers in a variety of media.
As of June 30, 1999, Lamaze Publishing had a direct sales organization
consisting of 10 sales professionals and three support personnel. Three
professionals concentrate primarily on advertising sales for the Newborn Channel
and video products, and six concentrate on print advertising sales. One
salesperson is dedicated solely to the sale of Special Delivery promotional
products. Due to the targeted nature of Lamaze products, sales professionals
have particular experience and expertise in the juvenile products and infant
care markets and work closely with advertisers and their agencies to maximize
brand awareness and sales to the young parent market.
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. 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 39 marketing professionals as of June 30,
1999.
iVillage has recently begun to market its brand offline. In November
1998, iVillage entered into an agreement with NBC, under which iVillage receives
advertising on the NBC network. Occasionally, iVillage uses print, radio, direct
mail and other media to reach its core audience with relevant news or offers.
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
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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.
To maximize distribution of its publications and the Newborn Channel,
and gain the endorsement of the professional community for these products,
Lamaze Publishing gives particular attention to marketing efforts targeted to
childbirth educators, maternity nurses and hospitals. A staff of four marketing
professionals contracts hospitals for distribution of the Newborn Channel and
works with the professional community to maintain distribution levels of Lamaze
Publishing publications and demonstrate how they can be used as teaching tools
for expectant parents and new mothers. Lamaze Publishing representatives attend
nine trade shows and professional conferences per year and also maintain contact
with the professional community through consumer publication updates and
personal sales calls.
In the advertising sales area particular attention is paid to market
research and providing advertisers information and expertise that will help them
market their products more effectively using products distributed in an
educational setting. In addition to information on readership, viewing levels
and advertising recall, studies are regularly conducted on purchasing patterns,
attitudes and brand preferences of expecting and new parents for dissemination
to advertisers.
Public relations activities include traditional press contacts to
encourage publicity on new articles and programming in Lamaze Publishing
products and the results of research among young parents. Events for advertisers
and agencies are also conducted on a regular basis to increase the overall
visibility of Lamaze Publishing and the Newborn Channel.
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Operating Infrastructure
iVillage's Internet 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
more than 30 servers. Key attributes of this infrastructure include the ability
to support growth, performance and service availability.
iVillage's servers run on the Sun Solaris, Microsoft NT and Linux
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., Verio, Inc. in San Francisco, California
and the San Diego Data Center of AT&T CERFnet. iVillage's operations are
dependent upon these companies' ability to protect its systems against damage
from fire, hurricanes, power loss, telecommunications failure, break-ins and
other events.
Exodus, Verio and AT&T CERFnet provide comprehensive facilities
management services, including human and technical monitoring of all production
servers 24 hours per day, seven days per week. However, Verio's facility is not
staffed at all times. Each of these companies provides the means of connectivity
for iVillage's servers to end-users via the Internet through multiple
connections. Each 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, except Astrology.Net, are copied to
backup tapes each night and stored at a third party, off-site storage facility.
iVillage expects to begin daily off-site backup of Astrology.net data shortly.
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 emergency
response team alerts are read, and, where appropriate, recommended action is
taken to address security risks and vulnerabilities. From time to time, iVillage
uses the services of third party computer security experts and penetration tests
have been performed to help improve security.
Our Web sites must accommodate 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.
Broadcasting of the Newborn Channel to hospitals originates from a
laser disc system operated by Group W, a division of Westinghouse Electric
Corp., from Group W's facility in Stamford, Connecticut. The system provides an
uplink signal to a satellite operated by PanAmSat. The signal is received
through a satellite dish at each hospital and distributed to patients' rooms.
Group W handles installation and service of all hospital receiving equipment.
Lamaze Publishing maintains business interruption insurance in the event
programming is interrupted over the designated satellite.
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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 and
Oxygen Media's Web sites, as well as web sites targeted to categories such as
health. iVillage also competes with e-commerce companies such as eToys, Inc. and
its wholly-owned subsidiary, BabyCenter, Inc. 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,
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, 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 and traditional media
companies, 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 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:
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o iVillage will be able to grow its membership, traffic levels
and advertiser customer-base at historical levels;
o iVillage will be able to retain its current members, traffic
levels or advertiser customers;
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 iVillage's strategic partners will not sever or will elect not
to renew their agreements with iVillage.
Several major publishing companies produce products that are directly
competitive with Lamaze Publishing magazines. Time Warner, Gruner and Jahr and
Primedia all publish various pre and postnatal publications. Disney Publishing
and Children's Television Workshop also publish general parenting magazines. All
of these publishers have substantially greater marketing, research and financial
resources than Lamaze Publishing. Lamaze Publishing competes by emphasizing the
highly targeted nature of its audience, product quality and the fact that its
publications are used as teaching tools by professionals, and the credibility
and trust parents place in the Lamaze brand name.
While Lamaze Publishing instructional videos and the Newborn Channel
currently have no direct competitors, advertisers in this marketplace are heavy
users of daytime network television and cable television networks targeted to
young parents. The broadcasting companies that provide such opportunities have
invested substantial amounts in programming, sales and marketing and are much
better-known to advertisers than Lamaze Publishing and the Newborn Channel. To
compete, Lamaze Publishing and the Newborn Channel must convince them that
advertising recall and effectiveness obtained in an educational or hospital
setting is superior to that of traditional broadcasting.
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
names, 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 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.
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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 licensees, 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 patents, 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, alter its site format and pay financial damages. There can be no
assurance that such changes of trademarks, alteration of content or format or
payment of financial damages will not adversely affect iVillage's business,
results of operations and financial condition.
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 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.
iVillage has acquired a new, proprietary brand, allHealth, 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.
Children's Services has proposed a resolution of this dispute that would allow
us to continue using the mark "PARENTSPLACE.COM". There can be no assurance that
a resolution can be achieved or 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.
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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 June 30, 1999, iVillage employed 289 full-time employees, of whom
73 were in sales and marketing, 57 were in editorial and community, 69 were in
administration and 90 were in technology, operations and support. As of June 30,
1999, Lamaze Publishing employed 34 full-time employees, of whom 14 were in
sales and marketing, 6 were in editorial and product development, 11 were in
administration and 3 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 or Lamaze Publishing's current employees are 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 40,950 square feet of space. iVillage leases space in
two buildings located across the street from each other. iVillage leases one
floor at 170 Fifth Avenue, which is approximately 3,650 square feet. The lease
expires on October 31, 1999. In addition, iVillage leases two floors at 170
Fifth Avenue which are approximately 3,650 square feet each on a month-to-month
basis. iVillage leases two floors at 149 Fifth Avenue, which are each
approximately 10,000 square feet. The lease expires on June 30, 2000. iVillage
has a third lease at 212 Fifth Avenue for approximately 10,000 square feet of
space. The lease expires on June 30, 2000. 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 the permanent
space for the long-term future of iVillage.
iVillage also leases a sales office which is located at 645 North
Michigan Avenue, Chicago, Illinois. The lease is on a month-to-month basis.
iBaby is currently leasing approximately 5,115 square feet of space on
a month-to-month basis at 8400 Miramar Road, San Diego, California. iBaby also
is under contract to lease 39,629 rentable square feet at a facility being
constructed at 6910 Carroll Road in San Diego, California for use as general
office, administrative, storage, warehousing and distribution. iBaby has an
option to lease an additional 34,307 feet and has a one-time right of first
refusal with respect to this same expansion space. The lease is for a term of 24
months with the right to extend the lease term for an additional 5 years.
Lamaze Publishing subleases approximately 8,500 square feet of space at
9 Old Kings Highway, Darien, Connecticut. The sublease expires on June 30, 2000.
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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 was subsequently amended to withdraw all claims
against two of those 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 100,000 shares of common stock.
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 March 12, 1999,
the U.S. District for the Middle District of Tennessee issued a ruling
transferring the case to the U.S. District Court for the Southern District of
New York. A motion by iVillage to dismiss the case has been filed and is
awaiting a decision. There is also pending a motion by the plaintiff for leave
to add as new plaintiffs two former executives who allege that iVillage breached
certain obligations to them and seek an award of an aggregate 560,000 stock
options. We believe that the suit and the proposed new claims are 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 August
16, 1999.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Candice Carpenter(e)................... 47 Co-Chairperson of the Board and Chief
Executive Officer
Nancy Evans(e)......................... 49 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....................... 46 Senior Vice President, Sponsorship
Caterina A. Conti...................... 37 General Counsel and Secretary
Donna M. Introcaso..................... 41 Senior Vice President,
Human Resources
Steven A. Elkes........................ 38 Senior Vice President, Business Affairs and
Assistant Secretary
Elizabeth J. Hudson.................... 50 Senior Vice President,
Corporate Communications
Scott Levine........................... 34 Vice President, Controller and Chief
Accounting Officer
Alan Colner(c)......................... 44 Director
Jay C. Hoag(a) (d)..................... 40 Director
Habib Kairouz(b) (e)................... 33 Director
Lennert J. Leader(a) (c)............... 44 Director
Michael Levy(b) (c).................... 52 Director
Douglas McCormick(b)(d)................ 49 Director
Daniel Schulman(d)..................... 41 Director
Martin Yudkovitz(a) (e)................ 44 Director
</TABLE>
- --------------
(a) Member of the audit committee.
(b) Member of the compensation committee.
(c) Class I director
(d) Class II director
(e) Class III director
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
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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.
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. Ms. Conti has resigned from iVillage as General
Counsel and Secretary effective October 19, 1999 in order to pursue personal
interests. Ms. Conti will continue with iVillage as an employee performing
services on a special projects basis.
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<PAGE>
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.
Steven A. Elkes has been Senior Vice President, Business Affairs since
April 1999 and Assistant Secretary since September 1997. From August 1996 to
April 1999, Mr. Elkes was Vice President, Business Affairs. From August 1993 to
April 1999, Mr. Elkes was Vice President Credit/Structured Finance at CNA
Insurance Company. From August 1991 to August 1993, Mr. Elkes served as
Assistant Vice President at CNA Insurance Company. Mr. Elkes received his M.B.A.
from Baruch College and his B.A. from Grinnell College.
Elizabeth J. Hudson has been Senior Vice President, Corporate
Communications since June 1999. From January 1998 to May 1999, Ms. Hudson was a
director in the Global Media and Communications Practice for Spencer Stuart, an
executive recruiting firm. From May 1996 to July 1997, Ms. Hudson was Senior
Vice President of Corporate Communications at The Readers Digest Association.
From 1979 to 1996, Ms. Hudson held various positions at the National
Broadcasting Company, Inc., including Vice President of Corporate Projects, Vice
President of Corporate Relations and Advertising, Vice President of Corporate
and Media Relations, Vice President of Corporate Communications and Senior Vice
President of Corporate Communications and Executive Producer of NBC Productions,
a division of NBC. Ms. Hudson received a B.A. in Journalism from the University
of Georgia.
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 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 is a director of GoTo.com, Inc., an Internet search company and NextCard,
Inc., an Internet-based provider of consumer credit. 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.
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Mr. Hoag is currently a director of ONYX Software Corporation, a provider of
customer management software and Autoweb.com, a consumer automotive Internet
service. 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.
Since February 1998, Mr. Leader has been 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 serves as a director at Multex.com, Inc. 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. Mr. Levy is also a
director of SportsLine USA. Prior to joining Sportsline USA, 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 June 1999, Mr. Schulman has been President and Chief Operating Officer of
Priceline.com. From October 1998 to June 1999, Mr. Schulman had 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.
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Martin Yudkovitz has been a director of iVillage since February 1999.
Since December 1995, Mr. Yudkovitz has been the President 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
iVillage's amended and restated Bylaws provides for a classified Board
of Directors consisting of three classes. The term of the initial Class I
directors consisting of three directors will terminate on the date of the 1999
annual meeting of stockholders; the term of the initial Class II directors
consisting of three directors will terminate on the date of the 2000 annual
meeting of stockholders; and the term of the initial Class III directors
consisting of four directors will terminate on the date of the 2001 annual
meeting of stockholders. 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. 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 plans and establishes and
reviews general policies relating to compensation and benefits of employees of
iVillage. The compensation committee currently consists of Douglas McCormick,
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
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and the board of directors or compensation committee of any other company, nor
has any such interlocking relationship existed in the past.
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. Nonemployee directors of iVillage are 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".
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
Senior Vice President, Business
Development................................................ 146,250 -- 8,333
Steven A. Elkes
Senior 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.
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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>
Individual Grants
-------------------------------------------------------
Percent of Potential Realizable
Total Value at Assumed Annual
Number of Options Rates of Stock Price
Securities Granted to Appreciation for
Underlying Employees Exercise Option Term
Options in Fiscal Price per Expiration -----------------------
Name Granted (#) Year (%)(1) Share ($/SH) Date 5%($) 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 A. Elkes.............. 16,667 1 6.00 4/1/05 40,710 94,872
</TABLE>
- --------------
(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.
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Fiscal Year End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities Underlying In-The-Money Options
Unexercised 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 A. 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, 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 where 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 has served on the Board of Directors for at least six months as of that
date. 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 25% annually over a four-year period. As of August 13, 1999, 133,333 shares
were authorized under the 1999 Director Option Plan, options to purchase an
aggregate of 66,667 shares had been granted and 66,666 shares were available for
future grant.
As of August 13, 1999, under the 1995 Amended and Restated Employee
Stock Option Plan, options to purchase 1,657,836 shares were outstanding and no
shares were available for future grant. Under the 1997 Amended and Restated
Acquisition Stock Option Plan, options to purchase 360,727 shares were
outstanding and no shares were available for future grant. As of August 13,
1999, under the 1999 Employee Stock Option Plan, 1,130,285 shares were
authorized, options to purchase 1,124,160 shares had been granted, and 6,125
shares were available for future
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<PAGE>
grant. As of August 13, 1999, under the 1999 Acquisition Stock Option Plan,
333,333 shares were authorized, options to purchase 333,333 shares had been
granted and no shares were available for future grant.
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 Committee. Any employee who is customarily
employed for more than 20 hours per week and more than five months in any
calendar year by iVillage or a participating subsidiary owned 50% or more by
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 whole percentage (up to 15%,
as elected by the employee) from each salary or commission payment to a
participating employee over certain offering periods. Payroll distributions are
after tax and are limited to $25,000 per calendar year. Unless determined
otherwise by the Board or the Committee, 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 currently is expected to commence by October 1, 1999. 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 successor 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.
Change of Control
iVillage's board of directors has adopted resolutions providing that,
in the event of a change of control of iVillage, 50% and 100% of the unvested
stock options held by iVillage's employees and senior executive officers,
respectively, will immediately vest. A change of control is defined as the
acquisition by a third party of 50% or more of iVillage's voting securities and
control of 50% or more of the members of iVillage's board of directors in office
at that time. The remaining unvested stock options held by iVillage's employees
will vest one year after the change of control event. If an iVillage employee is
terminated without cause or leaves his or her employment for good reason, during
the first year after the change of control event, then 100% of the terminated
employee's unvested stock options will immediately vest. A good reason includes
a reduction in the employee's title or responsibilities as a result of the
change of control event.
Limitation of Liability of Directors and Officers
Section 145 of the Delaware General Corporation Law permits a
corporation, to indemnify its officers, directors, employees and other
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement that are actually and reasonably incurred in
connection with any threatened, pending or completed actions, suits or
proceedings that they become involved in because of their status as an officer,
director, employee or agent of the corporation. Our Amended and Restated
Certificate of Incorporation and Bylaws require iVillage to indemnify our
officers and directors to the fullest extent permitted under this Section,
except that we will indemnify a director or officer in connection with an action
initiated by that person only if
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the action was authorized by our board of directors. The indemnification
includes the right to be paid expenses in advance of the final disposition of a
proceeding, but only if the director or officer agrees to repay the amounts if
it is determined he or she is not entitled to indemnification.
Also as permitted by the Delaware General Corporation Law, our Amended
and Restated Certificate of Incorporation provides that our directors are not
personally liable to us or our stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for any breach of the
director's duty of loyalty to us or our stockholders; for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; under Section 174 of the Delaware General Corporation Law, relating to
unlawful dividends or unlawful stock purchases or redemptions; or for any
transaction where the director derives an improper personal benefit. As result
of this provision, we and our stockholders may be unable to obtain monetary
damages from a director for breach of his or her duty of care.
Under our Bylaws, we have the power to purchase and maintain insurance
on behalf of any person who is or was one of our directors, officers, employees
or agents, against any liability asserted against the person or incurred by him
or her in one of these roles, whether or not we would have the power to
indemnify the person against the claim under the provisions of the Delaware
General Corporation Law. We have purchased director and officer liability
insurance on behalf of our directors and officers.
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. Certain of such liabilities may not be covered
by insurance.
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CERTAIN TRANSACTIONS
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 an 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 iVillage's
initial public offering on March 24, 1999, the series B convertible preferred
stock and series B-1 convertible preferred stock automatically converted 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 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 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 iVillage's initial public offering on March 24, 1999,
the series C convertible preferred stock automatically converted into an
aggregate of 4,397,815 shares of common stock.
Number of Shares
of Series C
Name of Investor Preferred Stock
- ---------------- ----------------
Entities Affiliated with Directors
America Online, Inc.................................. 1,202,661
Rho Management Trust I............................... 3,070,624
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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 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, March 1998 and May 1998, iVillage issued shares of
series D convertible preferred stock to certain entities affiliated with
directors 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 iVillage's initial public offering on March 24,
1999, the series D convertible preferred stock automatically converted into an
aggregate of 4,333,333 shares of common stock.
Number of Shares
of Series D
Name of Investor Preferred Stock
- ---------------- ----------------
Entities Affiliated with Directors
America Online, Inc.................................. 1,200,000
Rho Management Trust I............................... 1,080,000
TCV II Strategic Partners, L.P....................... 104,429
TCV II (Q), L.P...................................... 588,448
TCV II, V.O.F........................................ 24,864
Technology Crossover Ventures II, C.V................ 116,861
Technology Crossover Ventures II, L.P................ 765,398
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
the note 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.
On 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
had paid $312,500 of such amount. The
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balance of $234,375 was invoiced in 1999. In addition, in 1998, iVillage
received 2,243 shares of common stock of MyBasics.com in accordance with the
agreement. Candice Carpenter resigned as a director of MyBasics.com on April 5,
1999.
In December 1998, iVillage issued shares of series E convertible
preferred stock to certain entities affiliated with directors 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
iVillage's initial public offering, the series E convertible preferred stock
automatically converted into an aggregate of 3,910,316 shares of common stock.
Number of Shares
of Series E
Name of Investor Preferred Stock
- ---------------- ----------------
Entities Affiliated with Directors
TCV II Strategic Partners, L.P....................... 12,003
TCV II (Q), L.P...................................... 67,638
TCV II, V.O.F........................................ 2,858
Technology Crossover Ventures II,
C.V.................................................. 13,432
Technology Crossover Ventures II,
L.P.................................................. 87,976
America Online, Inc.................................. 701,754
Rho Management Trust I............................... 477,079
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.
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 $24.00 per share. 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 and
Daniel Schulman were granted stock options under the 1999 Director Option Plan
to purchase 33,333 and 16,666 shares of common stock, respectively, at an
exercise price equal to $24.00 per share. 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.
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On March 9, 1999, iVillage and NBC amended their November 11, 1998
advertising and promotional agreement and entered into a stock purchase
agreement pursuant to which iVillage issued 4,889,030 shares of series E
convertible preferred stock and warrants to purchase up to 970,874 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. The note, which bears interest at the rate
of 5% per annum is payable quarterly in twelve equal installments of
approximately $1.4 million beginning April 1, 1999. In addition, iVillage has
agreed to purchase, for cash, $13.5 million of advertising and promotional spots
during 1999 and $8.5 million per annum during 2000 and 2001. iVillage has also
agreed to pay $1.1 million during 1999 for prominent placement on the NBC.com
Web site.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of iVillage common stock, as of August 13, 1999 for:
o each person known by iVillage to beneficially own more than 5%
of the common stock;
o each director of iVillage;
o each executive officer named in the Summary Compensation
Table; and
o 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 August 13, 1999, but
excludes shares of common stock underlying options or warrants held by any other
person. Percentage of beneficial ownership is based on 26,119,690 shares of
common stock actually outstanding as of August 13, 1999 including the number of
shares of common stock to be issued in connection with the proposed acquisition
of Lamaze Publishing. "Shares Beneficially Owned" includes "Shares Issuable Upon
Exercise of Stock Options or Warrants".
<TABLE>
<CAPTION>
Shares Shares Issuable Upon Exercise
Beneficially of Stock Percentage of Shares
Name of Beneficial Owner Owned Options or Warrants Beneficially Owned
- ------------------------ ------------ ----------------------------- --------------------
<S> <C> <C> <C>
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166-9323...................... 2,404,840 350,908 9.1
National Broadcasting Company,
Inc.(1)
30 Rockefeller Plaza
New York, New York 10112......................... 1,838,009 -- 7.0
Rho Management Trust I(2)
767 Fifth Avenue
New York, New York 10153......................... 1,662,842 -- 6.4
Candice Carpenter(3)................................. 751,669 85,001 2.9
Nancy Evans(4)....................................... 352,500 19,167 1.3
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Shares Shares Issuable Upon Exercise
Beneficially of Stock Percentage of Shares
Owned Options or Warrants Beneficially Owned
------------ ----------------------------- --------------------
<S> <C> <C> <C>
Alan Colner(5)....................................... 743,293 -- 2.8
Jay C. Hoag(6)....................................... 616,634 -- 2.4
Habib Kairouz(7)..................................... 1,662,842 -- 6.4
Lennert J. Leader(8)................................. 2,404,840 350,908 9.1
Michael Levy......................................... 38,333 16,667 *
Douglas McCormick.................................... 11,111 11,111 *
Daniel Schulman...................................... 5,556 5,556 *
Martin Yudkovitz(9).................................. 1,842,009 -- 7.1
Steven A. Elkes...................................... 19,350 16,250 *
Stephen Lake......................................... 34,001 31,251 *
John W. Glascott..................................... 19,668 16,668 *
All directors and executive
officers as a group
(19 persons)..................................... 8,946,201 635,000 33.4
</TABLE>
- --------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1)According to a Schedule 13D, dated March 31, 1999, the National
Broadcasting Company, Inc. has sole voting and dispositive power over all
shares.
(2)Rho Management Partners L.P., a Delaware limited partnership, may be
deemed the beneficial owner of the 1,662,842 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 the shares.
(3)Includes 104,166 shares of common stock beneficially owned by the
Carpenter Family 1998 Irrevocable Trust. Ms. Carpenter disclaims beneficial
ownership of the shares of common stock held by the Carpenter Family 1998
Irrevocable Trust.
(4)Includes 104,166 shares of common stock beneficially owned by the
Evans/Wishman 1998 Irrevocable Trust. Ms. Evans disclaims beneficial
ownership of the shares of common stock held by the Evans/Wishman 1998
Irrevocable Trust.
(5)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.
and Remington Investment Strategies, L.P.
(6)Mr. Hoag is a Managing Member of Technology Crossover Management II,
L.L.C., the General Partner of TCV II Strategic Partners, L.P., TCV II (Q),
L.P., TCV II V.O.F.,
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Technology Crossover Ventures II, C.V. and Technology Crossover Ventures
II, L.P. Mr. Hoag may be deemed to have beneficial ownership of 40,246
shares owned by TCV II Strategic Partners, L.P., 226,786 shares owned by
TCV II (Q), L.P., 9,582 shares owned by TCV II V.O.F., 45,037 shares owned
by Technology Crossover Ventures II, C.V. and 294,981 shares owned by
Technology Crossover Ventures II, L.P. Mr. Hoag disclaims beneficial
ownership of the shares, except to the extent of his pecuniary interest
therein arising from his interest in Technology Crossover Management II,
L.L.C.
(7)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 1,662,842 shares owned by Rho
Management Trust I. Mr. Kairouz disclaims beneficial ownership of the
shares reported by Rho Management Trust I, other than 17,249 shares in
which Mr. Kairouz has a pecuniary interest.
(8)Consists of 2,404,840 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.
(9)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.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of iVillage common stock as of August 16, 1999 by persons
who:
o acquired shares in connection with iVillage's acquisition of
Astrology.Net in February 1999;
o acquired shares in connection with iVillage's acquisition of
the iBaby minority interest in March 1999; and
o are to acquire shares in connection with iVillage's proposed
acquisition of Lamaze Publishing.
The shares are being registered to permit public secondary trading of
these shares, and each of the selling stockholders may offer the shares for
resale from time to time. Please see "Plan of Distribution".
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<PAGE>
<TABLE>
<CAPTION>
Before the Offering After the Offering
------------------- -------------------
Name of Number of Percent of Shares Number of Number of Percent of Shares
Beneficial Owner (1) Shares Beneficially Owned Shares Offered Shares (2) Beneficially Owned
- -------------------- --------- ------------------ -------------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
Bruce F. Failing, Jr.(3)........... 345,864 1.3 345,864 - -
Elizabeth F. Failing and
Leigh Q. Failing, as
trustees of The Failing
Trust f/b/o Lindsay
Failing (3)..................... 169,151 * 169,151 - -
Elizabeth F. Failing and
Leigh Q. Failing, as
trustees of The Failing
Trust f/b/o Bruce F.
Failing III(3).................. 169,151 * 169,151 - -
Norton Garfinkle(3)................ 345,864 1.3 345,864 - -
Norton Garfinkle, as
trustee of The Gillian
Garfinkle S Corporation
Trust........................... 169,151 * 169,151 -- --
Norton Garfinkle, as
trustee of The Nicholas
Garfinkle S Corporation
Trust(3)........................ 169,151 * 169,151 - -
Robert C. Ford(3).................. 146,335 * 146,335 - -
David Diamond(3) .................. 79,724 * 79,724 - -
Virginia Cargill(3)(4)............. 50,615 * 50,615 - -
Douglas Bivona(3)(4)............... 33,743 * 33,743 - -
Paul Kessinger(3)(4)............... 8,435 * 8,435 - -
Brown Brothers Harriman
& Co............................... 37,640 * 37,640 - -
Lamaze International, Inc.......... 23,967 * 23,967 - -
iBaby stockholders................. 125,448 * 125,448 - -
Astrology.Net
stockholders....................... 802,125 3.1 802,125 - -
</TABLE>
- --------------
* less than one percent
(1) Except as indicated by footnote and subject to applicable community
property laws and except for shares deposited into escrow with
Continental Stock Transfer & Trust Company, the persons named in the
table have sole voting and investment power with respect to the shares
of common stock owned by them.
(2) Assumes the sale by the selling stockholders of all of the shares
offered for sale under this prospectus.
(3) A portion of the shares are subject to an indemnification escrow
agreement which will expire on _______, 2001.
(4) A portion of the shares are subject to an indemnification escrow
agreement which will expire on ______, 2001. In addition, another
portion of shares are expected to be sold to cover applicable
withholding taxes.
Except as noted below, none of the selling stockholders has had a
material relationship with
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iVillage within the past three years other than its interest in the transaction
by which iVillage is to acquire Lamaze Publishing, and the selling stockholder's
ownership of iVillage Common Stock as a result.
PLAN OF DISTRIBUTION
Under the Agreement and Plan of Reorganization among iVillage, Lamaze
Publishing, the Lamaze Publishing stockholders and certain other parties,
iVillage will issue 1,748,791 shares of the 2,676,364 shares of common stock
offered hereby to certain of the selling stockholders in connection with its
proposed acquisition of Lamaze Publishing. Pursuant to this acquisition, we
agreed to register the shares under the Securities Act of 1933 for resale to the
public. Under the Agreement and Plan of Reorganization we are required to use
our best efforts to cause this registration statement to be declared effective
by the Securities and Exchange Commission as soon as practicable after our
purchase of Lamaze Publishing is completed and, subject to certain exceptions,
to keep this registration statement continuously effective under the Securities
Act until the earlier of (1) such time as certain selling stockholders have sold
all their shares offered by this prospectus, or (2) one year following the date
of effectiveness of the registration statement.
According to the terms of the Reorganization Agreement, iVillage will
direct 15% of the common stock it issues in the Lamaze Publishing acquisition
(excluding the shares it will put in escrow to pay the withholding taxes of the
holders of stock appreciation units, as explained below) into an escrow account
as security for the indemnification obligations of the selling stockholders and
the holders of stock appreciation units of Lamaze Publishing. Continental Stock
Transfer and Trust Company, iVillage's transfer agent, is the designated escrow
agent. The escrow account will terminate 18 months after the closing date of the
transaction, subject to any unresolved indemnification claims. Under such
arrangements, the escrow agent will sell shares at the direction of the Lamaze
Publishing stockholders and stock appreciation unit holders and retain the
proceeds in escrow.
The holders of stock appreciation units of Lamaze Publishing receive
their shares after the closing of the transaction and immediately prior to the
effectiveness of the registration statement. The shares issuable to the holders
of stock appreciation units will be treated as compensation for tax purposes,
and withholding taxes on the shares must be paid within one day of receipt of
the shares by the holders of stock appreciation units. iVillage will direct a
portion of these shares into an escrow account to cover possible payment of the
taxes. In the event iVillage pays the taxes, Continental Stock Transfer, who is
the designated escrow agent under this arrangement, will sell the shares held in
escrow and deliver the proceeds to iVillage.
In addition, in March 1999, iVillage issued 125,448 shares of the
2,676,364 shares of common stock offered hereby to certain of the selling
stockholders in connection with its acquisition of the minority interest in
iBaby. In February 1999, iVillage issued 802,125 shares of the 2,676,364 shares
of commons stock offered hereby to certain of the selling stockholders of
Astrology.Net in connection with its acquisition of Astrology.Net. As part of
both sales, iVillage granted piggyback registration rights to the iBaby
stockholders and the Astrology.Net stockholders with respect to their shares of
iVillage common stock. With respect to the iBaby and Astrology.Net selling
stockholders, iVillage has agreed to keep this registration statement
continuously effective under the Securities Act until the earlier of (1) 180
days after the date of
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effectiveness or (2) such time as all of the shares held by the iBaby and the
Astrology.Net selling stockholders have been disposed of. All of the iBaby and
Astrology.Net selling stockholders are subject to a lock-up agreement under
which they have agreed not to transfer or dispose of, directly or indirectly,
any shares of common stock until September 18, 1999.
The sale of all or a portion of the shares of common stock offered
hereby by the selling stockholders may be effected from time to time at
prevailing market prices at the time of such sales, at prices related to such
prevailing prices, at fixed prices that may be changed or at negotiated prices.
The selling stockholders may effect such transactions by selling directly to
purchasers in negotiated transactions, to dealers acting as principals or
through one or more brokers, or any combination of these methods of sale. In
addition, shares may be transferred in connection with the settlement of call
options, short sales, through the issuance of exchangeable or convertible
securities or similar transactions that may be effected by the selling
stockholders. Dealers or brokers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or
purchasers of shares for whom they may act as agent (which compensation may be
in excess of customary commissions). The selling stockholders and any brokers or
dealers that participate in the distribution may under certain circumstances be
deemed to be "underwriters" within the meaning of the Securities Act, and any
commissions received by such brokers or dealers and any profits realized on the
resale of shares by them may be deemed to be underwriting discounts and
commissions under the Securities Act. iVillage and the selling stockholders may
agree to indemnify such brokers or dealers against certain liabilities,
including liabilities under the Securities Act.
To the extent required under the Securities Act or the rules of the
Securities and Exchange Commission, a supplemental prospectus will be filed,
disclosing (1) the name of any such brokers or dealers, (2) the number of shares
involved, (3) the price at which such shares are to be sold, (4) the commissions
paid or discounts or concessions allowed to such brokers or dealers, where
applicable, (5) that such brokers or dealers did not conduct any investigation
to verify the information set out in this prospectus, as supplemented, and (6)
other facts material to the transaction.
There is no assurance that the selling stockholders will sell any or
all of the shares of common stock offered hereby.
iVillage has agreed to pay the expenses incurred in connection with the
registration of the shares of common stock offered hereby. The selling
stockholders will be responsible for all selling commissions, transfer taxes and
related charges in connection with the offer and sale of such shares.
85
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
iVillage's certificate of incorporation 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 August 13, 1999, 26,119,690 shares of common stock were outstanding
including the shares of common stock to be issued in connection with the
proposed acquisition of Lamaze Publishing and no shares of preferred stock were
outstanding.
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 fully
paid and nonassessable.
Preferred Stock
The board of directors is 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
As of June 30, 1999, iVillage had outstanding warrants to purchase
1,020,625 shares of common stock at a weighted average exercise price of $12.53
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 the 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, as amended, the holders of 40% of the outstanding shares of common
stock, including shares issuable
86
<PAGE>
upon the exercise of warrants to purchase common stock, are 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. Furthermore, according to the terms of the registration rights agreement
the holders of 18,829,174 shares of common stock, including shares issuable upon
the exercise of warrants to purchase common stock, are 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.
iVillage has also granted piggyback registration rights to (i) the
former Astrology stockholders with respect to the 802,125 shares of iVillage
common stock issued to such stockholders in connection with iVillage's
acquisition of KnowledgeWeb, Inc. d/b/a Astrology.Net, (ii) the former minority
stockholders of iBaby with respect to the 125,448 shares of iVillage common
stock issued to such stockholders in connection with iVillage's acquisition of
the iBaby minority interest, (iii) the former OnLine Psych and Code Stone
stockholders with respect to the 571,709 shares of iVillage common stock issued
to such stockholders in connection with iVillage's acquisition of OnLine Psych
and CodeStone (the "Acquisition Registrable Shares"), in each case pursuant to
separate registration rights agreements and subject to the piggyback
registration rights of the holders under the Fourth Amended and Restated Rights
Agreement. None of the holders of Acquisition Registrable Shares have demand
registration rights nor do they have the right to require iVillage to file
registration statements on Form S-3.
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
87
<PAGE>
expenses of all registrations under the registration rights agreements, except
underwriting discounts and commissions. The registration rights agreements also
contain a commitment of iVillage to indemnify the holders of registration
rights.
Effective as of July 23, 1999, the Fourth Amended and Restated Rights
Agreement was amended to provide that the holders of registrable shares
thereunder do not have piggyback registration rights with respect to
registration of their shares on the registration statement of which this
prospectus is a part thereof. The iBaby stockholders and the Astrology.Net
stockholders did not consent to a similar amendment of the iBaby registration
rights agreement and Astrology.Net registration rights agreement, respectively.
The OnLine Psych registration rights agreement was not amended as it already
contains a similar exception to the piggyback registration rights of the holders
of registrable shares thereunder.
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 Bylaws provides that 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 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
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<PAGE>
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.
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, because of the 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.
As of August 13, 1999, an aggregate of 26,119,690 shares of our common
stock were outstanding, including the 1,748,791 shares to be issued in
connection with the proposed acquisition of Lamaze Publishing. Of these shares,
4,197,500 shares are freely tradeable without restriction or further
registration under the Securities Act, unless such shares are owned by
"affiliates" as that term is defined in Rule 144 under the Securities Act. The
remaining 21,922,190 shares of common stock 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 under the Securities Act, which rules
are summarized below. Of these restricted shares, the 2,676,364 shares offered
by this Prospectus have been registered under the Securities Act.
Lock-Up Agreements
All of our officers, directors and certain of our stockholders signed
lock-up agreements in connection with our initial public offering in March 1998
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, until September 18, 1999. 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.
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<PAGE>
Upon expiration of the lock-up period, 927,753 shares of common stock
offered by this prospectus will be eligible for resale to the public and
12,059,700 shares will be eligible for resale to the public in accordance with
Rule 144.
Rule 144
In general, under Rule 144 as currently in effect, 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 as of August 13, 1999 equals approximately 261,200
shares, including the shares of common stock to be issued in
connection with the proposed acquisition of Lamaze Publishing;
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 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 the
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Registration Rights
The holders of 21,030,559 shares of our common stock, including shares
issuable upon the exercise of warrants to purchase common stock, or their
transferees, are entitled to certain rights with respect to the registration of
such shares under the Securities Act. See "Description of Capital Stock -
Registration Rights".
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. A partner of
Orrick, Herrington & Sutcliffe LLP owns an aggregate of 4,408 shares of
iVillage's common 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, the balance sheets of Health ResponseAbility
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<PAGE>
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, the
balance sheets of KnowledgeWeb, Inc., as of December 31, 1997 and 1998 and the
statements of operations, stockholders equity and cash flows for the two years
then ended and the balance sheets of Lamaze Publishing Company, Inc. as of
December 31, 1997 and 1998 and the statements of operations, stockholders'
deficit and cash flows for the two years then ended have been included in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
iVillage is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and files reports, proxy and information
statements and other information with the Commission. You may read and copy all
or any portion of the reports, proxy and information 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 will also be available to you on
the Commission's Internet site (http://www.sec.gov).
iVillage has filed with the Commission a registration statement
(including the exhibits and schedules thereto) under the Securities Act. This
prospectus does not contain all the information set forth in the registration
statement. For further information, reference is made to the registration
statement. Copies of the registration statement may be inspected, without
charge, at the principal office of the Commission or at the regional offices
referred to above, or obtained upon payment of prescribed rates from the Public
Reference Section of the Commission at its principal office.
91
<PAGE>
INDEX TO FINANCIAL STATEMENTS
iVillage Inc. and Subsidiaries
Consolidated Financial Statements
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Report of Independent Accountants..............................................................................F-3
Consolidated Balance Sheets at December 31, 1997 and 1998......................................................F-4
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998...........................................................................F-5
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996,
1997 and 1998..............................................................................................F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998..................................................................................F-7 - F-8
Notes to Consolidated Financial Statements..............................................................F-9 - F-30
Schedule of Valuation and Qualifying Accounts.................................................................F-31
iVillage Inc. and Subsidiaries
Consolidated Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1998
and June 30, 1999 (unaudited).............................................................................F-32
Condensed Consolidated Statements of Operations for the three
months and six months ended June 30, 1998 and 1999 (unaudited)............................................F-33
Condensed Consolidated Statements of Cash Flows for the three
months and six months ended June 30, 1998 and 1999 (unaudited)............................................F-34
Notes to Condensed Consolidated Financial Statements...................................................F-35 - F-41
iVillage Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Financial Information
Unaudited Pro Forma Condensed Consolidated Financial Information.......................................F-42 - F-44
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1999......................................................................................................F-45
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1998...................................................................................F-46
Unaudited Pro Forma Consolidated Statement of Operations for the six months
ended June 30, 1999.......................................................................................F-47
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements...............................F-48 - F-49
Health ResponseAbility Systems, Inc.
Financial Statements
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
Report of Independent Accountants.............................................................................F-50
Balance Sheets at December 31, 1995 and 1996 and May 29,1997 (unaudited)......................................F-51
Statements of Operations for the years ended December 31, 1995 and 1996 and the
periods ended May 29, 1996 and 1997 (unaudited)...........................................................F-52
Statements of Stockholder's (Deficit) Equity for the years ended December 31, 1995
and 1996 and the period ended May 29, 1997 (unaudited)....................................................F-53
Statements of Cash Flows for the years ended December 31, 1995 and 1996 and the
periods ended May 29, 1996 and 1997 (unaudited)...........................................................F-54
Notes to Financial Statements..........................................................................F-55 - F-59
KnowledgeWeb, Inc.
Financial Statements
Report of Independent Accountants........................................................................... F-60
Balance Sheets at December 31, 1997 and 1998................................................................ F-61
Statements of Operations for the years ended
December 31, 1997 and 1998.............................................................................. F-62
Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1998.............................................................................. F-63
Statements of Cash Flows for the years ended
December 31, 1997 and 1998.............................................................................. F-64
Notes to Financial Statements........................................................................ F-65 - F-71
Lamaze Publishing Company, Inc.
Financial Statements
Report of Independent Accountants............................................................................. F-72
Balance Sheets at December 31, 1997 and 1998 and June 30, 1999 (unaudited).................................... F-73
Statements of Operations for the years ended December 31, 1997 and 1998 and the
six month period ended June 30, 1998 and 1999 (unaudited)................................................. F-74
Statements of Changes in Stockholder's Deficit for the years ended December 31, 1997
and 1998 and the period ended June 30, 1999 (unaudited)................................................... F-75
Statements of Cash Flows for the years ended December 31, 1997 and 1998 and the
six month period ended June 30, 1998 and 1999 (unaudited)................................................. F-76
Notes to Financial Statements.......................................................................... F-77 - F-84
</TABLE>
F-2
<PAGE>
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.
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
February 4, 1999
F-3
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, Pro Forma as of
-------------------------- December 31,
1997 1998 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 outstanding, 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-4
<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
------------ ------------- -------------
Cost of revenues............................................. 3,905,142 6,265,345 13,531,977
------------ ------------- -------------
Gross margin................................................. (3,173,097) (246,649) 1,479,846
Operating expenses:
Product development and technology ..................... 616,268 1,341,010 989,038
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 ........................... 6,537,867 20,838,435 45,807,352
------------ ------------- -------------
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-5
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Convertible Convertible Convertible Convertible
Preferred Preferred Preferred Preferred
Stock Stock Stock Stock
Series A Series B Series C Series D
-------- -------- -------- --------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <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.
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
--------- ---- --------- ------ ---------- ------ ---------- ------
--------- ---- --------- ------ ---------- ------ ---------- ------
<CAPTION>
Convertible
Preferred
Stock
Series E Common Stock Additional Stockholders
-------- ------------ Paid In Notes
Shares Amount Shares Amount Capital Receivable
------ ------ ------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996... 1,083,335 $10,833 $997,037
Issuance of warrants in
connection with
interest on convertible
notes...................... 30,101
Issuance of common stock in
connection with acquisition. 66,667 667 499,333
Issuance of Series B and
Series B-1 convertible
preferred stock............. 11,941,976
Issuance of stock options to
consultants and directors... 62,007
Issuance of warrants to AOL
for channel services........ 1,034,838
Net loss.....................
---------- ------ --------- ------- ------------ ---------
Balance at December 31,1996.. 1,150,002 11,500 14,565,292
Issuance of common stock in
connection with exercise
of stock options............ 33,333 333 99,667
Notes receivable due from
stockholders in connection
with exercise of options... $(65,000)
Issuance of Series C
convertible preferred stock 24,823,398
Issuance of warrants in
connection with interest
on convertible notes....... 334,339
Issuance of common stock and
options in connection with
business acquisitions....... 636,400 6,364 3,292,558
Issuance of stock options to
consultants and directors... 65,395
Net loss.....................
---------- ------ --------- ------- ------------ ---------
Balance at December 31,
1997...................... 1,819,735 18,197 43,180,649 (65,000)
Issuance of common stock
for cash................... 284,317 2,843 1,663,823
Issuance of Series D
convertible preferred stock 31,481,978
Issuance of Series E
convertible preferred stock. 11,730,948 $5,865 32,089,088
Issuance of stock options to
consultants and directors... 146,994
Issuance of common stock in
connection with exercise
of stock options............ 9,333 93 47,507
Issuance of stock options in
connection with business
transactions................ 277,799
Officer loan receivable...... (500,000)
Issuance of options to NBC... 3,960,667
Net loss.....................
---------- ------ --------- ------- ------------ ---------
Balance at December 31,
1998...................... 11,730,948 $5,865 2,113,385 $21,133 $112,848,505 $(575,000)
---------- ------ --------- ------- ------------ ---------
---------- ------ --------- ------- ------------ ---------
<CAPTION>
Unearned
Compensation
and Deferred Accumulated
Advertising Cost Deficit Total
---------------- ------- -----
<S> <C> <C> <C>
Balance at January 1, 1996... $(1,637,571) $(629,201)
Issuance of warrants in
connection with
interest on convertible
notes...................... 30,101
Issuance of common stock in
connection with acquisition. 500,000
Issuance of Series B and
Series B-1 convertible
preferred stock............. 11,944,365
Issuance of stock options to
consultants and directors... 62,007
Issuance of warrants to AOL
for channel services........ 1,034,838
Net loss..................... (9,682,682) (9,682,862)
----------- ------------ -----------
Balance at December 31,1996.. (11,320,253) 3,259,428
Issuance of common stock in
connection with exercise
of stock options............ 100,000
Notes receivable due from
stockholders in connection
with exercise of options... (65,000)
Issuance of Series C
convertible preferred stock 24,829,995
Issuance of warrants in
connection with interest
on convertible notes....... 334,339
Issuance of common stock and
options in connection with
business acquisitions....... 3,298,992
Issuance of stock options to
consultants and directors... 65,395
Net loss..................... (21,300,960) (21,300,960)
----------- ------------ -----------
Balance at December 31,
1997...................... (32,621,213) 10,522,119
Issuance of common stock
for cash................... 1,666,666
Issuance of Series D
convertible preferred stock 31,488,478
Issuance of Series E
convertible preferred stock. 32,094,953
Issuance of stock options to
consultants and directors... $(68,845) 78,149
Issuance of common stock in
connection with exercise
of stock options............ 47,600
Issuance of stock options in
connection with business
transactions................ 277,799
Officer loan receivable...... (500,000)
Issuance of options to NBC... (3,960,667)
Net loss..................... (43,653,682) (43,653,682)
------------ ------------ -----------
Balance at December 31,
1998...................... $(4,029,512) $(76,274,895) $32,022,082
----------- ------------ -----------
----------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<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
============ ========== ============
</TABLE>
F-7
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
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).
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<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,
F-9
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 the
up-front non refundable fee specified in the contract related to the up-front
customized design work 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
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.
F-10
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 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.
F-11
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 separately from
retained earnings and additional paid-in capital in the
F-12
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 a warrant 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.
F-13
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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.
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
F-14
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 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.
F-15
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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:
Working capital.............................. $ (77,323)
Equipment.................................... 19,726
Goodwill..................................... 557,597
--------
$ 500,000
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
F-16
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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:
Working capital............................... $ (159,991)
Equipment..................................... 50,300
Goodwill...................................... 5,955,331
-----------
$ 5,845,640
===========
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.
1996 1997
---- ----
Revenues................ $ 1,674,226 $ 6,381,437
Net loss................ $ (12,092,617) $ (22,910,945)
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.
F-17
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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.
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, 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
F-18
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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. In September 1997, the SOC adjusted the
exercise price of all ESOP shares priced above $5.10 to $5.10 per share based
upon the then determined current fair market value of the Company's common
stock. Generally, the options vest equally over a period of four years and
expire 5-10 years from the date of grant.
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:
F-19
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
Weighted Weighted
Average Fair Average
Value Per Exercise Price
Options 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-20
<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 Exercise
Value per Price Per
Options Option 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>
F-21
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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.
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:
Year ending December 31: 1998
1999..................................................... $669,684
2000..................................................... 279,540
2001..................................................... 12,280
--------
$961,504
========
Rent expense was approximately $149,000, $486,000 and $714,000 for the
years ended December 31, 1996, 1997 and 1998, respectively.
F-22
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
At December 31, 1998, minimum future lease payments due under capital
leases for computer equipment are as follows:
Year ending December 31: 1998
------------------------ ----
1999............................................... $144,203
Less: amount representing interest................. 7,630
--------
Net minimum lease payments......................... $136,573
========
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.
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
determining 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
F-23
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 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.
F-24
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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).
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,
F-25
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 March 9, 1999, the Company and NBC entered into an agreement to
amend, subject to closing conditions, the November 11, 1998 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-26
<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:
1997 1998
------ ------
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..... $ -- $ --
=========== ===========
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
Cost of revenues and product development 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.
F-27
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 $11.0 million (the "Purchase Price") (the "iBaby
Purchase Agreement"). The Purchase Price is comprised of $8 million in cash and
common stock having an aggregate value of $3.0 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
F-28
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
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 $21.0 million, based on a value of the Company's
common stock of $24.00 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.
Reverse Stock Split
On March 11, 1999, the Board effected a one-for-three reverse common
stock split. 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 March 9, 1999, the Company and NBC entered into an agreement to
amend, subject to closing conditions, 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 a warrant 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 $23.6 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
F-29
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
effectiveness of its anticipated initial public offering. In addition, the fair
value of the warrant of approximately $8.4 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 warrant was determined using the Black-Scholes option pricing model in
accordance with SFAS No. 123.
F-30
<PAGE>
Schedule II
iVILLAGE INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Additions
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and Other End of
of Period Expenses Accounts 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-31
<PAGE>
iVillage Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
Unaudited
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
--------- ---------
ASSETS:
<S> <C> <C>
Current assets:
Cash and cash equivalents ..................................................... $ 30,825 $ 85,279
Accounts receivable, net ...................................................... 2,078 2,843
Other current assets .......................................................... 715 1,162
--------- ---------
Total current assets ........................................................ 33,618 89,284
Fixed assets, net ............................................................... 7,380 6,968
Goodwill and intangible assets, net ............................................. 4,535 61,631
Other assets .................................................................... 188 189
--------- ---------
Total assets ................................................................ $ 45,721 $ 158,072
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued expenses ......................................... $ 11,561 $ 10,398
Capital leases payable ........................................................ 137 73
Deferred revenue .............................................................. 1,838 2,117
Other current liabilities ..................................................... 163 192
--------- ---------
Total liabilities ........................................................... 13,699 12,780
Commitments and contingencies
Stockholders' equity:
Series A, convertible preferred stock - par value $.0005, 1,000,000 and 0
shares authorized, issued and outstanding as of December 31, 1998 and June
30, 1999, respectively ...................................................... 1 --
Series B and B-1, convertible preferred stock - par value $.0005, 5,929,846
and 0 shares authorized, 4,777,746 and 0 issued and outstanding as of
December 31, 1998 and June 30, 1999, respectively ........................... 2 --
Series C, convertible preferred stock - par value $.0005, 13,528,765 and 0
shares authorized, 13,193,445 and 0 issued and outstanding as of December
31, 1998 and June 30, 1999, respectively .................................... 7 --
Series D, convertible preferred stock - par value $.0005, 13,000,000 and 0
shares authorized, issued and outstanding as of December 31, 1998 and June
30, 1999, respectively ...................................................... 6 --
Series E, convertible preferred stock - par value $.0005, 12,280,702 and 0
shares authorized, 11,730,948 and 0 issued and outstanding as of December
31, 1998 and June 30, 1999, respectively .................................... 6 --
Common stock, par value $.01, 35,000,000 and 65,000,000 shares authorized,
2,113,385 and 24,324,218 issued and outstanding at December 31, 1998 and
June 30, 1999, respectively ................................................. 21 243
Additional paid-in capital ...................................................... 112,849 302,430
Accumulated deficit ............................................................. (76,275) (134,549)
Stockholders' notes receivable .................................................. (565) (14,681)
Unearned compensation ........................................................... (4,030) (8,151)
--------- ---------
Total stockholders' equity .................................................. 32,022 145,292
--------- ---------
Total liabilities and stockholders' equity .................................. $ 45,721 $ 158,072
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-32
<PAGE>
iVillage Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1998 1999 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sponsorship, advertising and other ............................... $ 2,118 $ 5,994 $ 4,318 $ 10,684
Commerce ......................................................... 520 2,114 520 3,888
-------- -------- -------- --------
Total revenues ................................................. 2,638 8,108 4,838 14,572
Cost of revenues ................................................... 3,262 4,210 5,437 9,112
Operating margin ............................................... (624) 3,898 (599) 5,460
-------- -------- -------- --------
Operating expenses:
Product development and technology ............................... 504 1,353 986 3,038
Sales and marketing .............................................. 7,184 7,852 12,054 15,634
Sales and marketing - NBC expenses ............................... -- 4,466 -- 7,572
General and administrative ....................................... 2,202 3,847 4,206 7,872
Depreciation and amortization .................................... 1,397 4,665 2,658 7,519
-------- -------- -------- --------
Total operating expenses ....................................... 11,287 22,183 19,904 41,635
-------- -------- -------- --------
Loss from operations ........................................... (11,911) (18,285) (20,503) (36,175)
Interest income, net ............................................... 161 1,182 237 1,513
-------- -------- -------- --------
Net loss ....................................................... (11,750) (17,103) (20,266) (34,662)
-------- -------- -------- --------
Preferred stock deemed dividend .................................... -- -- (23,612)
Net loss attributable to common stockholders ....................... $(11,750) $(17,103) $(20,266) $(58,274)
======== ======== ======== ========
Basic and diluted net loss per share attributable to common
shareholders ..................................................... $ (1.85) $ (0.72) $ (3.28) $ (3.98)
======== ======== ======== ========
Weighted average shares of common stock outstanding used in
computing basic and diluted net loss per share ................... 6,337 23,728 6,179 14,656
======== ======== ======== ========
Pro forma basic and diluted net loss per share ..................... $ (2.77)
========
Shares of common stock used in computing pro forma
basic and diluted net loss per share ............................. 21,027
========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-33
<PAGE>
iVillage Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
Unaudited
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................ $ (11,750) $ (17,103) $ (20,266) $ (34,662)
Adjustments to reconcile net loss to net
cash used in operating activities:
Expense recognized in connection with issuance
of warrants and stock options ........... 186 1,102 186 2,979
Depreciation and amortization ............. 1,397 4,665 2,658 7,519
Bad debt expense .......................... 255 -- 255 500
Loss on sale .............................. 165 -- 165 --
Minority interest ......................... (138) -- (138) --
Changes in assets and liabilities:
Accounts receivable ................... (1,559) (1,136) (1,175) (1,265)
Prepaid expenses and other assets ..... 253 678 (339) (455)
Accounts payable and accrued expenses . 1,735 (1,760) 146 (1,168)
Deferred revenue ...................... 416 (521) 1,583 278
Other liabilities ..................... (77) -- (77) 36
--------- --------- --------- ---------
Net cash used in operating activities ..... (9,117) (14,075) (17,002) (26,238)
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of fixed assets ........................ (2,119) (958) (2,828) (1,693)
Acquisitions of Web sites ....................... -- (1,609) (520) (10,831)
Sale of Web sites ............................... 600 -- 600 --
--------- --------- --------- ---------
Net cash used in investing activities ..... (1,519) (2,567) (2,748) (12,524)
--------- --------- --------- ---------
Cash flows from financing activities:
Exercise of stock options ....................... -- 241 -- 505
Stockholder note receivable ..................... (250) 1,382 (250) 1,382
Issuance of common stock, net of fees ........... 1,667 (226) 1,667 91,392
Issuance of preferred stock, net of fees paid ... (630) -- 31,488 --
Principal payments on capitalized leases ........ (86) -- (124) (63)
--------- --------- --------- ---------
Net cash provided by financing
activities............................... 701 1,397 32,781 93,216
--------- --------- --------- ---------
Net increase (decrease) in cash for the period .... (9,935) (15,245) 13,031 54,454
Cash and cash equivalents, beginning of period .. 27,301 100,524 4,335 30,825
--------- --------- --------- ---------
Cash and cash equivalents, end of period .......... $ 17,366 $ 85,279 $ 17,366 $ 85,279
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-34
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Note 1 - The Company
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") are engaged in the development of programming
material for distribution through online service providers and the Internet and
are involved in the sale of products through the Company's Web sites.
In March 1999, the Company completed its initial public offering ("IPO")
of 4,197,500 shares of the Company's common stock resulting in net proceeds of
approximately $91.4 million. Upon the closing of the IPO, all classes of
outstanding convertible preferred stock converted into common stock on a three
for one ratio.
These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's Form S-1 registration statement, as amended, filed with the Securities
and Exchange Commission ("SEC") in connection with the Company's IPO.
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 the Company does not successfully implement its
business plan, certain assets may not be recoverable.
Unaudited Interim Financial Information
The unaudited interim consolidated financial statements of the Company
for the three and six months ended June 30, 1998 and June 30, 1999 included
herein have been prepared in accordance with the instructions for Form 10-Q
under the Securities Exchange Act of 1934, as amended, and Article 10 of
Regulation S-X under the Securities Act of 1933, as amended. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations relating to interim financial
statements.
In the opinion of management, the accompanying unaudited interim
consolidated financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial position
of the Company at June 30, 1999, and the results of its operations and its cash
flows for the three and six months ended June 30, 1998 and June 30, 1999. The
results for the three and six months ended June 30, 1999 are not necessarily
indicative of the expected results for the full fiscal year or any future
period. Certain prior period balances have been reclassified to conform to the
current period presentation.
F-35
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (cont.)
Net Loss Per Share
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
equivalents outstanding during the period. Common stock equivalent shares have
been excluded from the computation as their effect is anti-dilutive.
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, as of January 1, 1999, 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.
Note 2 - Related-Party Transactions
NBC
On March 9, 1999, iVillage and NBC amended the November 11, 1998
advertising and promotional agreement and entered into a stock purchase
agreement whereby iVillage issued 4,889,030 shares of Series E Convertible
Preferred Stock ("Series E") and warrants to purchase 970,874 shares of Series E
at $5.15 per share and 813,003 shares of Series E at $6.15 per share during 2000
and 2001, respectively, in exchange for a promissory note of approximately $15.5
million. The note, which bears interest at the rate of 5% per annum, is payable
quarterly in twelve equal installments of approximately $1.4 million beginning
April 1, 1999. In connection with the IPO and the reverse stock split, the
shares of Series E were converted into 1,629,676 shares of common stock and the
Series E warrants were converted into warrants to purchase 323,625 shares of
common stock at $15.45 per share and 271,003 shares of common stock at $18.45
per share. In addition, iVillage has agreed to purchase from NBC, for cash,
$13.5 million, $8.5 million and $8.5 million of advertising and promotional
spots during 1999, 2000 and 2001, respectively. iVillage has also agreed to pay
NBC $1.1 million during 1999 for prominent placement on the NBC.com Web site.
Under the revised NBC advertising and promotional agreement and in
accordance with EITF D-60, "Accounting for the Issuance of Convertible Preferred
Stock and Debt Securities with a Non-detachable Conversion Feature," the $23.6
million difference between the purchase price of the Series E and the fair
market value on the date of issuance was accounted for as a deemed dividend and
amortized using the effective interest method from the date of issuance through
the date the Company completed its IPO (the date of conversion into common
stock). In addition, the fair value of the warrants of approximately $8.4
million was recorded in stockholders' equity as deferred advertising costs and
is being amortized over the three-year advertising agreement. The fair value of
the warrants was determined using the Black-Scholes option pricing model in
accordance with SFAS No. 123.
F-36
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (cont.)
Note 3 - Acquisitions
iBaby
As a result of the IPO, the Company purchased all of the outstanding
shares of iBaby held by the minority stockholders pursuant to the Rights
Agreement dated as of April 8, 1998 among the Company, OurBaby LLC, JBM
Ventures, Inc. and iBaby, Inc., as subsequently amended on February 10, 1999.
The aggregate purchase price of $10.8 million consisted of (i) $8.0 million in
cash, of which $1.5 million was paid on February 12, 1999 and $6.5 million was
paid on March 25, 1999 and (ii) 125,448 shares of the Company's common stock.
The difference between the purchase price and the fair value of the acquired
minority interest in iBaby was recorded as goodwill and will be amortized over
the period of expected benefit, which is estimated at three years.
The cost of acquisition was allocated to the assets acquired and
liabilities assumed based upon their estimated fair values as follows:
Working Capital $ (452,752)
Fixed assets 399,181
Goodwill 11,064,324
-----------
$11,010,753
===========
Astrology.Net
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 common stock and approximately $1.2
million in cash. The acquisition was accounted for as a purchase with a purchase
price of approximately $21 million based on the $24.00 initial public offering
price of iVillage's common stock and an estimate for the value of Astrology.Net
options assumed by iVillage. The difference between the purchase price and the
fair value of the acquired net assets of Astrology.Net was recorded as goodwill
and is being amortized over the period of expected benefit, which is estimated
at three years.
Of the 802,125 shares of common stock, (i) 326,331 shares were issued at
the closing, (ii) 75,000 shares were issued into escrow for 18 months to cover
possible indemnification claims and (iii) the remaining 400,794 shares were
issued subject to earnout restrictions over five years.
The first 75,000 shares to be released under the earnout will be placed
into the indemnification escrow. The earnout shares will be released as
Astrology.Net meets certain revenue targets during the three years following
closing. Any earnout shares not released during the first three years will be
released five years from closing. In addition, all outstanding options to
purchase Astrology.Net common stock were converted into options to purchase
31,208 shares of iVillage common stock. The Agreement provides for employment,
non-compete and stock option agreements for the founding stockholders of
Astrology.Net.
F-37
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (cont.)
Astrology.Net (cont.)
iVillage also issued to the founding stockholders of Astrology.Net
options to purchase 150,000 shares of iVillage common stock at an exercise price
equal to $24.00 per share. These options are contingent on continued employment
with Astrology.Net and vest over a period of seven years, with accelerated
vesting dependent on Astrology.Net meeting certain revenue targets.
The following unaudited pro forma summary presents consolidated results
of operations for the Company as if the acquisition of Astrology.Net had been
consummated on January 1, 1998. 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.
1998 1999
---- ----
(in thousands, except per share data)
Revenues $ 2,345 $ 6,660
Net loss $(8,607) $(17,543)
Net loss per share, excluding
deemed dividend $ (3.15) $ (2.96)
OnLine Psych and Code Stone
On June 30, 1999, iVillage acquired OnLine Psychological Services, Inc.
("OnLine Psych") and Code Stone Technologies, Inc. ("Code Stone"). As a result
of the acquisition, OnLine Psych and Code Stone became wholly-owned subsidiaries
of iVillage. OnLine Psych operates a Web site focusing on mental health issues
while Code Stone provides much of the interactive technology used on Online
Psych's Web site.
The aggregate purchase price paid to acquire OnLine Psych and Code Stone
consisted of $1.5 million cash and approximately 577,000 shares of iVillage
common stock, valued under the purchase method of accounting at approximately
$30.0 million in the aggregate. The difference between the purchase price and
the fair value of the acquired net assets of OnLine Psych and Code Stone have
been recorded as goodwill and are being amortized over the period of expected
benefit, which is estimated to be three years.
iVillage also issued to certain employees of OnLine Psych options to
purchase shares of iVillage common stock. The options, which are contingent upon
continued employment with OnLine Psych, vest over a period of seven years, with
accelerated vesting dependent on OnLine Psych meeting certain revenue and other
performance targets. iVillage also granted to the founding stockholders of
OnLine Psych, subject to its existing registration rights agreements, piggyback
registration rights in connection with the shares.
F-38
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (cont.)
Note 4 - Segment Information
The Company's business is comprised of the development of programming
material by iVillage for distribution through online service providers and the
Internet and the sale of products by iBaby, iMaternity and Astrology.Net through
their Web sites. The Company's management reviews corporate assets and overhead
expenses within its media segment.
F-39
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (cont.)
The summarized segment information, as of and for the three months ended
June 30, 1999, is as follows:
(dollars in thousands)
<TABLE>
<CAPTION>
E-
Media Commerce Total
----- -------- -----
<S> <C> <C> <C>
Revenues $ 5,994 $ 2,114 $ 8,108
Cost of revenues 2,572 1,638 4,210
Product development and
technology 957 396 1,353
Sales and marketing 11,428 890 12,318
General and administrative 3,283 564 3,847
Depreciation and amortization 1,460 3,205 4,665
Loss from operations (13,705) (4,580) (18,285)
Total assets 156,326 1,746 158,072
========= ========= =========
</TABLE>
The summarized segment information, as of and for the six months ended June 30,
1999, is as follows:
(dollars in thousands)
<TABLE>
<CAPTION>
E-
Media Commerce Total
----- -------- -----
<S> <C> <C> <C>
Revenues $ 10,684 $ 3,888 $ 14,572
Cost of revenues 6,081 3,031 9,112
Product development and
technology 2,274 764 3,038
Sales and marketing 21,704 1,502 23,206
General and administrative 6,851 1,021 7,872
Depreciation and amortization 3,099 4,420 7,519
Loss from operations (29,324) (6,851) (36,175)
Total assets 156,326 1,746 158,072
========= ========= =========
</TABLE>
F-40
<PAGE>
iVillage Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (cont.)
Note 5 - Subsequent Events
On July 13, 1999, iVillage entered into an agreement to acquire all of
the outstanding stock of Lamaze Publishing Company, Inc. ("Lamaze Publishing"),
a multimedia provider of education information to expectant and new mothers. The
total purchase price, valued at approximately $100.0 million under the purchase
method of accounting, consists of approximately 1.7 million shares of iVillage
common stock, subject to certain adjustments, and approximately $5.0 million of
assumed debt. The closing of the transaction is subject to customary closing
conditions and the filing of a registration statement with the Securities and
Exchange Commission covering the resale of the issued shares. Lamaze Publishing
is the exclusive licensee of the LAMAZE mark for use in connection with consumer
publications and other communications, which include print, audio, visual and
other consumer oriented media, that are commercial in nature. Lamaze Publishing
is also the exclusive marketing agent for Lamaze Publishing International, Inc.,
the owner of the Lamaze Publishing family of marks.
On August 4, 1999, iVillage acquired the domain name Astrology.com from
Boulevards New Media, Inc.
On August 6, 1999, iVillage entered into a three-year employment
agreement with Harriet Rubin, an author and publisher on the subjects of
business and money/life issues, to develop content for the iVillage Work
channel. On August 6, 1999, iVillage also entered into an agreement with Ms.
Rubin to license certain assets, including the domain name The Soloist.com, for
one year, with an option to purchase such assets at the end of the one-year
term.
F-41
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The pro forma financial information gives effect to the following
transactions.
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 approximately $11.0 million. The purchase price is
comprised of $8 million in cash and common stock having an aggregate value of
$3.0 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 were dependent upon the IPO price
per share, less underwriters' discount.
The acquisition of the minority interest of iBaby has been accounted
for as a 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 were 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 has been accounted for as a purchase with an estimated
purchase price of approximately $21.0 million, based on a value of the Company's
common stock of $24.00 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 has been
recorded as goodwill and amortized over the period of expected benefit.
F-42
<PAGE>
NBC Agreement
On March 9, 1999, the Company and NBC entered into an agreement to
amend, subject to closing conditions, 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.
Lamaze Publishing
On July 13, 1999, iVillage entered into an agreement to acquire all of
the outstanding stock of Lamaze Publishing, a multimedia provider of education
information to expectant and new mothers. The total purchase price consisted of
1,748,791 shares of iVillage common stock, subject to certain adjustments, and
approximately $5 million to repay debt. The difference between the purchase
price of $102.3 million as calculated according to generally accepted accounting
principles and the fair value of the acquired net assets of Lamaze Publishing
will be recorded as goodwill and amortized over the period of expected benefit
which is estimated at ten years.
F-43
<PAGE>
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of all of the events discussed above as if they
had occurred on January 1, 1998 for the unaudited pro forma condensed
consolidated statements of operations. The unaudited pro forma condensed
consolidated balance sheet gives effect to the acquisition of Lamaze Publishing
Company, Inc. as if it had occurred on June 30, 1999.
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 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 audited and unaudited
historical financial statements of iVillage which are contained elsewhere in
this prospectus.
F-44
<PAGE>
iVillage Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
(in thousands)
<TABLE>
<CAPTION>
iVillage Inc.
and Lamaze Pro Forma
Subsidiaries Publishing Adjustments Pro Forma
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 85,279 $ 85 1(a) $ (4,720) $ 80,644
Accounts receivable, net 2,843 2,191 -- 5,034
Prepaid expenses and other current assets 1,162 2,646 -- 3,808
------------- ------------- -------------- --------------
Total current assets 89,284 4,922 (4,720) 89,486
Fixed assets, net 6,968 2,216 -- 9,184
Other assets 189 189
Prepaid distribution costs -- 65 -- 65
Goodwill and intangible assets, net 61,631 402 1(b) 101,121 163,154
------------- ------------- -------------- --------------
Total assets $ 158,072 $ 7,605 $ 96,401 $ 262,078
============= ============= ============== ==============
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable and accrued expenses $ 10,398 $ 2,708 1(f) $ 350 $ 13,456
Capital leases payable 73 -- -- 73
Deferred revenue 2,117 4,345 -- 6,462
Other current liabilities 192 2,552 1(c) (2,552) 192
------------- ------------- -------------- --------------
Total current liabilities 12,780 9,605 (2,202) 20,183
Long term debt and stockholders' loans -- 2,168 1(c) (2,168) --
Capital leases payable, net of current portion -- -- -- --
------------- ------------- -------------- --------------
Total liabilities 12,780 11,773 (4,370) 20,183
------------- ------------- -------------- --------------
Commitments and Contingencies
Stockholders' equity:
Common stock 243 534 1(d) (534) 260
1(e) 17
Additional paid-in capital 302,430 -- 1(e) 96,586 399,016
Accumulated deficit (134,549) (4,702) 1(d) 4,702 (134,549)
Stockholders notes receivable (14,681) -- -- (14,681)
Unearned compensation and deferred advertising (8,151) -- -- (8,151)
------------- ------------- -------------- --------------
Total stockholders' equity 145,292 (4,168) 100,771 241,895
------------- ------------- -------------- --------------
Total liabilities and stockholders' equity $ 158,072 $ 7,605 $ 96,401 $ 262,078
============= ============= ============== ==============
</TABLE>
F-45
<PAGE>
iVillage Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1998
(in thousands, except per share data)
<TABLE>
<CAPTION>
iVillage Inc. Lamaze Pro Forma
and Subsidiaries Astrology.Net Publishing Adjustments Pro Forma
---------------- ------------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues $ 15,012 $ 848 $ 11,212 $ - $ 27,072
---------------- ------------- ---------- ----------- ---------
Cost of revenues 13,532 204 5,488 19,224
---------------- ------------- ---------- ----------- ---------
Gross margin 1,480 644 5,724 - 7,848
---------------- ------------- ---------- ----------- ---------
Operating expenses:
Product development and technology 989 - 989
Sales and marketing 28,523 127 2,666 - 31,316
General and administrative 10,612 537 2,812 - 13,961
Depreciation and amortization 5,683 91 830 2(a) 10,112 27,356
---------------- ------------- ---------- ---------
2(a) 3,670
2(a) 6,970
-----------
Total operating expenses 45,807 755 6,308 20,752 73,622
---------------- ------------- ---------- ----------- ---------
Loss from operations (44,327) (111) (584) (20,752) (65,774)
Interest income (expense), net 591 - (299)2(b) 299 591
Loss on sale of Web site (504) - - (504)
Minority interest 587 - - 2(c) (587) 0
---------------- ------------- ---------- ----------- ---------
Net loss $ (43,653) $ (111) $ (883) $(21,040) $ (65,687)
================ ============= ========== =========== =========
Pro forma basic and diluted net loss per
share attributable to common stockholders $ (2.59) $ (3.10)
================ =========
2(d) 1,630
Weighted average shares of common stock 2(d) 125
outstanding used in computing pro forma 2(d) 802
basic and diluted net loss per share 16,854 2(d) 1,749 21,160
================ =========== =========
</TABLE>
F-46
<PAGE>
iVillage Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six months ended June 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
iVillage Inc. Lamaze Pro Forma
and Subsidiaries Astrology.Net Publishing Adjustments Pro Forma
------------------ ---------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 14,572 $ 190 6,403 $ 21,165
------------------ ---------------- ---------------- ------------ ------------
Cost of revenues 9,112 124 3,393 12,629
------------------ ---------------- ---------------- ------------ ------------
Gross margin 5,460 66 3,010 - 8,536
------------------ ---------------- ---------------- ------------ ------------
Operating expenses:
Product development and technology 3,038 - - 3,038
Sales and marketing 23,206 29 1,327 24,562
General and administrative 7,872 64 1,461 9,397
Depreciation and amortization 7,519 9 435 3(a) 5,056 14,349
------------------ ---------------- ---------------- ------------
3(a) 871
3(a) 459
------------
Total operating expenses 41,635 102 3,223 6,386 51,346
------------------ ---------------- ---------------- ------------ ------------
Loss from operations (36,175) (36) (213) (6,386) (42,810)
Interest income (expense), net 1,513 (3) (180) 3(b) 180 1,510
------------------ ---------------- ---------------- ------------ ------------
Net loss $ (34,662) $ (39) $ (393) $ (6,206) $ (41,300)
Preferred stock deemed dividend (23,612) - (23,612)
Net loss attributable to common stockholders $ (58,274) $ (39) $ (393) $ (6,206) $ (64,912)
================== ================ ================ ============ ============
Pro foma basic and diluted net loss per share
attributable to common stockholders $ (2.77) $ (2.75)
================== ============
214
Weighted average shares of common stock 29
outstanding used in computing basic 625
and diluted net loss per share 21,027 3(c) 1,749 23,644
================== ================ ================ ============ ============
</TABLE>
F-47
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(in thousands, except share data)
1. The pro forma adjustments to the unaudited pro forma condensed
consolidated balance sheet as of June 30, 1999 are as follows:
a) Adjustment to cash, for the cash portion of the acquisition price,
of approximately $4,720 for Lamaze Publishing Company, Inc.
("Lamaze Publishing").
b) Adjustment to goodwill and intangible assets to reflect the
excess of the purchase price over the fair value of net assets
acquired of Lamaze Publishing, calculated as follows:
Lamaze
------
Cash portion of purchase price.............. $ 4,720
Value of stock and option portion of
purchase price............................ 96,603
Acquisition costs........................... 350
--------
Purchase price.............................. 101,673
Fair value of net assets to be acquired..... 552
--------
Goodwill.................................... $101,121
========
* The value of the common stock to be issued in connection with the
acquisition of Lamaze Publishing was estimated as $55.24, the
average value of the iVillage common stock surrounding the date
the terms of the acquisition were agreed to.
The allocation of the purchase price to the assets and liabilities
acquired are preliminary. Final allocations will be based on
appraisal and other analyses of fair values. The final allocation
may differ from the amounts reflected above.
c) Adjustment to remove the short-term and long-term notes payable
of Lamaze Publishing that are to be paid off by iVillage on the
date of acquisition.
d) Adjustment to reflect the elimination of all of the stockholders'
equity balances of Lamaze Publishing.
e) Adjustment to reflect the issuance of 1,748,791 shares of iVillage
common stock for the acquisition of Lamaze Publishing.
f) Adjustment to record the estimated acquisition expenses incurred
by iVillage of approximately $350.
2. The pro forma adjustments to the unaudited pro forma condensed
consolidated statement of operations for the year ended December 31,
1998 are as follows:
a) Adjustment to depreciation and amortization of goodwill of
$10,112, $3,670 and $6,970 resulting from the acquisitions of
Lamaze Publishing, iBaby and Astrology.Net, respectively, over the
expected period of benefit (three years for iBaby and
Astrology.Net and ten years for Lamaze Publishing).
F-48
<PAGE>
b) Adjustment to remove Lamaze Publishing interest expense of $299,
assuming all notes were paid off by iVillage on January 1, 1998.
c) Adjustment to minority interest of $587 to add back the net loss
previously attributed to the minority stockholders of iBaby.
d) Adjustment to weighted average shares of common stock outstanding
used in computing basic and diluted net loss per share to reflect
the issuance of 802,125, 125,448 and 1,748,791 shares of common
stock, in connection with the acquisitions of Astrology.Net, iBaby
and the acquisition of Lamaze Publishing, respectively, and the
1,629,676 shares issued to NBC in connection with the advertising
and promotion agreement as of January 1, 1998.
3. The pro forma adjustments to the unaudited pro forma condensed
consolidated statement of operations for the six months ended June 30,
1999 are as follows:
a) Adjustment to reflect the amortization of goodwill of $5,056, $459
and $871 resulting from the acquisitions of Lamaze Publishing,
iBaby and Astrology.Net, respectively, over the expected period of
benefit (three years for iBaby and Astrology.Net and ten years for
Lamaze Publishing.
b) Adjustment to remove Lamaze Publishing interest expense of $180,
assuming all notes were paid off by iVillage on January 1, 1998.
c) Adjustment to reflect weighted average shares of common stock
outstanding used in computing basic and diluted net loss per
share. This adjustment reflects the issuance of 802,125, 125,448
and 1,748,791 shares of common stock, in connection with the
acquisitions of Astrology.Net, iBaby and the acquisition of Lamaze
Publishing and the issuance of 1,629,676 shares to NBC in
connection with the NBC agreement.
F-49
<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-50
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, May 29,
------------ -------
1995 1996 1997
---- ---- ----
(Unaudited)
Assets
<S> <C> <C> <C>
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-51
<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-52
<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-53
<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-54
<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.
F-55
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(continued)
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.
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.
F-56
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(continued)
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.
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.
F-57
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(continued)
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.
Interest expense, including amortized discount 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:
Year Ending December 31:
1997.............................. $53,920
1998.............................. 27,769
------
$81,689
F-58
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(continued)
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-59
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of KnowledgeWeb, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders equity and cash flows present fairly, in all
material respects, the financial position of KnowledgeWeb, Inc. at December 31,
1998 and 1997, and the results of their operations and cash flows for the
years 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, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
January 29, 1999
New York, New York
F-60
<PAGE>
KnowledgeWeb, Inc.
Balance Sheets
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1998 1997
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 103,852 $ 9,718
Accounts receivable, net of allowance of $12,538 and $0 as of 113,855 19,139
December 31, 1998 and 1997, respectively
Prepaid expenses 1,126 956
----------- ----------
Total current assets 218,833 29,813
----------- ----------
Property and equipment, net 65,057 64,139
Internal use software, net 71,954 44,110
Other assets 5,429 4,027
Total assets $ 361,273 $ 142,089
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 84,156 $ 12,962
Due to stockholder 121,971 148,184
Current portion of capital lease obligations (Note 5) 17,248 11,947
Accrued expenses and other current liabilities 66,017 2,032
----------- ----------
Total current liabilities 289,392 175,125
Capital lease obligations, net of current obligations (Note 5) 22,936 23,478
----------- ----------
Total liabilities 312,328 198,603
Commitments and contingencies (Note 5)
Stockholders' Equity
Convertible preferred stock, par value $0.0001 per share; 5,000,000
shares authorized, 421,880 shares issued and outstanding 42 -
Common stock, par value $0.0001 per share, 25,000,000 shares
authorized, 5,111,111 and 4,973,000 shares issued and outstanding 511 497
as of December 31, 1998 and 1997, respectively
Additional paid-in capital 313,552 64,502
Unearned compensation (32,268) -
Accumulated deficit (232,892) (121,513)
----------- ----------
Total stockholders' equity/(deficit) 48,945 (56,514)
----------- ----------
Total liabilities and stockholders' equity $ 361,273 $ 142,089
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
KnowledgeWeb, Inc.
Statements of Operations
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1998 1997
Revenues $ 847,517 $ 403,670
Costs and expenses:
Cost of revenues 204,004 35,856
General and administrative expenses 754,792 374,023
Interest expense, net 100 78
---------- ----------
Net loss (111,379) (6,287)
========== ==========
Basic and diluted net loss per share $(0.02) $(0.00)
========== ==========
Weighted average shares of common stock
outstanding used in computing basic
and diluted net loss per share 5,075,543 4,892,268
========== ==========
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
KnowledgeWeb, Inc.
Statements of Stockholders' Equity
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional
-------------------- ------------------- Paid-In Unearned Accumulated
Shares Amount Shares Amount Capital Compensation Deficit Total
-------- -------- --------- -------- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 - $ - 4,600,000 $ 460 $ 39,540 $ - $(115,226) $(75,226)
Issuance of common stock - - 373,000 37 24,962 - - 24,999
Net loss - - - - - - (6,287) (6,287)
-------- -------- --------- -------- ---------- ------------- ----------- ----------
Balance at December 31, 1997 - - 4,973,000 497 64,502 - (121,513) (56,514)
Issuance of common stock - - 138,111 14 16,653 - - 16,667
Issuance of Series A convertible
preferred stock at $0.49 per
share 421,880 42 - - 177,658 - - 177,700
Compensation expense on option
grants (Note 7) - - - - 54,739 (32,268) 22,471
Net loss - - - - - - (111,379) (111,379)
-------- -------- --------- -------- ---------- ------------- ----------- ----------
Balance at December 31, 1998 421,880 $ 42 5,111,111 $ 511 $313,552 $ (32,268) $(232,892) $ 48,945
======== ======== ========= ======== ========== ============= =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
KnowledgeWeb, Inc.
Statements of Cash Flows
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (111,379) $ (6,287)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 91,061 66,490
Bad debt expenses 12,538 -
Compensation expense on stock option grants 22,471 -
Changes in operating assets and liabilities:
Accounts receivable, net (107,254) (18,269)
Prepaid expenses and other assets (1,572) (4,689)
Accounts payable 135,179 12,932
----------- ---------
Net cash provided by operating activities 41,044 50,177
----------- ---------
Cash flows from investing activities:
Purchase of fixed assets (15,628) (9,174)
Increase in capitalized software (84,757) (46,351)
----------- ---------
Net cash used by investing activities (100,385) (55,525)
----------- ---------
Cash flow from financing activities:
Repayment of stockholder loan (32,038) (23,087)
Interest accretion on stockholder loans 5,825 6,918
Advances by stockholder - 11,398
Repayment of capital lease obligations (14,665) (8,241)
Proceeds from issuance of common stock 16,653 25,000
Proceeds from issuance of convertible preferred stock 177,700 -
----------- ---------
Net cash provided by financing activities 153,475 11,988
----------- ---------
Net increase in cash for the period 94,134 6,640
Cash and cash equivalents, beginning of year 9,718 3,078
----------- ---------
Cash and cash equivalents, end of year $ 103,852 $ 9,718
=========== =========
Cash paid for:
Interest $ 12,381 $ 6,910
=========== =========
Income taxes $ - $ -
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Description of Business
KnowledgeWeb, Inc. (the "Company") is a California corporation
organized on January 4, 1995. The Company owns and operates the
internet web site, Astrology.net. Astrology.net is a web site where
users can receive information on astrology, and obtain astrology charts
and reports. The Company conducts its business primarily in the United
States within one industry segment.
The Company's future prospects are subject to the risks and
uncertainties frequently encountered by the companies in the new and
evolving markets of the Internet product and services industry. These
risks include the failure to develop and extend the Company's online
services, 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 overcome these risks, certain assets may not be
recovered.
Revenue Recognition
The Company generates several types of revenue including the following:
Chart sales
The Company's web site enables users to generate personalized
astrology reports based on the user's particulars. These charts are
delivered online to the customer immediately upon request. Revenue
is recognized upon delivery of the charts and when the collection
of the receivables are reasonably assured.
Advertising
Advertising revenues are derived from the sale of banner
advertisements on the Company's web site. The Company recognizes
income from these advertisements over the period in which the
advertisements are displayed.
Custom licensing
The Company also generates revenues through the licensing of
astrological reports and editorials to other web sites and
publications. Revenues from licensing are recognized in the period
when the editorial is sold.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method for software and the declining balance
method for all other property and equipment over the estimated useful
lives of the assets, generally three to five years.
F-65
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Internal Use Software
The Company capitalizes internally developed software in accordance
with Statement of Position 98-1. These capitalized costs primarily
include payroll and benefits relating to employees engaged in
developing the software plus direct outside costs incurred during the
application development stage being achieved. Internally developed
software is amortized on a straight-line basis over three years,
beginning in the year in which the software is placed in service.
Statement of Cash Flows
The Company considers cash equivalents to be short term investments
with original maturities of three months or less.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
significant concentration of credit risk consist primarily of cash and
accounts receivable. Substantially all of the Company's excess cash has
been invested in highly liquid investments.
The Company performs ongoing credit evaluations of its advertising
customers' financial condition and generally does not require
collateral on accounts receivable. The Company maintains allowances for
credit losses and such losses have been within management's
expectations. At December 31, 1998 three customers accounted for a
total of 78% of the accounts receivable balance. At December 31, 1997
one customer represented 75% of the total accounts receivable balance.
The same customer represented 13% and 30% of total revenues for the
years ended December 31, 1998 and 1997, respectively.
Income Taxes
The Company calculates its income tax provision in accordance with
Financial Accounting Standards Board (FASB) Statement No. 109. Deferred
taxes are provided on temporary differences between the tax basis of
assets or liabilities and amounts reported in the financial statements.
Basic and Diluted Net Loss Per Share
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 equivalent shares outstanding during the period. Common
equivalent shares consist of the common shares issuable upon conversion
of the convertible preferred stock and shares issuable upon the
exercise of stock options. These common equivalent shares could
potentially dilute basic EPS in the future, however, they were not
included in the current computation of diluted EPS because to do so
would have been anti-dilutive.
F-66
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions. These estimates and assumptions affect the reported
amounts 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 those estimates.
Supplier Concentration
The Company depends on one unrelated supplier for the software that
generates astrology reports and charts. The Company believes that, if
necessary, this supplier could be replaced and that the quality and
price of the new software would be similar.
2. Property and Equipment
December 31, December 31,
1998 1997
Computer equipment and software $ 155,901 $ 120,835
Furniture and fixtures 7,487 7,487
Motor vehicle 12,848 12,848
---------- ----------
176,236 141,170
Less accumulated depreciation (111,179) (77,031)
---------- ----------
$ 65,057 $ 64,139
========== ==========
Depreciation expense for the years ended December 31, 1998 and 1997 totaled
$34,148 and $38,148, respectively.
3. Due to Stockholder
One of the stockholders periodically transfers cash and other property to
the Company in exchange for demand notes. In addition, this stockholder
periodically makes payments on behalf of the Company in exchange for demand
notes. These notes are unsecured, and carry a compounded interest rate of 5
percent.
The balance of loans, including accrued interest, at December 31, 1998 and
1997 was $121,971 and $148,184, respectively.
F-67
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
4. Internal Use Software
December 31, December 31,
1998 1997
Internal use software $ 180,781 $ 96,024
Less accumulated amortization (108,827) (51,914)
----------- ----------
$ 71,954 $ 44,110
=========== ==========
Amortization expense for the years ended December 31, 1998 and 1997
totaled $56,913 and $32,008, respectively.
5. Commitments and Contigencies
Lease Commitments
As of December 31, 1998, the Company leases office space under a
cancelable operating lease. Rent expense was $38,624 and $16,761 for
the years ended December 31, 1998 and 1997, respectively.
As of December 31, 1998, the Company leased certain computer equipment
under noncancelable capital leases. Future minimum lease payments
required under the capital leases are as follows:
1999 $ 26,153
2000 23,451
2001 5,029
2002 -
2003 and thereafter -
----------
Total minimum lease payments $ 54,633
Less amount representing interest 14,449
----------
Present value of net minimum lease payments 40,184
Less current portion 17,248
----------
$ 22,936
==========
The cost of equipment under capital lease included in property and
equipment was $64,656 and $45,218 at December 31, 1998 and 1997,
respectively.
F-68
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Employee Benefits
The Company does not provide postretirement benefits to its employees,
nor does the Company offer company-sponsored savings or pension plans.
6. Income Taxes
No provision for federal and state income taxes has been recorded as the
Company has incurred net operating losses through December 31, 1998. The
following table sets forth the primary components of deferred tax assets:
December 31, December 31,
1998 1997
Net operating loss and credit carryforwards $ 86,270 $ 46,495
Nondeductible expenses and reserves 15,404 5,838
--------- ---------
Gross deferred tax assets 101,674 52,333
Valuation allowance (101,674) (52,333)
--------- ---------
$ - $ -
========= =========
At December 31, 1998 and 1997, the Company fully reserved its deferred tax
assets. The Company believes uncertainty exists regarding the ultimate
realizability of the deferred tax assets such that a full valuation
allowance is required. If the Company achieves profitability, these net
deferred tax assets would be available to offset future income taxes.
Deferred tax assets and related valuation allowances of approximately
$9,000 relate to operating loss carryforwards resulting from the issuance
of employee stock options, the tax benefit of which, when recognized, will
be accounted for as a credit to additional paid-in capital rather than a
reduction of the income tax provision.
At December 31, 1998, the Company had approximately $230,000 of federal net
operating loss carryforwards for tax reporting purposes available to offset
future taxable income; such carryforwards will expire beginning in 2010.
7. Stockholders' Equity
On August 18, 1998, the Company's Board of Directors approved an Amended
and Restated Articles of Incorporation, for the purpose of (i) effecting a
100 for one stock split, (ii) the authorization of the Corporation to issue
up to 25,000,000 shares of Common Stock and 5,000,000 of Preferred Stock,
and (iii) the creation of a class of Series A Preferred Stock. It was also
determined that the par value of the Preferred Stock and the Common Stock
would be $0.0001 per share.
F-69
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
Stock Split
In August 1998, the Company's Board of Directors approved a 100 for one
Common Stock split whereby stockholders of record on September 17, 1998
received 100 shares of Common Stock in exchange for each common share
held on that date. All references to the number of shares of Common
Stock, weighted average common shares, and per share amounts have been
retroactively restated in the accompanying financial statements to
reflect the 100 for one split.
Preferred Stock
At December 31, 1998, the Company has authorized 5,000,000 shares of
Preferred Stock, of which 1,300,000 has been designated Series A
Convertible Preferred Stock ("Series A"). The remaining shares of
Preferred Stock may be issued from time to time in one or more series.
At December 31, 1998, the Company has 421,880 Series A shares issued
and outstanding.
Holders of Series A were entitled to receive noncumulative,
preferential dividends of $0.0392 per annum, when and if declared by
the Board of Directors. No such dividends were declared. In the event
of liquidation, sale of the Company or corporate reorganization in
which the shareholders of the Company do not own a majority of the
outstanding shares of the surviving Company, Series A shareholders were
entitled to a per share distribution in preference to common
shareholders equal to the original issue price per share of $0.49, plus
any declared but unpaid dividends on each such share.
Stock Option Plan
In August 1998, the Board of Directors adopted the 1998 Stock Incentive
Plan (the "Plan") which provided for the grant of up to 1,000,000
incentive stock options and non-qualified stock options.
Notwithstanding the foregoing, at any given time the number of shares
issuable upon exercise of all outstanding stock options shall not
exceed a number of shares which is equal to 30% of the then outstanding
shares of the Company.
Under the Plan, incentive stock options may be granted to employees,
officers and directors of the Company and non-qualified stock options
may be granted to consultants, employees, directors, and officers of
the Company. Options granted under the Plan must be issued at prices
not less than 100% and 85%, for incentive and nonqualified stock
options, respectively, of the fair market value of the stock on the
date of grant as determined by the Board of Directors. The Plan
requires that all options be exercised at a rate of not less than 20%
per year, over five years, from the date of grant. Incentive options
granted under the Plan shall vest over a four year period at a rate of
1/16th of the total shares subject to the option on the first day of
each calendar quarter from the various vesting start dates. All
non-qualified stock options were issued fully vested on the date of
grant with the exception of 59,549 shares for which vesting is
contingent upon a future event. Options to purchase 93,629 shares were
exercisable at December 31, 1998.
F-70
<PAGE>
KnowledgeWeb, Inc.
Notes to Financial Statements
December 31, 1998 and 1997
- --------------------------------------------------------------------------------
A summary of the Plan's activity is as follows:
Weighted
Average
Available Options Price Per
for Grant Outstanding Share
--------- ----------- ---------
Balance at December 31, 1997 - - $ -
Shares reserved 1,000,000 - -
Options granted (228,079) 93,629 0.25
Options exercised - - -
--------- ------ ------
Balance at December 31, 1998 771,921 93,629 $ 0.25
========= ====== ======
In November 1998, the Company granted options to purchase an aggregate
of 228,079 shares of Common Stock at an exercise price of $0.25 per
share. Based on an estimated market price of the stock, $0.49, at grant
date, $54,739 of compensation expense relating to these options is to
be recognized, of which $22,471 was recognized in 1998. The balance of
the compensation expense is to be recognized over the remaining vesting
period of the options.
Stock Compensation
The Company accounts for stock-based compensation in accordance with
the provisions of APB 25. Had compensation expense been determined
based on the fair value at the grant dates, as prescribed in SFAS 123,
the Company's net loss would have been $114,188 and basic and diluted
loss per share would have been $0.02 for the year ended December 31,
1998. The fair value of each option grant was determined on the date of
grant using the minimum value method. The following assumptions were
used to estimate the fair value of stock options granted to employees:
expected life of 30 months; risk free interest rate of 4.55%; and no
dividend yield. The weighted average fair value of options granted to
employees at December 31, 1998 is $0.49. For pro forma purposes, the
estimated fair value of the Company's stock options to employees is
amortized over the options vesting period. Because additional stock
options are expected to be granted each year, the above pro forma
disclosures are not representative of pro forma effects on reported
financial results for future years.
8. Subsequent Events
On February 18, 1999, the Company sold 100% of the outstanding stock
of the Company to iVillage Inc. in exchange for 802,125 shares of
iVillage Inc. common stock and approximately $1 million.
F-71
<PAGE>
Report of Independent Accountants
To the Stockholders and Board of Directors
of Lamaze Publishing Company, Inc.:
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' deficit and cash flows present fairly, in all material
respects, the financial position of Lamaze Publishing Company, Inc. (the
"Company") at December 31, 1997 and 1998, and the results of its operations and
its cash flows for each of the years ended December 31, 1997 and 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
New York, New York
June 14, 1999
except for note 10,
as to which the date
is July 13, 1999
F-72
<PAGE>
Lamaze Publishing Company, Inc.
Balance Sheets
($ in 000's)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
---------------------- June 30,
1997 1998 1999
--------- --------- -----------
(unaudited)
<S> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 187 $ 164 $ 85
Accounts receivable, less allowance of $30,000
and $55,000 and $80,000 (unaudited) in 1997,
1998 and 1999, respectively 1,175 2,000 2,191
Other current assets 1,024 1,538 2,646
--------- --------- ---------
Total current assets 2,386 3,702 4,922
--------- --------- ---------
Fixed assets, net 1,674 1,997 2,216
Goodwill, net 636 483 402
Other assets 12 55 65
--------- --------- ---------
Total assets $ 4,708 $ 6,237 $ 7,605
========= ========= =========
Liabilities and Stockholders' Deficit:
Current liabilities:
Accounts payable and accrued expenses $ 2,862 $ 2,996 $ 2,708
Deferred revenue 2,566 3,288 4,345
Current maturities or long-term debt - 234 312
Bank credit line 950 1,300 2,240
--------- --------- ---------
Total current liabilities 6,378 7,818 9,605
--------- --------- ---------
Long term debt, less current maturities - 1,016 938
Stockholders' notes payable, including accrued interest 1,188 1,178 1,230
--------- --------- ---------
Total liabilities 7,566 10,012 11,773
--------- --------- ---------
Commitments and contingencies
Stockholders' deficit:
Common stock, 40,000 shares authorized, no par
value, 36,478 shares issued and outstanding 534 534 534
Accumulated deficit (3,392) (4,309) (4,702)
--------- --------- ---------
Total stockholders' deficit (2,858) (3,775) (4,168)
--------- --------- ---------
Total liabilities and stockholders' deficit $ 4,708 $ 6,237 $ 7,605
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-73
<PAGE>
Lamaze Publishing Company, Inc.
Statements of Operations
($ in 000's)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Month
Year Ended December 31, Period Ended June 30,
----------------------- ---------------------
1997 1998 1998 1999
--------- --------- --------- --------
(unaudited)
<S> <C> <C> <C> <C>
Revenues:
Publishing $ 3,800 $ 4,325 $ 1,895 $ 2,712
Satellite broadcasting 2,793 3,750 1,624 1,807
Video 1,376 1,605 765 954
Sampling/Coupons 683 995 470 627
Other 247 537 168 303
--------- --------- --------- --------
Total revenue 8,899 11,212 4,922 6,403
--------- --------- --------- --------
Cost of revenues 4,144 5,488 2,257 3,393
--------- --------- --------- --------
Gross profit 4,755 5,724 2,665 3,010
--------- --------- --------- --------
Operating expenses:
Sales and marketing 2,145 2,666 1,158 1,327
General and administrative 2,526 2,812 1,357 1,461
Depreciation and amortization 549 830 401 435
--------- --------- --------- --------
Total operating expenses 5,220 6,308 2,916 3,223
--------- --------- --------- --------
Loss from operations (465) (584) (251) (213)
--------- --------- --------- --------
Interest expense (152) (299) (119) (180)
--------- --------- --------- --------
Net loss $ (617) $ (883) $ (370) $ (393)
========= ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-74
<PAGE>
Lamaze Publishing Company, Inc.
Statements of Changes in Stockholders' Deficit
For the years ended December 31, 1997 and 1998
and the period ended June 30, 1999 (unaudited)
($ in 000's)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total
Common Stock Accumulated Stockholders'
Shares Amount Deficit Deficit
------------ -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $ 31,002 $ 450 $ (2,475) $ (2,025)
Issuance of common stock 604 80 - 80
Issuance of common stock in connection
with business acquisition 4,872 4 - 4
Distributions - (300) (300)
Net loss - - (617) (617)
---------- -------- ---------- ----------
Balance at December 31, 1997 36,478 534 (3,392) (2,858)
Distributions - - (34) (34)
Net loss - - (883) (883)
---------- -------- ---------- ----------
Balance at December 31, 1998 36,478 534 (4,309) (3,775)
Net loss (unaudited) - - (393) (393)
---------- -------- ---------- ----------
Balance at June 30, 1999
(unaudited) 36,478 $ 534 $ (4,702) $ (4,168)
========== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-75
<PAGE>
Lamaze Publishing Company, Inc.
Statements of Cash Flows
($ in 000's)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Month
Year Ended Period Ended
December 31, June 30,
-------------------- --------------------
1997 1998 1998 1999
--------- -------- --------- --------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (617) $ (883) $ (370) $ (393)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 549 830 401 435
Bad debt expense 30 25 - -
Changes in operating assets and liabilities:
Accounts receivable (531) (850) (239) (191)
Other current assets (2) (514) (513) (1,108)
Accounts payable and accrued expenses 1,639 124 (1,293) (239)
Deferred revenue (2) 722 855 1,057
-------- -------- -------- --------
Net cash provided by (used in)
operating activities 1,066 (546) (1,159) (439)
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of fixed assets (1,152) (991) (376) (565)
Acquisition of a business (730) - - -
-------- -------- -------- --------
Net cash used in investing activities (1,882) (991) (376) (565)
-------- -------- -------- --------
Cash flows from financing activities:
Proceeds from bank term loan - 1,250 1,250 -
Borrowings (repayments) under revolving credit
facilities 950 350 150 940
Payment for debt issuance cost - (52) (52) (15)
Distributions paid to stockholders (300) (34) - -
Stockholders' notes payable 200 - - -
Proceeds from issuance of common stock 80 - - -
-------- -------- -------- --------
Net cash provided by financing activities 930 1,514 1,348 925
-------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents 114 (23) (187) (79)
Cash and cash equivalents, beginning of period 73 187 187 164
-------- -------- -------- --------
Cash and cash equivalents, end of period $ 187 $ 164 $ - $ 85
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. The Company:
Organization and Business
Lamaze Publishing Company, Inc. (the "Company"), publishes magazines
regarding pre- and post-natal educational material which are distributed
to over 3.0 million new and expecting parents annually. These are
distributed in childbirth education classes, as well as in hospitals, at
no cost. The Company produces an educational video tape "You and Your
Baby" which is distributed to childbirth educators and reaches 1.8
million expectant parents. The Company Newborn Channel has exclusive
rights to broadcast on closed-circuit television in approximately 700
hospitals, providing infant care programming to new mothers. In 1998,
the Company launched Lamaze Family Magazine which is expected to be
mailed to 750,000 homes in 1999, targeting families with pre-school
children.
2. Significant Accounting Policies and Procedures:
Revenue Recognition
Revenues are principally derived from advertising inserts and are
recorded as follows:
Publishing and Sampling/Coupons - Publications are mailed to Certified
Child Birth Educators for distribution to expecting parents. Revenue is
recognized upon the distribution to expecting parents, which
approximates the straight-line method. The publications are issued twice
a year as a Spring/Summer issue and a Fall/Winter issue.
Satellite Broadcasting - Advertising revenue is recognized monthly based
on the actual number of births per month divided by the number of births
specified in the contract period and multiplied by the contract amount.
Video - Revenue is recognized upon the distribution to expecting parents
by the Certified Child Birth Educators, which approximates the
straight-line method. Videos are shipped in March of each year.
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.
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 are capitalized, and repairs and
maintenance costs are charged to operations in the periods incurred.
Goodwill
Goodwill consists of the excess of purchase price paid over identified
intangible and tangible net assets of acquired companies. Goodwill is
amortized using the straight-line method over the period of expected
benefit, five years. The Company assesses the recoverability of its
goodwill by determining whether the amortization of the unamortized
balance of its remaining life can be
F-77
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
recovered through forecasted cash flows. If undiscounted forecasted cash
flows indicate that the 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 for the years
ended December 31, 1997 and 1998 was approximately $127,000 and
$153,000, respectively.
Income Taxes
The Company has elected to be taxed as an S Corporation as provided for
by the Internal Revenue Code. Under "S" Corporation status, the
Company's net income or loss is taxed to its stockholders.
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 bank 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 amounts 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 those
estimates. Significant estimates made by the Company include the useful
lives of fixed assets and the recoverability of fixed assets, goodwill
and deferred tax assets.
Concentration of Credit Risk and Other
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash, cash equivalents, and accounts
receivable. The Company's accounts receivable is derived from revenue
earned from customers, principally advertisers, without requiring
collateral. The Company maintains an allowance for potential bad debt
based upon the expected collectibility of all accounts receivable;
historically, such losses have not been significant.
The Company is dependent on a limited number of customers for a
significant part of its revenues. The Company had two customers which
accounted for approximately 18% and 12% of net accounts receivable at
December 31, 1997. The Company had one customer which accounted for 10%
of net accounts receivable at December 31, 1998. The Company had two
different customers which individually accounted for 14% of revenues as
of December 31, 1997. The Company had a different customer which
accounted for 18% of revenues as of December 31, 1998. Additionally,
revenues from the Company's ten largest advertisers accounted for
approximately 66% and 63% of total revenues for the year ended December
31, 1997 and 1998, respectively.
F-78
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Risks and Uncertainties
The Company's operations are subject to certain risks and uncertainties
including actual or prospective competition by entities with greater
financial resources, experience and market presence than the Company, in
addition to risks associated with growth, technology and regulatory
matters.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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 separately from retained earnings and
additional paid-in capital in the equity section of the statement of
operations. 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.
Segment Reporting
During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS 131 uses a
management approach to report financial and descriptive information
about a company's operating segments. Operating segments are
revenue-producing components of the enterprise for which separate
financial information is produced internally for management. Under this
definition, the Company operated as a single segment for all years
presented. The adoption of SFAS 131 did not have a material impact on
the Company's financial position or results of operations.
Start-Up Costs
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 did not have a significant
impact on the Company's results of operations, financial position or
cash flow for the six months ended June 30, 1999.
Software Costs
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 specific 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.
F-79
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Recent Accounting Pronouncements
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.
Unaudited Interim Financial Statements
The financial statements as of June 30, 1999 and for the periods ended
June 30, 1998 and 1999 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.
3. Fixed Assets:
Fixed assets consist of the following:
($ in 000's)
December 31,
---------------------
1997 1998
--------- ---------
Hospital equipment $ 2,321 $ 3,111
Office and computer equipment 121 223
Capitalized software 56 92
Furniture and fixtures 102 118
Leasehold improvements 56 103
-------- --------
2,656 3,647
-------- --------
Less, accumulated depreciation and amortization (982) (1,650)
$ 1,674 $ 1,997
======== ========
Depreciation and amortization of fixed assets was approximately $422,000
and $668,000 for the years ended December 31, 1997 and 1998,
respectively.
F-80
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
4. Business Acquisition:
The Newborn Channel, L.P.
On February 28, 1997, the Company acquired all of the outstanding stock
of the Newborn Channel, L.P. ("TNCLP") a closed-circuit television
channel which provides information regarding various baby care issues,
in exchange for 4,872 shares of the Company's common stock. The cost of
the TNCLP acquisition was allocated to the assets and liabilities
assumed based upon their estimated fair values as follows:
($ in 000's)
Working capital $ (841)
Equipment 808
Goodwill 763
--------
$ 730
========
The following unaudited pro forma summary presents consolidated results
of operations for the Company as if the acquisition of TNCLP had been
consummated on January 1, 1996. 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.
($ in 000's)
1996 1997
---------- ----------
Revenues $ 9,208 $ 9,455
Net income (loss) $ 1,047 $ (769)
5. Related Party Transactions:
Notes Payable to Stockholders
The Company has received loans from its stockholders payable on demand.
As of December 31, 1998, total principal of $1,099,086 was due to
stockholders. Interest on the amounts advanced accrue at the rate of one
percent above the prime interest rate. Accrued interest at December 31,
1997 and 1998 was $88,504 and $78,871, respectively. Interest expense
for 1997 and 1998 was $88,504 and $107,714, respectively. The
stockholders' loans are subordinate to senior bank debt. The
stockholders have informed the Company that they do not intend to make a
demand within the next twelve months, and are committed to support the
operations through 1999.
Fees Paid to Stockholders
The Company has entered into an informal consulting agreement with a
principal stockholder of the Company's common stock. During 1997,
approximately $258,000 was paid in consulting fees related to video
production, management and marketing. During 1998, approximately
$108,000 was paid in video production consulting fees.
F-81
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
6. Bank Loans Payable:
The Company had the following bank loans outstanding as of December 31:
($ in 000's)
1997 1998
---------- ----------
Term loan $ - $ 1,250
Secured line of credit $ 950 $ 1,300
--------- ---------
$ 950 $ 2,550
========= =========
The Company has entered into loan agreements with the Bank of New York
(the "Bank"), providing for a $2.75 million credit facility. The Term
Loan Agreement, dated March 9, 1998, provides for a long-term credit
facility of $1.25 million. The Secured Line of Credit, entered into on
February 9, 1998 and renewed on June 12, 1998, provides for a revolving
credit facility of $1.5 million.
The long-term facility includes a $1.25 million term loan (the "Term
Loan") which is payable in 48 equal consecutive monthly installments in
the amount of $26,042 each, the first of which shall be due and payable
on April 1, 1999. Interest accrues at the Bank's prime rate or
Eurodollar rate plus a margin of between 1.5% to 2%, depending on
attaining certain bank covenants. On January 21, 1999, the agreement was
amended making the first installment payable on July 1, 1999 and
extending the Term Loan to July 2003.
The credit facility is collateralized by receivables, inventories,
equipment and certain real property. Under the terms of the
Agreement, the Company is required to maintain certain financial ratios
and other financial conditions. The Agreement also prohibits the
Company from incurring certain additional indebtedness, limits certain
investments, advances or loans and restricts substantial asset sales,
capital expenditures and cash dividends.
The revolving credit facility requires payment of interest at the Bank's
prime rate which was 7.50% at December 31, 1998 or Eurodollar rate plus
a margin of between 1.5% to 2%, depending on attaining certain bank
covenants. The total amount of unused revolving credit available to the
Company at December 31, 1998 was $200,000. Either party may cancel the
line of credit at any time. Unless cancelled earlier the line of credit
shall be available until May 31, 1999. On January 21, 1999 the credit
facility was increased to $2.5 million and extended until December 31,
1999.
7. Stock Appreciation Plan:
Under the Company's key employee stock bonus plan, stock appreciation
units ("SAU's") were granted to three key employees under terms and
conditions as stated in their respective employment letter. Each
employee was granted three SAU's, one of which shall vest on each of the
first three anniversaries provided they remain employed by the Company
as of each anniversary. All SAU's granted shall vest in full as a result
of a merger, consolidation, sale,
F-82
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
transfer or acquisition. The redemption price shall be determined based
on a multiple of earnings before interest and taxes of the Company for
the period of four consecutive fiscal quarters of the Company
immediately proceedings redemption of such SAU and the number of shares
outstanding at several points in time. The effects of changes in
redemption price during the vesting period are recognized as
compensation cost over the vesting period in accordance with the method
illustrated in SFAS 123, "Accounting for Stock Appreciation Rights and
Other Variable Stock Option or Award Plans". Changes in the amount of
the liability due to stock price changes after the vesting period are
compensation cost of the period in which the changes occur. Due to
negative earnings before interest and taxes in 1998 and 1997, no
compensation expense for fiscal 1998 and 1997 was recorded. During 1997
one employee elected to redeem their SAU's. As a result, the value of
the employee's equity position of $240,000 was paid out, half in January
1998 while the other half will be paid in January 1999 plus accrued
interest.
8. Commitments and Contingencies:
Leases
The Company leases office space, under non-cancelable operating lease
expiring in June 2000. The following is a schedule of future minimum
lease payments under the non-cancelable operating lease as of December
31, 1998:
Year ended December 31: 1988
---------------------- ----------
($ in 000's)
1999 $ 158
2000 $ 79
---------
$ 237
=========
Rent expense was approximately $142,000 and $179,000 for the years ended
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, financial position or
cash flows.
9. Capital Stock:
Common Stock
In October 1997, the Company issued 604 shares of common stock in
exchange for net proceeds of approximately $80,000.
F-83
<PAGE>
Lamaze Publishing Company, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
10. Subsequent Event (unaudited):
On July 13, 1999, the Company entered into a definitive agreement to be
acquired by iVillage Inc., which runs a network of web sites for women,
in exchange for 1.75 million shares of iVillage Common Stock and
approximately $5 million in cash to retire certain indebtedness.
iVillage Inc. has agreed that in the event the Company should request
financial assistance to fund its operations, it will provide the
necessary funds needed to meet the Company's minimum working capital
requirements for the twelve month period beginning from the date of the
transaction closing. The closing of the transaction is subject to
certain customary closing conditions.
F-84
<PAGE>
2,676,364 Shares
iVILLAGE INC.
Common Stock
---------------------
___________, 1999
----------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses payable by the
registrant in connection with the distribution of the common stock being
registered. All amounts are estimated, except the SEC registration fee and the
Nasdaq National Market listing fee:
SEC registration fee $22,088
Nasdaq National Market listing fee 17,500
Accounting fees and expenses *
Legal fees and expenses *
Miscellaneous *
Total $ *
========
* 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 any 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 XII of the Registrant's Amended and Restated Certificate of
Incorporation and Article VI of the Registrant's Bylaws provides for
indemnification by the Registrant of its directors and officers 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 has obtained obtain directors' and officers' insurance
providing indemnification for certain of the Registrant's directors, officers
and employees for certain liabilities.
II-1
<PAGE>
The Registrant has entered into indemnification agreements with each
director and officer which provide indemnification under certain circumstances
for acts and omissions which may not be covered by any directors' and officers'
liability insurance.
Under the terms of the Agreement and Plan of Reorganization, dated as
of July 13, 1999, by and among iVillage Inc., LPC Acquisition Corporation,
Lamaze Publishing Company, Inc. and the Shareholders and Stock Appreciation Unit
Holders of Lamaze Publishing Company, Inc. filed as Exhibit 2.8 and related
documents, the Registrant and the selling stockholders have agreed to indemnify
each other in certain circumstances.
Item 15. Recent Sales of Unregistered Securities
1. In May 1996, the Registrant issued 797,130 shares of Series B
Convertible Preferred Stock to America Online, Inc. ("AOL") at a price per share
of $2.50 in exchange for the cancellation of a note payable.
2. 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.
3. 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.
4. 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").
5. 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.
6. 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).
7. 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).
8. 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).
9. 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.
II-2
<PAGE>
10. 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 ("Sonem"), Tenet Healthcare
Corporation ("Tenet"), Transatlantic Venture Partners C.V., Tribune, The
Trustees of the General Electric Pension Trust, Norman Tulchin, Stanley Tulchin
and one other corporate investor.
11. 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 (on a post-split basis) in consideration for services
rendered.
12. In May 1997, in connection with a Plan of Reorganization and
Merger, among the Registrant, Health responsibility 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).
13. 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 and O'Sullivan
Graev & Karabell, L.L.P., Profit Sharing Plan F/B/O Martin H. Levenglick
("Levenglick").
14. In February 1998, the Registrant issued and sold an aggregate of
284,317 shares of common stock to Tenet at a price per share of $5.86 (on a
post-split basis).
15. 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.
16. 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.
17. 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.
("Nexus"), NIG-Village Ltd. ("NIG"), 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.
18. 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.
("Transatlantic"), 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. ("Moore"),
Remington Investment Strategies, L.P. ("Remington"), Ralph Mack, Cox and one
other corporate investor.
II-3
<PAGE>
19. 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.
20. 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.
21. 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).
22. In December 1998, the Registrant issued and sold an aggregate of
11,730,948 shares of Series E Convertible Preferred Stock at a price per share
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, 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
Venture Partners 1996, LP, Applewood Associates, Fred F. Nazem, Admirals, L.P.,
Fred Tanzer, and Van Wagoner Capital Management.
23. 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).
24. 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).
25. 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).
26. 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).
27. 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).
28. 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).
29. 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).
30. In January 1999, Christine Ohly exercised options and received 250
and 2,416 shares of common stock at prices per share of $3.00 and $5.10,
respectively (on a post-split basis).
31. 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).
II-4
<PAGE>
32. 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).
33. 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).
34. 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).
35. In February 1999, Ramsey Burn exercised an option and received
8,882 shares of common stock at a price per share of $5.10 (on a post-split
basis).
36. In March 1999, employees exercised options and received an
aggregate 1,415 shares of common stock at a price per share of $5.10 (on a
post-split basis).
37. In March 1999, Michael Levy exercised options and received 16,666
shares of common stock at a price of $7.50 (on a post-split basis).
38. In March 1999, in connection with the NBC agreement, the Registrant
issued 4,889,030 shares of Series E Convertible Preferred Stock to NBC.
39. In June 1999, in connection with the acquisitions of OnLine
Psychological Services, Inc. and Code Stone Technologies, the Registrant issued
571,709 shares of Common Stock.
40. In July 1999, in connection with the acquisition of Lamaze
Publishing Company, Inc. the Registrant agreed to issue 1,748,791 shares of
common stock. Such shares will not be issued earlier than the closing of such
acquisition.
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-5
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
Exhibit
Number Exhibit
------- -------
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.*
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.*
2.6 Agreement and Plan of Reorganization, dated as of
June 30, 1999, by and among the Registrant, OnLine
Psych Acquisition Corporation, OnLine
Psychological Services, Inc. and the stockholders
of OnLine Psychological Services, Inc.
(incorporated by reference from Exhibit 2.1 to the
Registrant's Form 8-K Current Report dated as of
June 30, 1999, File No. 000-25469).
2.7 Agreement and Plan of Reorganization, dated as of
June 30, 1999, by and among the Registrant, Code
Stone Acquisition Corporation, Code Stone
Technologies, Inc. and the sole stockholder of
Code Stone Technologies, Inc. (incorporated by
reference from Exhibit 2.2 to the Registrant's
Form 8-K Current Report dated as of June 30, 1999,
File No. 000-25469).
2.8 Agreement and Plan of Reorganization, dated as of
July 13, 1999, by and among the Registrant, LPC
Acquisition Corporation, Lamaze Publishing
Company, Inc. and the Shareholders and Stock
Appreciation Unit Holders of Lamaze Publishing
Company, Inc. (incorporated by reference from
Exhibit 2.3 to the Registrant's Form 10-Q
Quarterly Report for the period ended June 30,
1999, File No. 000-25469)
3.1 Amended and Restated Certificate of Incorporation
of the Registrant.
3.2 Bylaws of the Registrant.
4.1 Form of Registrant's common stock Certificate.*
II-6
<PAGE>
Exhibit
Number Exhibit
------- -------
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 1999 Employee Stock Option Plan of the Registrant.
10.5 1999 Director Option Plan of the Registrant.
10.6 1999 Employee Stock Purchase Plan of the
Registrant.
10.7 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.+*
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.*
II-7
<PAGE>
Exhibit
Number Exhibit
------- -------
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 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 April 15,
1996, as further amended and supplemented January
20, 1997, and as amended and supplemented May 8,
1997, between 170 Fifth Associates (the
"Landlord") and the Registrant.*
10.21 Lease dated March 19, 1998, commencing March 15,
1998 between 149 Fifth Avenue and the Registrant,
as supplemented on June 30, 1998.*
10.22 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.*
10.23 Promissory Note dated June 5, 1998 in the amount
of $500,000 between Candice Carpenter and the
Registrant.*
10.24 Fourth Amended and Restated Stockholders'
Agreement dated as of December 4, 1998, among the
Registrant, the Founders and each of the
Investors identified therein.*
10.25 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, as amended as of July 26,
1999.**
10.26 Amended and Restated Stock Purchase Agreement
dated as of March 9, 1999 among the Registrant, GE
Investments Subsidiary, Inc. and the National
Broadcasting Company, Inc.*
10.27 Amended Letter Agreement dated as of March 9, 1999
between the Registrant and the National
Broadcasting Company, Inc.*
10.28 Promissory Note dated March 9, 1999 in the amount
of $15,497,558.48 between the Registrant and
GE Investments Subsidiary, Inc.* *
10.29 Agreement dated October 18, 1989 (the "Video
Agreement") between Lamaze International, Inc.
(formerly known as The American Society for
Psychoprophylaxis in Obstetrics, Inc.) and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime Institute for Family Education, Inc.
("Lifetime") in turn as successor-in-interest to
Medical Communications Corporation ("MCC")).* *
II-8
<PAGE>
Exhibit
Number Exhibit
------- -------
10.30 Addendum to the Video Agreement dated December 9,
1992 between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime, in turn as successor-in-interest to
MCC). * *
10.31 Second Addendum to the Video Agreement dated April
22, 1993 between Lamaze International, Inc. and
Lamaze Publishing Company, Inc. (as
successor-in-interest to Lifetime, in turn as
successor-in-interest to MCC). * *
10.32 Intellectual Property Agreement dated April 6,
1990 between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime). * *
10.33 Loan/Activity Agreement dated August 2, 1990
between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime). * *
10.34 LPM Agreement dated August 2, 1990 between Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime) and Lamaze International, Inc. * *
10.35 Onsert Agreement dated December 7, 1992 between
Lamaze International, Inc. and Lamaze Publishing
Company, Inc. (as successor-in-interest to
Lifetime). * *
10.36 Amendment to Onsert Agreement dated June 4, 1999
between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime). * *
10.37 Statement of Terms concerning Child Development
Newsletter dated August 20, 1993 between Lamaze
International, Inc. and Lamaze Publishing Company,
Inc. * *
10.38 Agreement of Modification and Clarification dated
January 1, 1996 between Lamaze International, Inc.
and Lamaze Publishing Company, Inc. (directly, and
as successor-in-interest to Lifetime). * *
21 Subsidiaries of the Registrant. * *
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-12).
27.1 Financial Data Schedule.
- -----------------
* Incorporated by reference from the same exhibit number to Registration
Statement File No. 333-68749.
II-9
<PAGE>
- -----------------
+ Confidential treatment has been granted for certain portions of these
exhibits. Omitted portions have been filed separately with the
Securities and Exchange Commission.
** To be filed by amendment.
(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.
Item 17. Undertakings
A. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers, and controlling persons of the Registrant pursuant to the
provisions described in Item 15 above, 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 Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
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 Securities Act and will be governed by the
final adjudication of such issue.
B. The undersigned Registrant hereby undertakes to do the following, to
the extent that such actions are required by the rules and regulations of the
Securities and Exchange Commission:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof)
II-10
<PAGE>
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused 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 August 17, 1999.
iVILLAGE Inc.
By: /s/ Candice Carpenter
-------------------------
Candice Carpenter
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints Candice Carpenter and Steven A.
Elkes, or either of them, each with the power of substitution, his or her
attorney-in-fact, to sign any amendments to this registration statement
(including post-effective amendments), and to file same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of such
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Candice Carpenter Co-Chairperson of the Board of Directors and August 17, 1999
- ------------------------------------- Chief Executive Officer
Candice Carpenter (Principal Executive Officer)
/s/ Nancy Evans Co-Chairperson of the Board of Directors and August 17, 1999
- ------------------------------------- Editor-in-Chief
Nancy Evans
/s/ Craig T. Monaghan Chief Financial Officer August 17, 1999
- ------------------------------------- (Principal Financial Officer)
Craig T. Monaghan Vice President, Controller and Chief
/s/ Scott Levine Accounting Officer August 17, 1999
- ------------------------------------- (Principal Accounting Officer)
Scott Levine
/s/ Alan Colner August 17, 1999
- -------------------------------------
Alan Colner Director
II-12
<PAGE>
Signature Capacity Date
--------- -------- ----
/s/ Jay Hoag
- -------------------------------------
Jay Hoag Director August 17, 1999
/s/ Lennert J. Leader August 17, 1999
- -------------------------------------
Lennert J. Leader Director
/s/ Habib Kairouz August 17, 1999
- -------------------------------------
Habib Kairouz Director
/s/ Michael Levy August 17, 1999
- -------------------------------------
Michael Levy Director
/s/ Douglas McCormick August 17, 1999
- -------------------------------------
Douglas McCormick Director
/s/ Martin Yudkovitz August 17, 1999
- -------------------------------------
Martin Yudkovitz Director
/s/ Daniel Schulman August 17, 1999
- -------------------------------------
Daniel Schulman Director
</TABLE>
II-13
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit
------ -------
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.*
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.*
2.6 Agreement and Plan of Reorganization, dated as of
June 30, 1999, by and among the Registrant, OnLine
Psych Acquisition Corporation, OnLine
Psychological Services, Inc. and the stockholders
of OnLine Psychological Services, Inc.
(incorporated by reference from Exhibit 2.1 to the
Registrant's Form 8-K Current Report dated as of
June 30, 1999, File No. 000-25469).
2.7 Agreement and Plan of Reorganization, dated as of
June 30, 1999, by and among the Registrant, Code
Stone Acquisition Corporation, Code Stone
Technologies, Inc. and the sole stockholder of
Code Stone Technologies, Inc. (incorporated by
reference from Exhibit 2.2 to the Registrant's
Form 8-K Current Report dated as of June 30, 1999,
File No. 000-25469).
2.8 Agreement and Plan of Reorganization, dated as of
July 13, 1999, by and among the Registrant, LPC
Acquisition Corporation, Lamaze Publishing
Company, Inc. and the Shareholders and Stock
Appreciation Unit Holders of Lamaze Publishing
Company, Inc. (incorporated by reference from
Exhibit 2.3 to the Registrant's Form 10-Q
Quarterly Report for the period ended June 30,
1999, File No. 000-25469)
3.1 Amended and Restated Certificate of Incorporation
of the Registrant.
3.2 Bylaws of the Registrant.
4.1 Form of Registrant's common stock Certificate.*
<PAGE>
Exhibit
Number Exhibit
------ -------
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 1999 Employee Stock Option Plan of the Registrant.
10.5 1999 Director Option Plan of the Registrant.
10.6 1999 Employee Stock Purchase Plan of the
Registrant.
10.7 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.+*
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.*
15
<PAGE>
Exhibit
Number Exhibit
------ -------
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 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
April 15, 1996, as further amended and
supplemented January 20, 1997, and as
amended and supplemented May 8, 1997,
between 170 Fifth Associates (the "Landlord") and
the Registrant.*
10.21 Lease dated March 19, 1998, commencing March 15,
1998 between 149 Fifth Avenue Corporation
and the Registrant, as supplemented on June 30,
1998.*
10.22 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.*
10.23 Promissory Note dated June 5, 1998 in the amount
of $500,000 between Candice Carpenter and the
Registrant.*
10.24 Fourth Amended and Restated Stockholders'
Agreement dated as of December 4, 1998,
among the Registrant, the Founders and each of the
Investors identified therein.*
10.25 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, as amended as of July 26,
1999.**
10.26 Amended and Restated Stock Purchase Agreement
dated as of March 9, 1999 among the Registrant, GE
Investments Subsidiary, Inc. and the National
Broadcasting Company, Inc.*
10.27 Amended Letter Agreement dated as of March 9, 1999
between the Registrant and the National
Broadcasting Company, Inc.*
10.28 Promissory Note dated March 9, 1999 in the amount
of $15,497,558.48 between the Registrant and
GE Investments Subsidiary, Inc.* *
10.29 Agreement dated October 18, 1989 (the "Video
Agreement") between Lamaze International, Inc.
(formerly known as The American Society for
Psychoprophylaxis in Obstetrics, Inc.) and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime Institute for Family Education, Inc.
("Lifetime") in turn as successor-in-interest to
Medical Communications Corporation ("MCC")).* *
16
<PAGE>
Exhibit
Number Exhibit
------ -------
10.30 Addendum to the Video Agreement dated December 9,
1992 between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime, in turn as successor-in-interest to
MCC). * *
10.31 Second Addendum to the Video Agreement dated April
22, 1993 between Lamaze International, Inc. and
Lamaze Publishing Company, Inc. (as
successor-in-interest to Lifetime, in turn as
successor-in-interest to MCC). * *
10.32 Intellectual Property Agreement dated April 6,
1990 between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime). * *
10.33 Loan/Activity Agreement dated August 2, 1990
between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime). * *
10.34 LPM Agreement dated August 2, 1990 between Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime) and Lamaze International, Inc. * *
10.35 Onsert Agreement dated December 7, 1992 between
Lamaze International, Inc. and Lamaze Publishing
Company, Inc. (as successor-in-interest to
Lifetime). * *
10.36 Amendment to Onsert Agreement dated June 4, 1999
between Lamaze International, Inc. and Lamaze
Publishing Company, Inc. (as successor-in-interest
to Lifetime). * *
10.37 Statement of Terms concerning Child Development
Newsletter dated August 20, 1993 between Lamaze
International, Inc. and Lamaze Publishing Company,
Inc. * *
10.38 Agreement of Modification and Clarification dated
January 1, 1996 between Lamaze International, Inc.
and Lamaze Publishing Company, Inc. (directly, and
as successor-in-interest to Lifetime). * *
21 Subsidiaries of the Registrant. * *
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-12).
27.1 Financial Data Schedule.
- -----------------
* Incorporated by reference from the same exhibit number to Registration
Statement File No.333-68749.
17
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- -----------------
+ Confidential treatment has been granted for certain portions of these
exhibits. Omitted portions have been filed separately with the
Securities and Exchange Commission.
** To be filed by amendment.
18
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AMENDED AND 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 i Village Inc. and the original
Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on June 9, 1995.
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 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
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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 accordance with this
Certificate of Incorporation, may deem advisable and are not
inconsistent with law and the provisions of this Certificate
of Incorporation.
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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
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 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.
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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 Steven
A. Elkes its Assistant Secretary, this 24th day of March, 1999.
iVillage Inc.
By: /s/ Candice Carpenter
-------------------------------------
Candice Carpenter
Chief Executive Officer
ATTEST: /s/ Steven Elkes
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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 chief executive officer,
or by one or more stockholders holding shares in 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.
<PAGE>
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 chief
executive officer, 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 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
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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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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 to cumulate their votes in the election of directors, each such
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes
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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, facsimile 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 chief executive officer, or in the absence of the chief executive
officer, the chairman of the board, or, in the absence of the chief executive
officer 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 chief executive officer, 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 ten (10) 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 three 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
three 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 four 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 chief executive officer, 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 chief executive
officer, 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 chief executive
officer, 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, a
president, 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 Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the chief executive officer 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 chief executive
officer 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 chief executive officer 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 by
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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 chief
executive officer may be removed, either with or without cause, at any time by
the chief executive officer. Any Administrative Officer may resign at any time
by giving written notice to the chief executive officer 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 chief executive officer, 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 CHIEF EXECUTIVE OFFICER
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 chief executive officer 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 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 chief executive officer 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 chief executive officer, 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
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the chief executive officer and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the chief executive officer. 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 chief executive officer 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
chief executive officer 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.
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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 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 chief executive officer of the corporation.
Administrative Officers shall perform such duties and have such powers as from
time to time may be determined by the chief executive officer 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 chief executive officer 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
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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.
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.
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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 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.
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7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the chief executive officer, 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 chief executive officer 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.
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.
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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.
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 chief executive officer 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
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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 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.
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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.
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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CERTIFICATE OF ADOPTION OF BYLAWS
OF
iVILLAGE INC.
The undersigned hereby certifies that she is the duly elected,
qualified, and acting Secretary of iVillage Inc. and that the foregoing Bylaws,
comprising twenty-two (22) pages, were adopted as the Bylaws of the corporation
effective as of March 24, 1999.
-------------------
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and
affixed the corporate seal this 24th day of March 1999.
/s/ Caterina A. Conti
--------------------------
Caterina A. Conti
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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 1,130,285.
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;
(iv) to approve forms of agreement for use under the Plan;
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(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;
(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 200,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 200,000 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.
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18. 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.
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 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
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(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. The Shares may be
authorized, but unissued, or reacquired 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.
(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'
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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 one hundred percent
(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 twenty-five percent (25%) 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.
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,
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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 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
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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 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.
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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.
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.
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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.
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(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.
(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.
(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.
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(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.
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.
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(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 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
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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 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.
5
<PAGE>
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, 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
6
<PAGE>
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 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
7
<PAGE>
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.
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
8
<PAGE>
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.
9
<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
A-1
<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 (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
<PAGE>
constitute a quorum and the actions of a majority of the members of the
Committee present at a 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 100,000 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.
(c) Repricing of NSOs. Subsequent to the date of grant of any
NSO, the Committee may, at its discretion and with the consent of the Optionee,
establish a new Option Price for such NSO so as to increase or decrease the
Option Price of such NSO.
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. 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;
(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
5
<PAGE>
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.
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;
6
<PAGE>
(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.
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
7
<PAGE>
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 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
8
<PAGE>
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 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
9
<PAGE>
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.
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,
10
<PAGE>
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
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.
11
<PAGE>
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.
12
<PAGE>
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."
/s/ PricewaterhouseCoopers LLP
New York, New York
August 16, 1999
<PAGE>
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 consolidated financial
statements of Health ResponseAbility Systems, Inc. as of December 31, 1995 and
1996 and 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
August 16, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated January 29, 1999, on our audits of the consolidated financial
statements of KnowledgeWeb, Inc as of and for the years ended December 31, 1998
and 1997. We also consent to the reference to our firm under the caption
"Experts."
/s/ PricewaterhouseCoopers LLP
New York, New York
August 16, 1999
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated June 14, 1999, except for note 10, as to which the date is July 13,
1999, on our audits of the financial statements of Lamaze Publishing Company,
Inc. as of and for the years ended December 31, 1998 and 1997. We also consent
to the reference to our firm under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
New York, New York
August 16, 1999
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<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
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