<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1999
REGISTRATION NO. 333-68749
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
iVILLAGE INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7375 13-3845162
(STATE OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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170 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 604-0963
(212) 604-9133 (FAX)
(ADDRESS AND TELEPHONE NUMBER OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
CANDICE CARPENTER
CO-CHAIRPERSON OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
iVILLAGE INC.
170 FIFTH AVENUE
NEW YORK, NEW YORK 10010
(212) 604-0963
(212) 604-9133 (FAX)
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
Please send copies of all communications to:
MARTIN H. LEVENGLICK, ESQ. MARK G. BORDEN, ESQ.
RUBI FINKELSTEIN, ESQ. JAMES R. BURKE, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP HALE AND DORR LLP
30 ROCKEFELLER PLAZA 60 STATE STREET
NEW YORK, NEW YORK 10112 BOSTON, MASSACHUSETTS 02109
(212) 506-5000 (617) 526-6000
(212) 506-3730 (FAX) (617) 526-5000 (FAX)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
as amended (the "Securities Act"), please check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated March 12, 1999.
3,650,000 Shares
[LOGO]
iVILLAGE INC.
Common Stock
------------------------
This is an initial public offering of shares of iVillage Inc. All of the
3,650,000 shares of common stock are being sold by iVillage. iVillage
anticipates that the initial public offering price will be between $12.00 and
$14.00 per share.
At the request of iVillage, the underwriters have reserved at the initial
public offering price up to 538,461 shares of common stock for sale to National
Broadcasting Company, Inc., Liberty Media Corporation and America Online, Inc.
Prior to this offering, there has been no public market for the common
stock. The common stock has been approved for quotation on the Nasdaq National
Market under the symbol "IVIL".
Please see "Risk Factors" beginning on page 7 to read about certain factors
you should consider before buying shares of the common stock.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Initial public offering price............. $ $
Underwriting discount..................... $ $
Proceeds, before expenses, to iVillage.... $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 547,500 shares from iVillage at the initial public offering price
less the underwriting discount.
------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 1999.
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
------------------------
WIT CAPITAL CORPORATION
Facilitator of Internet distribution
------------------------
Prospectus dated , 1999.
<PAGE>
The inside front cover contains the following:
Picture of iVillage.com home page and other pages and arrows to indicate that
the site provides information, experts, personalized services, community,
integrated sponsors and transactions. Various other screens within iVillage's
Web sites.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and iVillage's consolidated financial statements and the notes to
those statements appearing elsewhere in this prospectus.
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about iVillage and our
industry. These forward-looking statements involve risks and uncertainties.
iVillage's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, as more fully
described in the "Risk Factors" section and elsewhere in this prospectus.
iVillage undertakes no obligation to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.
iVILLAGE INC.
OUR BUSINESS
iVillage Inc. is a leading online women's network and one of the most
demographically targeted online communities on the World Wide Web. iVillage.com
is an easy-to-use, comprehensive online network of sites tailored to the
interests and needs of women aged 25 through 49. We provide advertisers and
merchants with targeted access to women using the Web.
Our network of sites consists of 14 channels organized by subject matter.
The channels cover leading topics of interest to women online, such as family,
health, work, money, food, relationships, shopping, travel, pets and astrology.
We facilitate channel usage by providing common features and functionality
within each channel, including experts, chats, message boards and services. Some
features of our Web sites are restricted to members, however, membership in
iVillage.com is free.
As of December 31, 1998, iVillage's membership and its core audience was
82% female and consisted of approximately 960,000 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
month ended December 31, 1998, iVillage.com had approximately 65 million page
views and 2.7 million unique visitors. Page views are the total number of
complete pages retrieved and viewed by visitors to the iVillage network. 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.
OUR MARKET OPPORTUNITY
We believe that women are one of the principal driving forces behind the
growth of the Internet and that as of January 1998, women made up 45% of the
online population. We believe that women also represent an attractive
demographic group for advertisers and businesses. Consumers spend $3 trillion
annually, and women control or influence 80% of all purchase decisions.
To effectively reach women online, advertisers, merchants and Web sites
that develop and provide content need to address the differing uses of the
Internet by men and women. We believe that women are interested in
problem-solving, community, researching product information and simple
navigation. They appear to spend less time "surfing" the Internet than men and
more of their time online at fewer destinations.
We have developed innovative sponsorship relationships that go beyond
traditional banner advertising to support broad marketing
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objectives of brand promotion, awareness, product introductions, online research
and the integration of advertising with editorial content. These sponsorships
and highly-targeted marketing opportunities attract advertisers and sponsors
from whom we derive a substantial majority of our revenues.
We generate e-commerce revenues from sales through iBaby, Inc., an online
retailer of baby gifts and products, Knowledge Web, Inc. d/b/a Astrology.Net, an
Internet content provider, and agreements with leading merchants, including
Amazon.com, Inc. iVillage currently owns a majority interest in iBaby and has
agreed to acquire the minority interest in iBaby.
OUR STRATEGY
Our objective is to be the leading online women's network. Our strategy
includes:
o building strong brand recognition;
o aggressively growing membership and usage;
o enhancing and expanding the network;
o pursuing strategic acquisitions and alliances;
o increasing sponsor and advertising revenues; and
o generating e-commerce revenues.
We actively promote our brand awareness and site usage through a variety of
online and traditional media, including through recently signed agreements with
AOL, NBC and AT&T to provide both online and offline advertising.
OUR OFFICES
Our executive offices are located at 170 Fifth Avenue, New York, New York
10010. Our telephone number at that location is 212-604-0963 and our Internet
address is www.ivillage.com.
THE OFFERING
<TABLE>
<S> <C>
Shares offered by iVillage................... 3,650,000
Shares to be outstanding after this
offering(1)................................ 23,210,776
Nasdaq National Market symbol................ IVIL
Use of proceeds.............................. o Brand promotion;
o expansion of sales and marketing;
o acquisition of the minority interest in iBaby; and
o working capital and general corporate purposes,
including channel expansion and content development, expansion
and/or relocation of our offices and possible acquisitions. Please
see "Use of Proceeds".
</TABLE>
- ------------------------------
(1) Based on the number of shares actually outstanding on February 15, 1999.
Includes the shares issued or to be issued in connection with:
o the Astrology.Net acquisition;
o the acquisition of the iBaby minority interest; and
o the NBC agreement.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following table summarizes the financial data for our business.
iVillage acquired ParentsPlace.com, Inc. in December 1996 and Health
ResponseAbility Systems, Inc. in May 1997, and the financial data reflect the
results of operations of these subsidiaries since their dates of acquisition.
For the year ended December 31, 1998, a portion of the net loss for iBaby, Inc.
attributable to minority stockholders is included as a reduction to net loss.
<TABLE>
<CAPTION>
JULY 1, 1995 YEAR ENDED DECEMBER 31,
(INCEPTION) TO ---------------------------------
DECEMBER 31, 1995 1996 1997 1998
----------------- ------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues................. $ -- $ 732 $ 6,019 $ 15,012
------- ------- ---------- ----------
Operating expenses:
Production, product and
technology............. 629 4,521 7,606 14,521
Sales and marketing...... 329 2,709 8,771 28,523
General and
administrative......... 656 3,104 7,841 10,612
Depreciation and
amortization........... 17 109 2,886 5,683
------- ------- ---------- ----------
Total operating
expenses............. 1,631 10,443 27,104 59,339
------- ------- ---------- ----------
Loss from operations..... (1,631) (9,711) (21,085) (44,327)
Interest (expense)
income, net............ (7) 28 (216) 591
Loss on sale of Web
site................... -- -- -- (504)
Minority interest........ -- -- -- 586
------- ------- ---------- ----------
Net loss................. $(1,638) $(9,683) $ (21,301) $ (43,654)
------- ------- ---------- ----------
------- ------- ---------- ----------
Basic and diluted net
loss per share......... $ (1.51) $ (8.90) $ (13.65) $ (21.10)
------- ------- ---------- ----------
------- ------- ---------- ----------
Weighted average shares
of common stock
outstanding used in
computing basic and
diluted net loss per
share.................. 1,083 1,087 1,561 2,068
------- ------- ---------- ----------
------- ------- ---------- ----------
Pro forma basic and
diluted net loss per
share.................. $ (2.59)
----------
----------
Shares of common stock
used in computing pro
forma basic and diluted
net loss per share..... 16,854
----------
----------
</TABLE>
The following table indicates a summary of our balance sheet at December
31, 1998:
o on an actual basis;
o on a pro forma basis giving effect to (a) the purchase of the minority
interest in iBaby, (b) the acquisition of Astrology.Net and (c) the
shares to be issued in connection with the NBC agreement; and
o on a pro forma as adjusted basis to reflect the sale of 3,650,000 shares
of common stock, after deducting underwriting discounts and commissions
and estimated offering expenses. Please see "Use of Proceeds",
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Recent Events".
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....... $30,825 $21,929 $ 64,557
Working capital................. 19,919 10,848 53,476
Total assets.................... 46,791 60,731 103,359
Long-term liabilities........... -- 23 23
Stockholders' equity............ 32,022 45,650 88,278
</TABLE>
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iVillage(Registered), the iVillage logo and Parent Soup(Registered) are
registered marks of iVillage. Community Challenge; Community Challenges;
"iVillage.com. Honest Answers. For The Stuff That Really Matters."; Armchair
Millionaire; Parentsplace; Parentsplace.com; Astrology-dot-net(Registered);
Astrozine(Registered); and KnowledgeWeb(Registered) are marks of iVillage. iBaby
and Internetbaby are marks of iBaby, Inc. All other trademarks and service marks
are the property of their respective owners. The information on our Web sites is
not a part of this prospectus.
Unless otherwise specifically stated, information throughout this
prospectus assumes:
o the underwriters' over-allotment option is not exercised;
o the conversion of all outstanding shares of our convertible preferred
stock into 14,785,205 shares of common stock automatically upon the
closing of this offering;
o the effectiveness of a one-for-three reverse stock split of common stock
and the adjustment of par value to $.01 per share immediately prior to
the effective date of this prospectus; and
o assumes an initial public offering price of $13.00 per share;
and excludes as of February 22, 1999:
o a $5.7 million deemed non-cash dividend to NBC in connection with the
issuance of 4,889,030 shares of series E convertible preferred stock and
warrants to purchase up to 1,783,882 shares of series E convertible
preferred stock;
o 3,157,369 shares issuable upon the exercise of outstanding options and
warrants and an additional 161,333 shares expected to be issuable upon
the exercise of options that are to be granted prior to the effective
date of this prospectus; and
o 515,520 shares reserved for future issuance under our stock option
plans.
6
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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. An investor in our common stock must
consider the risks and difficulties frequently encountered by early stage
companies in new and rapidly evolving markets, including the Internet
advertising market. These risks include our ability to:
o attract a larger audience to our online network;
o increase awareness of our brand;
o strengthen user-loyalty;
o offer compelling content;
o maintain our current, and develop new, strategic relationships;
o attract a large number of advertisers from a variety of industries;
o respond effectively to competitive pressures;
o continue to develop and upgrade our technology; and
o attract, retain and motivate qualified personnel.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our limited operating
history.
WE LACK SIGNIFICANT REVENUES AND HAVE RECENT AND ANTICIPATED CONTINUING LOSSES
We have not achieved profitability and expect to continue to incur
operating losses for the foreseeable future. We incurred net losses of
$11.3 million for the period from July 1995 (inception) through December 31,
1996, $21.3 million for the year ended December 31, 1997, and $43.7 million for
the year ended December 31, 1998. As of December 31, 1998, our accumulated
deficit was $76.3 million. We expect to continue to incur significant operating
and capital expenditures and, as a result, we will need to generate significant
revenues to achieve and maintain profitability.
Although our revenues have grown in recent quarters, we cannot assure you
that we will achieve sufficient revenues for profitability. Even if we do
achieve profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. If revenues grow
slower than we anticipate, or if operating expenses exceed our expectations or
cannot be adjusted accordingly, our business, results of operations and
financial condition will be materially and adversely affected. Please see
"Selected Consolidated Financial Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
WE ARE DEPENDENT ON BARTER TRANSACTIONS WHICH DO NOT GENERATE CASH REVENUE
During 1998, revenues from barter transactions represented approximately
20% of total revenues. Barter revenues may continue to represent a significant
portion of our total revenues in future periods. Barter transactions do not
generate any cash revenue and are entered into by us to promote our brand
without any expenditure on our part of our cash resources. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
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
7
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operations. We do not believe that period-to-period comparisons of our operating
results are necessarily meaningful nor should they be relied upon as 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 iVillage.com. Such future revenues
are difficult to forecast. In addition, we plan to increase our sales and
marketing operations and to expand and develop content. We also plan to upgrade
and enhance our technology and infrastructure development in order to support
our growth. We may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall.
If we have a shortfall in revenues in relation to our expenses, or if our
expenses precede increased revenues, then our business, results of operations
and financial condition would be materially and adversely affected. This would
likely affect the market price of our common stock in a manner which may be
unrelated to our long-term operating performance.
SEASONAL AND CYCLICAL PATTERNS MAY AFFECT OUR BUSINESS
We believe that advertising sales in traditional media, such as television
and radio, generally are lower in the first and third calendar quarters of each
year. If our market makes the transition from an emerging to a more developed
market, seasonal and cyclical patterns may develop in the future. As a result,
if our industry follows the same seasonal patterns as those in traditional
media, we may experience lower advertising revenues in the first and third
calendar quarter of each year. Seasonal and cyclical patterns in Internet
advertising may also affect our revenues. In addition, traffic levels on our Web
sites typically fluctuate during the summer and year-end vacation and holiday
periods. Furthermore, we anticipate that sales from iBaby and any other future
consumer goods we may sell will typically increase during the fourth quarter as
a result of the holiday season and may decline during other periods. Please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales, Marketing and Public Relations" for detailed
information on our quarterly operating results.
THE MARKET FOR INTERNET ADVERTISING IS UNCERTAIN
We expect to derive a substantial amount of our revenues from sponsorships
and advertising for the foreseeable future, and demand and market acceptance for
Internet advertising solutions is uncertain.
There are currently no standards for the measurement of the effectiveness
of Internet advertising, and the industry may need to develop standard
measurements to support and promote Internet advertising as a significant
advertising medium. If such standards do not develop, existing advertisers may
not continue their levels of Internet advertising. Furthermore, advertisers that
have traditionally relied upon other advertising media may be reluctant to
advertise on the Internet. Our business would be adversely affected if the
market for Internet advertising fails to develop or develops more slowly than
expected.
Different pricing models are used to sell advertising on the Internet. It
is difficult to predict which, if any, will emerge as the industry standard.
This makes it difficult to project our future advertising rates and revenues.
Our advertising revenues could be adversely affected if we are unable to adapt
to new forms of Internet advertising. Moreover, software programs that limit or
prevent advertising from being delivered to an Internet user's computer are
available. Widespread adoption of this software could adversely affect the
commercial viability of Internet advertising.
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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 during
the time we are replacing these services. We are currently implementing
additional systems designed to record demographic data on our users. If we do
not implement these systems successfully, we may not be able to accurately
evaluate the demographic characteristics of our users. Companies may choose to
not advertise on our Web sites or may pay less for advertising if they do not
perceive our measurements or measurements made by third parties to be reliable.
WE 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 are currently experiencing a period
of significant growth. This growth has placed, and our anticipated future growth
in our operations will continue to place, a significant strain on our resources.
As part of this growth, we will have to implement new operational and financial
systems, procedures and controls.
SEVERAL MEMBERS OF SENIOR MANAGEMENT HAVE ONLY RECENTLY JOINED iVILLAGE
Several members of our senior management joined us in 1998 and 1999,
including our Chief Financial Officer, Chief Operating Officer, Senior Vice
President, Sponsorship, General Counsel, Vice President, Finance, Vice
President, Controller and Chief Accounting Officer and Senior Vice President,
Human Resources. In addition, we have recently hired a Chief Technology Officer
and plan to hire additional technical personnel. These individuals have not
previously worked together and are becoming integrated as a management team. As
a result, our senior managers may not work together effectively as a team to
successfully manage our growth.
WE MAY NOT ATTRACT A SUFFICIENT AMOUNT OF TRAFFIC AND ADVERTISING WITHOUT OUR
CHANNELS BEING CARRIED ON AOL
AOL has accounted for a significant portion of our online traffic based on
the delivery to us of a guaranteed number of impressions. A significant amount
of our visitors and members reach our Web sites through AOL. Our agreement with
AOL does not prohibit AOL from carrying online sites or developing and providing
content that compete with our sites, and AOL is currently carrying additional
competing sites. Our agreement with AOL expires on December 31, 2000 and even
though either party may extend it for an additional year, AOL does not have any
obligation to renew it. If the carrying of our channels on AOL is discontinued,
our business, results of operations and financial condition would be materially
adversely affected.
AOL 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, announced a merger with Netscape Communications Corp. The
relationship between AOL and Oxygen Media and AOL and other internet companies
may result in potential conflicts of interest for AOL, which may not be resolved
in our favor. Please see "Certain Transactions".
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<PAGE>
WE HAVE A SMALL NUMBER OF CUSTOMERS AND THE LOSS OF A NUMBER OF THESE CUSTOMERS
COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS
We have, so far, depended on a limited number of customers for a
significant part of our revenues. Consequently, the loss of a number of these
customers at any one time may adversely affect our financial condition and
results of operations. For the year ended December 31, 1997, no one advertiser
accounted for greater than 10% of total revenues, but revenues from our five
largest advertisers accounted for 26% of total revenues. At December 31, 1997,
one advertiser accounted for 31% of net accounts receivable. Although no
advertiser accounted for more than 10% of total revenues for the year ended
December 31, 1998, our five largest advertisers accounted for 17% of total
revenues. At December 31, 1998, one advertiser accounted for 11% of net accounts
receivable.
We anticipate that our results of operations in any given period will
continue to depend to a significant extent upon revenues from a small number of
customers. In addition, we anticipate that such customers will continue to vary
over time, so that the achievement of our long-term goals will require us to
obtain additional significant customers on an ongoing basis. Our failure to
enter into a sufficient number of large contracts during a particular period
could have a material adverse effect on our business, financial condition and
results of operations. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
WE MAY NOT BE ABLE TO INTEGRATE THE OPERATIONS FROM OUR RECENT ACQUISITION OF
ASTROLOGY.NET
We recently acquired KnowledgeWeb, Inc. d/b/a Astrology.Net. We could have
difficulty in assimilating its personnel, operations, technology and software.
In addition, the key personnel of Astrology.Net may decide not to work for us.
These difficulties could disrupt our ongoing business, distract our management
and employees, increase our expenses and adversely affect our results of
operations due to the amortization of goodwill.
WE MAY BE SUED FOR INFORMATION RETRIEVED FROM THE WEB
We may be subjected to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our Web site. These types of claims have been brought,
sometimes successfully, against online services as well as other print
publications in the past. We could also be subjected to claims based upon the
content that is accessible from our Web sites through links to other Web sites
or through content and materials that may be posted by members in chat rooms or
bulletin boards. We also offer e-mail services, which may subject us to
potential risks, such as liabilities or claims resulting from unsolicited
e-mail, lost or misdirected messages, illegal or fraudulent use of e-mail or
interruptions or delays in e-mail service. Our insurance, which covers
commercial general liability, may not adequately protect us against these types
of claims.
WE MAY INCUR POTENTIAL PRODUCT LIABILITY FOR PRODUCTS SOLD OVER THE INTERNET
Consumers may sue us if any of the products that we sell online are
defective, fail to perform properly or injure the user. To date, we have had
very limited experience in the sale of products online and the development of
relationships with manufacturers or suppliers of such products. We plan to
develop a range of products targeted specifically at women through our iBaby
site, Astrology.Net and other e-commerce sites that we may acquire in the
future. We also may foster relationships with manufacturers or companies to
offer such products directly on iVillage.com. Such a strategy involves numerous
risks and uncertainties. Although our agreements with manufacturers typically
contain provisions intended to limit our exposure to liability claims, these
limitations may not prevent all potential claims. Liability claims could require
us to spend significant time and money in litigation or to pay significant
damages. As a result, any
10
<PAGE>
such claims, whether or not successful, could seriously damage our reputation
and our business.
THERE IS INTENSE COMPETITION FOR INTERNET-BASED BUSINESS
The number of Web sites competing for the attention and spending of
members, users and advertisers has increased and we expect it to continue to
increase.
We compete for members, users and advertisers with the following types of
companies:
o online services or Web sites targeted at women, such as Women.com
Networks, a joint venture between Women.com Networks and The Hearst
Corp., Microsoft Corporation's womencentral.msn.com, condenet.com and
Oxygen Media's Web sites;
o Web search and retrieval and other online service companies, commonly
referred to as portals, such as Excite, Inc., Infoseek Corporation,
Lycos, Inc. and Yahoo! Inc.; and
o publishers and distributors of traditional media, such as television,
radio and print.
Increased competition could result in price reductions, reduced margins or
loss of market share, any of which could adversely affect our business. Please
see "Business--Competition".
OUR UNCERTAIN SALES CYCLES COULD ADVERSELY AFFECT OUR BUSINESS
The time between the date of initial contact with a potential advertiser or
sponsor and the execution of a contract with the advertiser or sponsor, is often
lengthy, typically ranging from six weeks for smaller agreements to nine months
for larger agreements, and is subject to delays over which we have little or no
control, including:
o customers' budgetary constraints;
o customers' internal acceptance reviews;
o the success and continued internal support of advertisers' and sponsors'
own development efforts; and
o the possibility of cancellation or delay of projects by advertisers or
sponsors.
During the sales cycle, we may expend substantial funds and management
resources and yet not obtain sponsorship or advertising revenues. Accordingly,
our results of operations for a particular period may be adversely affected if
sales to advertisers or sponsors forecasted in a particular period are delayed
or do not otherwise occur.
OUR BUSINESS IS DEPENDENT ON OUR CHIEF EXECUTIVE OFFICER AND EDITOR-IN-CHIEF
Our future success depends to a significant extent on the continued
services of our senior management and other key personnel, particularly, Candice
Carpenter, Chief Executive Officer, and Nancy Evans, Editor-in-Chief. The loss
of the services of Mdmes. Carpenter or Evans, or other key employees, would
likely have a significantly detrimental effect on our business.
We have no employment agreements with either of these executives. We do not
maintain "key person" life insurance for any of our personnel, other than
Ms. Carpenter. Our future success also depends on our continuing to attract,
retain and motivate highly skilled employees.
COMPETITION FOR PERSONNEL IN OUR INDUSTRY IS INTENSE
We may be unable to retain our key employees or attract, assimilate or
retain other highly qualified employees in the future. We have from time to time
in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled employees with appropriate
qualifications as a result of our rapid growth and expansion. In addition, there
is significant competition for qualified employees in the Internet industry. As
a result, we have incurred increased salaries, benefits and recruiting expenses
during 1998. If we do not succeed in
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<PAGE>
attracting new personnel or retaining and motivating our current personnel, our
business will be adversely affected. Please see "Business--Human Resources" and
"Management" for detailed information on our key personnel.
WE ARE DEPENDENT ON CONTINUED GROWTH IN USE OF THE INTERNET
Our market is new and rapidly evolving. Our business would be adversely
affected if Internet usage does not continue to grow, particularly usage by
women. A number of factors may inhibit Internet usage, including:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth and its performance and
reliability may decline. In addition, Web sites have experienced interruptions
in their service as a result of outages and other delays occurring throughout
the Internet network infrastructure. If these outages or delays frequently occur
in the future, Internet usage, as well as the usage of our Web sites, could grow
more slowly or decline.
WE MAY BE UNABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE IN OUR INDUSTRY
Our market is characterized by rapidly changing technologies, frequent new
product and service introductions and evolving industry standards. The recent
growth of the Internet and intense competition in our industry exacerbate these
market characteristics. To achieve our goals, we need to effectively integrate
the various software programs and tools required to enhance and improve our
product offerings and manage our business. Our future success will depend on our
ability to adapt to rapidly changing technologies by continually improving the
performance features and reliability of our services. We may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new products and services. In addition, our new
enhancements must meet the requirements of our current and prospective users and
must achieve significant market acceptance. We could also incur substantial
costs if we need to modify our service or infrastructures to adapt to these
changes.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. However, laws and regulations may be
adopted in the future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act sought to prohibit transmitting 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, libel and personal privacy are applicable to the
Internet. Any new laws or regulations relating to the Internet could adversely
affect our business.
OUR SYSTEMS MAY FAIL OR EXPERIENCE A SLOW DOWN AND OUR USERS DEPEND ON OTHERS
FOR ACCESS TO OUR WEB SITES
Substantially all of our communications hardware and some of our other
computer hardware operations are located at Exodus Communications, Inc.'s
facilities in Jersey City, New Jersey. Fire, floods, earthquakes, power loss,
telecommunications failures, break-ins and similar events could damage these
systems.
12
<PAGE>
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.
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. These could include claims for unauthorized
purchases with credit card information, impersonation or other similar fraud
claims. They could also include claims for other misuses of personal
information, such as for unauthorized marketing purposes. These claims could
result in litigation. In addition, the Federal Trade Commission and state
agencies have been investigating 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.
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.
13
<PAGE>
WE COULD BE SUBJECT TO POSSIBLE INFRINGEMENT ACTIONS BASED UPON CONTENT LICENSED
FROM OTHERS
It is possible that we could become subject to infringement actions based
upon content we may license from third parties. Any of these claims, with or
without merit, could subject us to costly litigation and the diversion of our
financial resources and technical and management personnel. Further, if such
claims are successful, we may be required to change our trademarks, alter the
content, pay financial damages or obtain licenses from others.
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 alleges breach of an alleged employment agreement
and fraudulent inducement to accept a job in New York and to move from Tennessee
to New Jersey. In addition to unspecified damages, the complaint seeks an award
of options to purchase shares of common stock, which number presumably would be
equivalent to 33,333. We are vigorously defending against these claims. This
litigation, whether or not determined in our favor or settled by us, may be
costly and may divert the efforts and attention of our management from normal
business operations.
WE ARE INVOLVED IN INTELLECTUAL PROPERTY DISPUTES AND CANNOT PREDICT THE
LIKELIHOOD OF AN UNFAVORABLE OUTCOME IN THE EVENT CLAIMS ARE ASSERTED
We filed a service mark application for the mark "PARENTSPLACE.COM". On
July 22, 1998, Jewish Family and Children's Services filed a Notice of
Opposition in the Trademark Trial and Appeal Board of the U.S. Patent and
Trademark Office. On January 22, 1999, we filed an Answer to the Notice of
Opposition, denying that there was any likelihood of confusion between our mark,
"PARENTSPLACE.COM", and the mark used by Children's Services. 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 us 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 us
in the future with respect to the use of "PARENTSPLACE.COM" or "PARENTSPLACE",
either as currently used or as developed in the future. We are not able at this
time to evaluate the likelihood of an unfavorable outcome in the event such
claims are asserted, or to estimate the amount or range of potential loss.
On January 28, 1999, an attorney for Dailey & O'Brien sent a formal cease
and desist letter, requesting that we stop using "MONEYLIFE" on our money
channel and provide certain information concerning our use of the term. On
February 22, 1999, a complaint was filed in the U.S. District Court for the
Eastern District of Virginia by Dailey & O'Brien alleging, among other things,
trademark infringement. On March 8, 1999, the complaint was dismissed by the
plaintiff. We have reached an agreement with Dailey & O'Brien granting us a
license to use the term "MONEYLIFE." There can be no assurance that other
entities are not using the term "MONEYLIFE". We are not able at this time to
evaluate the likelihood of an unfavorable outcome in the event that claims are
asserted by any other entity, or to estimate the amount or range of potential
loss.
FAILURE OF COMPUTER SYSTEMS AND SOFTWARE PRODUCTS TO BE YEAR 2000 COMPLIANT
COULD NEGATIVELY IMPACT OUR BUSINESS
Many currently installed computer systems and software products only accept
two digits to identify the year in any date. Thus, the year 2000 will appear as
"00", which the system might consider to be the year 1900 rather than the year
2000. This could result in system failures, delays or miscalculations causing
14
<PAGE>
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".
OUR STOCK PRICE COULD BE EXTREMELY VOLATILE AND INVESTORS MAY NOT BE ABLE TO
RESELL THEIR SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE
We cannot predict the extent to which investor interest in iVillage will
lead to the development of a trading market or how liquid that market might
become. The initial public offering price for the shares will be determined by
negotiations between iVillage and the representatives of the underwriters and
may not be indicative of prices that will prevail in the trading market. The
stock market has experienced significant price and volume fluctuations, and the
market prices of technology companies, particularly Internet-related companies,
have been highly volatile. Investors may not be able to resell their shares at
or above the initial public offering price. Please see "Underwriting".
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted. Litigation could result in substantial costs and a diversion of
management's attention and resources.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE
Sales of a substantial number of shares of common stock in the public
market following this offering or the perception that sales could occur, could
adversely affect the market price for our common stock. After this offering,
there will be outstanding 23,210,776 shares of our common stock. Of these
shares, the shares sold in this offering will be freely tradeable except for any
shares purchased by our "affiliates" as defined in Rule 144 under the Securities
Act. The remaining 19,560,776 shares of common stock held by existing
stockholders will be "restricted securities" and will become eligible for sale
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 under the Securities Act. In addition, 180 days after
the date of this prospectus, all of the remaining outstanding shares of common
stock will be freely tradeable subject to the restrictions on resale imposed
upon "affiliates" by Rule 144 under the Securities Act.
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<PAGE>
USE OF PROCEEDS
The net proceeds to iVillage from the sale of the shares of common stock
offered hereby are estimated to be $42.6 million, after deducting the estimated
underwriting discount and offering expenses payable by iVillage. If the
underwriters' over-allotment option is exercised in full, we estimate that net
proceeds will be $49.2 million.
iVillage presently intends to use a portion of the net proceeds from this
offering to promote its brand, expand sales and marketing and purchase the
minority interest in iBaby. The balance of the net proceeds of this offering
will be used for working capital and general corporate purposes, including
channel expansion and content development, expansion and/or relocation of its
offices and possible acquisitions. iVillage believes opportunities may exist to
expand its current business through acquisitions and may utilize a portion of
the proceeds for such purpose. In addition, iVillage may consider acquisitions
of complementary businesses. Except for the agreement with iBaby, Inc., iVillage
is not currently a party to any contracts or letters of intent with respect to
any acquisitions, and there can be no assurance that any of iVillage's expansion
plans will be realized or, if realized, will prove profitable for iVillage.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Pending such uses, the net proceeds of this offering
will be invested in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
iVillage has never declared or paid any cash dividends on its capital
stock. iVillage presently intends to retain future earnings, if
any, to finance the expansion of its business and does not expect to pay any
cash dividends in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth iVillage's capitalization as of
December 31, 1998:
o on an actual basis after giving effect to the
one-for-three reverse common stock split;
o on a pro forma basis to reflect (a) the conversion of all of iVillage's
convertible preferred stock into common stock, (b) the purchase of the
minority interest in iBaby, (c) the acquisition of Astrology.Net, (d) the
issuance of shares in connection with the NBC agreement and (e) the
filing of a charter amendment effective upon the closing of this offering
authorizing blank check preferred stock; and
o on a pro forma as adjusted basis to reflect the estimated net proceeds
from the sale of the common stock offered by iVillage after deducting the
estimated underwriting discount and offering expenses payable by
iVillage. Please see "Use of Proceeds".
You should read this information together with iVillage's consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ------------ -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term liabilities.............. $ -- $ 23 $ 23
Stockholders' equity:
Series A convertible preferred
stock, par value $.0005;
1,000,000 shares authorized,
issued and outstanding
(actual); no shares authorized,
issued or outstanding (pro
forma and pro forma as
adjusted)...................... 1 -- --
Series B and B-1 convertible
preferred stock, par value
$.0005; 5,929,846 shares
authorized, 4,777,746 shares
issued and outstanding
(actual); no shares authorized,
issued or outstanding (pro
forma and pro forma as
adjusted)...................... 2 -- --
Series C convertible preferred
stock, par value $.0005;
13,528,762 shares authorized,
13,193,445 shares issued and
outstanding (actual); no shares
authorized, issued or
outstanding (pro forma and pro
forma as adjusted)............. 7 -- --
Series D convertible preferred
stock, par value $.0005;
13,000,000 shares authorized,
issued and outstanding
(actual); no shares authorized,
issued or outstanding (pro
forma and pro forma as
adjusted)...................... 6 -- --
Series E convertible preferred
stock, par value $.0005;
18,953,616 shares authorized,
11,730,948 shares issued and
outstanding (actual); no shares
authorized, issued or
outstanding (pro forma and pro
forma as adjusted)............. 6 -- --
Preferred stock, par value $.01;
no shares authorized, issued or
outstanding (actual); 5,000,000
shares authorized, no shares
issued or outstanding (pro
forma and pro forma as
adjusted)...................... -- -- --
Common stock, par value $.01;
65,000,000 shares authorized,
2,113,385 shares issued and
outstanding, (actual);
19,545,776 and 23,195,776
shares issued and outstanding,
pro forma and pro forma as
adjusted, respectively(1)...... 21 195 232
Additional paid-in capital....... 112,848 141,824 184,415
Accumulated deficit.............. (76,275) (76,275) (76,275)
Stockholders' notes receivable... (565) (16,065) (16,065)
Unearned compensation and
deferred advertising........... (4,029) (4,029) (4,029)
----------- ------------ -------
Total stockholders' equity....... 32,022 45,650 88,278
----------- ------------ -------
Total capitalization............. $ 32,022 $ 45,673 $88,301
----------- ------------ -------
----------- ------------ -------
</TABLE>
- ------------------------------
(1) Based on the number of shares actually outstanding on December 31, 1998.
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<PAGE>
DILUTION
The pro forma net tangible book value of iVillage as of December 31, 1998
was approximately $18.5 million, or approximately $0.95 per share of common
stock. Pro forma net tangible book value per share represents the amount of
iVillage's total tangible assets less total liabilities, divided by the pro
forma number of shares of common stock outstanding after giving effect to:
o the purchase of the minority interest in iBaby;
o the acquisition of Astrology.Net; and
o the shares to be issued in connection with the NBC agreement.
After giving effect to the sale of the common stock offered by iVillage hereby
and after deducting the estimated underwriting discount and offering expenses
payable by iVillage, the pro forma net tangible book value of iVillage, as
adjusted, as of December 31, 1998 would have been approximately $61.2 million,
or $2.64 per pro forma share of common stock. This represents an immediate
increase in net tangible book value of $1.69 per share to iVillage's existing
stockholders and an immediate dilution in net tangible book value of $10.36 per
share to new investors of common stock in this offering. If the initial public
offering price is higher or lower, the dilution to the new investors will be
greater or less, respectively. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............. $13.00
Pro forma net tangible book value per share prior
to this offering................................ $ 0.95
Increase per share attributable to this
offering........................................ 1.69
--------
Adjusted pro forma net tangible book value per
share after this offering....................... 2.64
------
Dilution per share to new investors(1)............ $10.36
------
------
</TABLE>
- ------------------------------
(1) Assuming the exercise in full of the underwriters' over-allotment option,
the pro forma net tangible book value of iVillage at December 31, 1998 would
have been approximately $2.85 per share, representing an immediate increase
in net tangible book value of $1.90 per share to iVillage's existing
stockholders and an immediate dilution in net tangible book value of $10.15
per share to new investors.
------------------------
The following table summarizes, on a pro forma basis, as of December 31,
1998, the number of shares of common stock purchased from iVillage, the total
consideration provided to iVillage and the average price per share provided by
existing stockholders and giving effect to:
o the purchase of the minority interest in iBaby;
o the acquisition of Astrology.Net;
o the issuance of shares in connection with the NBC agreement; and
o the sale of shares to investors in this offering.
The calculation below is based on an assumed initial public offering price of
$13.00 per share, before deducting the estimated underwriting discount and
offering expenses payable by iVillage.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------ -------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... 19,545,776 84.3% $138,946,710 74.5% $ 7.11
New Investors........... 3,650,000 15.7 47,450,000 25.5 $ 13.00
---------- ------ ------------ ------
Total.............. 23,195,776 100.0% $186,396,710 100.0%
---------- ------ ------------ ------
---------- ------ ------------ ------
</TABLE>
------------------------
This discussion and table assumes no exercise of options outstanding under
iVillage's 1995 Amended and Restated Employee Stock Option Plan and the 1997
Amended and Restated Acquisition Stock Option Plan and no issuance of shares
reserved for future issuance under iVillage's 1999 Employee Stock Option Plan,
1999 Acquisition Stock Option Plan, 1999 Director Option Plan and 1999 Employee
Stock Purchase Plan. As of December 31, 1998, there were options outstanding to
purchase a total of 2,175,391 shares of common stock at a weighted average price
of $6.10 per share and 425,998 shares issuable upon exercise of outstanding
warrants with a weighted average exercise price of $6.54 per share. To the
extent that any of these options are exercised, there will be further dilution
to new investors. Please see "Capitalization", "Management--Stock Option Plans",
"--1999 Employee Stock Purchase Plan" and note 6 and note 9 to iVillage's
consolidated financial statements.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and iVillage's consolidated financial statements and notes to those
statements and other financial information included elsewhere in this
prospectus. The consolidated statement of operations data for the years ended
December 31, 1996, 1997 and 1998 and the consolidated balance sheet data as of
December 31, 1997 and 1998 are derived from the audited consolidated financial
statements of iVillage included in this prospectus. The consolidated balance
sheet data as of December 31, 1996 and 1995 and the consolidated statement of
operations data for the six month period for July 1, 1995 (inception) to
December 31, 1995 are derived from the audited financial statements of iVillage
not included herein. The historical results presented here are not necessarily
indicative of future results.
<TABLE>
<CAPTION>
JULY 1, 1995
(INCEPTION)
TO YEAR ENDED DECEMBER 31,
DECEMBER 31, -----------------------------
1995 1996 1997 1998
------------ ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues................. $ -- $ 732 $ 6,019 $ 15,012
-------- ------- -------- --------
Operating expenses:
Production, product and
technology........... 629 4,521 7,606 14,521
Sales and marketing.... 329 2,709 8,771 28,523
General and
administrative....... 656 3,104 7,841 10,612
Depreciation and
amortization......... 17 109 2,886 5,683
-------- ------- -------- --------
Total operating
expenses........... 1,631 10,443 27,104 59,339
-------- ------- -------- --------
Loss from operations..... (1,631) (9,711) (21,085) (44,327)
Interest (expense)
income, net............ (7) 28 (216) 591
Loss on sale of Web
site(1)................ -- -- -- (504)
Minority interest........ -- -- -- 586
-------- ------- -------- --------
Net loss................. $ (1,638) $(9,683) $(21,301) $(43,654)
-------- ------- -------- --------
-------- ------- -------- --------
Basic and diluted net
loss per share......... $ (1.51) $ (8.90) $ (13.65) $ (21.10)
-------- ------- -------- --------
-------- ------- -------- --------
Weighted average shares
of common stock
outstanding used in
computing basic and
diluted net loss per
share.................. 1,083 1,087 1,561 2,068
-------- ------- -------- --------
-------- ------- -------- --------
Pro forma basic and
diluted net loss per
share(2)............... $ (2.59)
--------
--------
Shares of common stock
used in computing pro
forma basic and diluted
net loss per
share(2)............... 16,854
--------
--------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1995 1996 1997 1998
----- ------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....... $ 162 $2,102 $ 4,335 $30,825
Working capital (deficit)....... (715) 1,006 1,114 19,919
Total assets.................... 275 4,997 16,236 46,791
Long-term liabilities........... -- -- 139 --
Stockholders' equity
(deficit)..................... (629) 3,259 10,522 32,022
</TABLE>
- ------------------------------
(1) Please see note 5 to iVillage's consolidated financial statements.
(2) Please see note 2 to iVillage's consolidated financial statements.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with iVillage's
consolidated financial statements and notes to those statements and the other
financial information appearing elsewhere in this prospectus. In addition to
historical information, the following discussion and other parts of this
prospectus contain forward-looking information that involves risks and
uncertainties. iVillage's actual results could differ materially from those
anticipated by such forward-looking information due to competitive factors,
risks associated with iVillage's expansion plans and other factors discussed
under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
The iVillage network, iVillage.com, provides an easy-to-use, comprehensive
online network of sites tailored to the interests and needs of women using the
Internet. iVillage.com consists of 14 channels organized by subject matter. The
channels cover leading topics of interest to women online, such as family,
health, work, money, food, relationships, shopping, travel, pets and astrology.
We facilitate channel usage by providing common features and functionality
within each channel, including experts, chats, message boards and services.
To date, iVillage's revenues have been derived primarily from the sale of
sponsorship and advertising contracts. Sponsorship and advertising revenues
constituted 80% of total revenues for the year ended December 31, 1998.
Sponsorship revenues are derived principally from contracts ranging from
one to three years. Sponsorships are designed to support broad marketing
objectives, including brand promotion, awareness, product introductions, online
research and the integration of advertising with editorial content. Sponsorship
agreements typically include the delivery of impressions 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 are recognized ratably in the period in which the advertisement is
displayed provided that none of iVillage's significant obligations remain, at
the lesser of the ratio of impressions delivered over total guaranteed
impressions or the straight line basis over the term of the contract. The
portion of sponsorship revenues related to the up-front customized design work,
as specified in the contract, is recognized in the period in which the design
work is performed typically within the first three months of the contract term.
As part of our sponsorship deals, sponsors who also sell products provide
us with a commission on sales of their products generated through our Web site.
To date, these amounts have been immaterial.
Advertising revenues are derived principally from short-term advertising
contracts in which iVillage typically guarantees a minimum number of impressions
to be delivered to users over a specified period of time for a fixed fee.
Advertising rates, measured on a cost per thousand impressions basis, or CPMs,
are dependent on whether the impressions are for general rotation throughout
iVillage's Web sites or for targeted audiences and properties within specific
areas of iVillage.com. Advertising revenues are recognized ratably in the period
in which the advertisement is displayed, provided that no significant iVillage
obligations remain, at the lesser of the ratio of impressions delivered over
total guaranteed impressions or the straight line basis over the term of the
contract. To the extent that minimum guaranteed impressions are not met,
iVillage defers recognition of the corresponding revenues until the guaranteed
impressions are achieved.
Sponsorship and advertising revenues also include barter revenues, which
represent an exchange by iVillage of advertising space on iVillage's Web sites
for reciprocal advertising space or traffic on other Web sites. Revenues from
these barter transactions are recorded as advertising revenues at the lower of
the estimated fair value of the advertisements delivered, unless the fair value
of the goods and services received is more objectively
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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. 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. Barter revenues increased from approximately
$0.6 million in 1997 to approximately $2.5 million in 1998 because of the
increased acceptance of barter for online advertising in the Internet industry.
iVillage anticipates that barter revenue will continue to increase in the future
although it will decrease as a percentage of total revenue if iVillage
successfully executes its business strategy. iVillage believes that it must
replace barter revenues with cash revenues to fund its operations.
Commerce revenues are derived principally from sales through iBaby, a
majority-owned joint venture with Kid's Warehouse. Commerce revenues received
from iBaby consist of the sale of baby-related products, including strollers,
high chairs, bedding, toys and accessories. Kid's Warehouse presently carries
the inventory for iBaby. iBaby takes orders for iBaby products, collects the
payment and ships the items to the customer. iVillage recognizes revenues from
iBaby product sales, net of any discounts, when products are shipped to
customers and the collection of the receivable is reasonably assured.
On December 9, 1996, iVillage acquired all of the outstanding stock of
ParentsPlace.com, Inc., an Internet content provider, in exchange for 66,666
shares of iVillage's common stock.
In May 1997, iVillage completed the acquisition of Health ResponseAbility
Systems, Inc., an Internet content provider, in exchange for $2.6 million in
cash, 433,400 shares of iVillage's common stock and cash amounts contingent on
future performance levels of Health ResponseAbility Systems and iVillage. In
addition, iVillage issued to AOL 203,000 shares of common stock in exchange for
the release of all equity rights in Health ResponseAbility Systems held by AOL.
The goodwill recorded of approximately $6.0 million is being amortized over a
three-year period. In January 1998, iVillage agreed to pay approximately $1.6
million to the prior owners of Health ResponseAbility Systems in a final
settlement of the cash amounts contingent on future performance levels, as
stipulated in the agreement for the acquisition of Health ResponseAbility
Systems. This amount was recorded as additional goodwill and is being amortized
over the remaining goodwill amortization period.
In September 1997, iVillage acquired substantially all of the assets of
StudentCenter LLC, an Internet content provider, for $125,000 and the issuance
of options to purchase 41,666 shares of common stock at $5.10 per share. In
addition, iVillage was required to make revenue-based and other bonus payments,
of which $30,000 was recorded as of December 31, 1997, based on the amount of
StudentCenter revenues, page views and other criteria. In connection with the
sale of iVillage's About Work content channel in May 1998, iVillage sold the
assets of StudentCenter. At the time of the sale, iVillage paid the former
owners of StudentCenter $520,000 and issued options to purchase an additional
33,333 shares of common stock at $5.10 per share as settlement of all revenue-
based and other bonus payments.
In April 1998, iVillage entered into a joint venture agreement with
Ourbaby, LLC, a California limited liability company, to form iBaby. iVillage
purchased 1,000,000 of the 1,666,666 shares outstanding of iBaby for $1,350,000
and for the delivery of certain promotional rights, including impressions on
iVillage.com.
Since the formation of iBaby in April 1998, the accounts of iBaby have been
consolidated into iVillage's financial statements, as iVillage holds a majority
interest and control of iBaby.
In May 1998, iVillage entered into a production and asset sale agreement
with TMP Worldwide Inc., or TMP, for one of its content channels, About Work,
and the assets of StudentCenter, in exchange for net proceeds of $600,000. In
connection with this sale, iVillage reported a loss of approximately $504,000
due
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to the bonus payment, the options issued to StudentCenter, the write-off of
remaining goodwill and the accrual for AOL carriage fees to be paid on behalf of
TMP for About Work.
An additional $575,000 was received in exchange for production, sponsorship
and consulting services provided to TMP during 1998. The agreement also required
a $600,000 reimbursement payment to be made to iVillage for maintaining the
About Work tenancy on AOL. In the event the About Work channel is not carried on
AOL through iVillage's distribution agreement, this reimbursement payment will
not be made.
On November 11, 1998, iVillage entered into an agreement with National
Broadcasting Company, Inc., or NBC, which is being amended, pursuant to which
iVillage will advertise primarily in prime time on NBC television as well as on
Snap.com and NBC.com over the next three years. In addition, NBC will acquire
4,889,030 shares of series E convertible preferred stock of iVillage. Please see
"--Recent Events".
iVillage has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in the
new and rapidly evolving markets for Internet products and services. These risks
include the failure to develop and extend iVillage's online service brands, the
rejection of iVillage's services by Web consumers, vendors and/or advertisers,
the inability of iVillage to maintain and increase the levels of traffic on its
online services, as well as other risks and uncertainties. In the event that
iVillage does not successfully implement its business plan, certain assets may
not be recoverable.
iVillage has incurred significant net losses and negative cash flows from
operations since its inception, and as of December 31, 1998, had an accumulated
deficit of approximately $76.3 million. These losses have been funded primarily
through the issuance of preferred equity securities. iVillage intends to
continue to invest heavily in marketing and promotion, content development and
technology and infrastructure development. As a result, iVillage believes that
it will continue to incur operating losses and negative cash flows from
operations for the foreseeable future and that the rate at which such losses
will be incurred may increase from current levels.
RESULTS OF OPERATIONS
The following table sets forth the results of operations for iVillage
expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Revenues........................... 100% 100% 100%
------ ---- ----
Operating expenses:
Production, product and
technology.................... 618 126 97
Sales and marketing.............. 370 146 190
General and administrative....... 424 130 71
Depreciation and amortization.... 15 48 38
------ ---- ----
Total operating expenses...... 1,427 450 396
------ ---- ----
Loss from operations............... (1,327) (350) (295)
------ ---- ----
------ ---- ----
Net loss........................... (1,323) (354) (291)
------ ---- ----
------ ---- ----
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 TO DECEMBER 31, 1997
REVENUES
Revenues increased 149% to $15.0 million for the year ended December 31,
1998, from $6.0 million for the year ended December 31, 1997. The increase in
revenues was primarily due to iVillage's ability to generate significantly
higher sponsorship and advertising revenues, and the development of its commerce
strategy through the investment in iBaby. Sponsorship advertising and usage
revenues increased $6.4 million primarily as a result of a higher number of
impressions sold and additional sponsors advertising on iVillage's Web sites.
Commerce revenues accounted for $2.6 million in 1998, with no revenues in 1997.
During
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1998, iVillage expanded its sales force and the number of impressions available
on its Web sites increased as additional channels were launched and additional
content was produced. Sponsorship and advertising revenues accounted for
approximately 80% and 93% of revenues for the years ended December 31, 1998 and
1997, respectively. Commerce revenues accounted for approximately 17% of
revenues for the year ended December 31, 1998, with no such revenues for the
comparable period in 1997. iVillage expects revenues to grow in 1999 due to a
full year of iBaby activity and the acquisition of Astrology.Net.
Although no one advertiser accounted for greater than 10% of total revenues
for the year 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
recorded in 1998, when the services were provided. Included in sponsorship and
advertising revenues are barter transactions which accounted for approximately
20% and 10% of revenues for the years ended December 31, 1998 and 1997,
respectively. Barter revenues increased as a percentage of revenues because of
the development of barter as a viable vehicle for online advertising in the
industry.
OPERATING EXPENSES
PRODUCTION, PRODUCT AND TECHNOLOGY. Production, product and technology
expenses consist primarily of salaries, payroll taxes and benefits and
expenditures related to editorial content, community management and support
personnel, technology, software development and operations expenses, and product
costs related to merchandise sales. Production, product and technology expenses
increased to $14.5 million, or 97% of revenues, for the year ended December 31,
1998 from $7.6 million, or 126% of revenues, for the year ended December 31,
1997. The dollar increase was primarily attributable to increased personnel
costs related to enhancing the content and functionality of iVillage's Web sites
which increased by $2.7 million, and product costs of $2.1 million arising from
commerce transactions that did not exist in 1997. Production, product and
technology expenses decreased as a percentage of revenues because of the
increased growth in revenues relative to the growth in iVillage's cost
structure. iVillage believes that significant investments in technology and
product development are required to remain competitive and, therefore, expects
that its production, product and technology expenses will continue to increase
in absolute dollars for the foreseeable future.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
costs of distribution agreements, salaries, payroll taxes and benefits for sales
and marketing personnel, commissions, advertising and other marketing related
expenses. Sales and marketing expenses increased to $28.5 million, or 190% of
revenues, for the year ended December 31, 1998, from $8.8 million, or 146% of
revenues, for the year ended December 31, 1997. The dollar increase in sales and
marketing expenses was primarily due to expanded distribution agreements which
increased by about $6.3 million, increases in advertising expenses related to
iVillage's branding campaign of $5.4 million and higher advertising and sales
personnel expenses of about $3.0 million. iVillage has invested heavily in
distribution arrangements in the past twelve months and currently has agreements
with AOL, Snap and Infoseek. Sales and marketing expenses as a percentage of
revenues increased due to iVillage's branding campaign and distribution
agreements. Included in sales and marketing expenses are barter transactions,
which accounted for approximately 10% and 7% of sales and marketing expenses for
the years ended December 31, 1998 and 1997, respectively.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, payroll taxes and benefits and related costs for general
corporate functions, including
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executive management, finance, facilities, legal and fees for other professional
services. General and administrative expenses increased to $10.6 million, or 71%
of revenues, for the year ended December 31, 1998, from $7.8 million, or 130% of
revenues, for the year ended December 31, 1997. The increase in general and
administrative expenses was primarily due to an increase in salaries and
benefits, recruiting costs and facilities expenses resulting from an increase in
the number of personnel hired during the year to support the growth of
iVillage's business. General and administrative expenses decreased as a
percentage of total revenues because of the growth in revenues relative to the
growth in iVillage's general and administrative expenses. This is due to the
development of iVillage's infrastructure in 1997 which was necessary for future
growth of revenues. iVillage expects that it will incur additional general and
administrative expenses as iVillage continues to hire personnel and incurs
expenses related to the growth of the business and its operations as a public
company.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased to $5.7 million, or 38% of revenues, for the year ended December 31,
1998 from $2.9 million, or 48% of revenues, for the year ended December 31,
1997. The dollar increase was primarily attributable to increased depreciation
of $1.2 million resulting from purchases of fixed assets of approximately $6.3
million and increased amortization expense of $1.6 million due to the Health
ResponseAbility Systems acquisition in May 1997.
INTEREST (EXPENSE) INCOME, NET
Interest (expense) income, net includes interest income from iVillage's
cash balances and interest expense related to iVillage's financing obligations,
including non-cash expenses related to the issuance of warrants associated with
a bridge financing in 1997. Interest (expense) income, net improved to an income
of $0.6 million for the year ended December 31, 1998, from an expense of
$0.2 million for the year ended December 31, 1997. This increase was primarily
due to a higher average net cash and cash equivalents balance from the issuance
of preferred and common stock during the year.
MINORITY INTEREST
Minority interest represents the portion of the net loss of iBaby
attributable to minority stockholders.
INCOME TAXES
As of December 31, 1998, iVillage had approximately $31.3 million of
federal net operating loss carryforwards for tax reporting purposes available to
offset future taxable income. iVillage's federal net operating loss
carryforwards expire beginning in 2010. Certain future changes in the share
ownership of iVillage, as defined in the Tax Reform Act of 1986, may restrict
the utilization of carryforwards. A valuation allowance has been recorded for
the entire deferred tax asset as a result of uncertainties regarding the
realization of the asset due to the lack of iVillage's earnings history.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES
Revenues were $6.0 million and $0.7 million for the years ended
December 31, 1997 and 1996, respectively. The increase was driven by the growth
in sponsorship and advertising revenues, which was the result of more
advertisers and a higher number of impressions sold. Sponsorship and advertising
revenues accounted for 93% and 74% of revenues for the years ended December 31,
1997 and 1996, respectively. Included in advertising and sponsorship revenues
were barter transactions, which accounted for approximately 10% and 1% of
revenues for the years ended December 31, 1997 and 1996, respectively. At
December 31, 1997 and 1996, one customer accounted for 31% and four customers
each represented greater than 10% of the net accounts receivable balance,
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.
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During the year ended December 31, 1997, iVillage entered into a new agreement
with AOL that eliminated usage fees.
OPERATING EXPENSES
PRODUCTION, PRODUCT AND TECHNOLOGY. Production, product and technology
expenses were $7.6 million, or 126% of revenues, and $4.5 million, or 618% of
revenues, for the years ended December 31, 1997 and 1996, respectively. The
increase in production, product and technology expenses was primarily
attributable to increases in personnel and related costs to support enhancement
of iVillage's Web site technology and content. Production, product and
technology expenses as a percentage of revenues have decreased because of the
growth in revenues.
SALES AND MARKETING. Sales and marketing expenses were $8.8 million, or
146% of revenues, and $2.7 million, or 370% of revenues, for the years ended
December 31, 1997 and 1996, respectively. The increase in sales and marketing
expenses was primarily due to expanded online banner and distribution
arrangements and the addition of a direct sales force, which iVillage began
building in the second half of 1996. Included in sales and marketing are barter
transactions, which accounted for approximately 7% of sales and marketing in the
year ended December 31, 1997. Sales and marketing expenses as a percentage of
revenues have decreased because of the growth in revenues.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were
$7.9 million, or 130% of revenues, and $3.1 million, or 424% of revenues, for
the years ended December 31, 1997 and 1996, respectively. The increase in
general and administrative expenses was primarily due to increases in the number
of general and administrative personnel and professional services and facility
expenses to support the growth of iVillage's operations. General and
administrative expenses as a percentage of revenues have decreased because of
the growth in revenues.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased to $2.9 million, or 48% of revenues, for the year ended December 31,
1997 from $0.1 million, or 15% of revenues, for the year ended December 31,
1996. The dollar increase was primarily attributable to purchases of fixed
assets of approximately $4 million and acquisitions of Web sites for
approximately $2.9 million during the year ended December 31, 1997.
INTEREST (EXPENSE) INCOME, NET
Interest (expense) income, net was approximately $216,000 expense and
$28,000 income for the years ended December 31, 1997 and 1996, respectively. The
increase in interest (expense) income, net for the year ended December 31, 1997
was primarily due to warrants issued in connection with the receipt of bridge
financing resulting in an interest charge of approximately $650,000.
RECENT EVENTS
Under a prior agreement with iBaby and other parties, on February 10, 1999,
iVillage entered into a definitive agreement to purchase all of the outstanding
shares of iBaby held by the minority stockholders of iBaby for an aggregate
purchase price of $10.8 million. The purchase price consisted of $8 million in
cash, of which $1.5 million was paid on February 12, 1999 and the remaining
$6.5 million is payable within two business days of the closing of this
offering, and an aggregate number of shares of iVillage common stock having an
aggregate value of $2.8 million. The number of shares of iVillage common stock
to be issued to the minority stockholders will be dependent upon the price per
share of common stock in this offering. In addition, subject to its existing
agreements with respect to registration rights, iVillage granted piggyback
registration rights in connection with the shares of iVillage common stock to be
issued pursuant to the agreement.
If this offering is not completed by May 31, 1999, the agreement with iBaby
gives iVillage the right to purchase the outstanding shares of iBaby held by the
minority stockholders for an aggregate purchase price of $9.3 million. To
maintain this right, iVillage must give the minority stockholders written notice
of its intent to purchase their shares by April 15, 1999 and make a
non-refundable $1 million payment to the minority stockholders as a credit
towards the remaining $9.3 million purchase price.
If the shares held by the minority stockholders of iBaby are not purchased
by
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iVillage, the non-refundable payment will be forfeited and the terms of the
existing agreement between iBaby and iVillage will remain in effect.
On February 18, 1999, iVillage acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a Astrology.Net, an Internet content provider, in
exchange for 802,125 shares of iVillage's common stock and $1 million in cash.
The agreement provides for employment, non-compete and stock option agreements
for the founding stockholders of Astrology.Net.
The terms of the agreement provide that 326,331 of the shares of common
stock are issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be accelerated dependent on Astrology.Net
meeting revenue targets. In the event there is no acceleration of the release of
these shares by the end of the five-year term, all remaining shares in escrow
will be released to Astrology.Net's stockholders. In addition, all outstanding
options to purchase Astrology.Net common stock were converted into non-
qualified options to purchase an aggregate of 31,208 shares of iVillage common
stock.
In addition to the shares issued, iVillage issued to the founding
stockholders of Astrology.Net options to purchase 150,000 shares of iVillage
common stock at an exercise price equal to the initial public offering price of
the common stock in this offering. These options, which are contingent on
continued employment with Astrology.Net, vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting revenue targets. iVillage
also granted to the founding stockholders of Astrology.Net, subject to its
existing agreements with respect to registration rights, piggyback registration
rights in connection with the shares of iVillage common stock to be issued
pursuant to the agreement.
The acquisition will be accounted for as a purchase with an estimated
purchase price of approximately $11.8 million based on a value of iVillage's
common stock of $13.00 per share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net will be
recorded as goodwill and amortized over the period of expected benefit.
On March 9, 1999, iVillage and NBC entered into an agreement to amend,
subject to closing conditions, the November 11, 1998 advertising and promotional
agreement with NBC as follows:
a. 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.
b. Upon closing, iVillage will issue, subject to anti-dilution protection,
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 at 5% interest per annum. The principal amount of the note
and interest is payable in twelve equal installments of approximately
$1.4 million, payable each quarter beginning April 1, 1999.
c. iVillage has also agreed to pay $1.1 million during 1999 for prominent
placement on the NBC.com Web site.
Under the revised agreement and in accordance with Emerging Issues Task
Force No. D-60 "Accounting for the Issuance of Convertible Preferred Stock and
Debt Securities with a Nondetachable Conversion Feature", the $5.7 million
difference between the purchase price of the series E convertible preferred
stock and the fair market value on the date of issuance will be accounted for as
a deemed dividend and amortized using the effective interest method from the
date of issuance through the date the securities are first convertible. iVillage
expects this to occur in March 1999 with the effectiveness of its initial public
offering. In addition, the fair value of the warrant as of February 22, 1999, of
approximately $3.3 million, will be recorded in stockholders' equity as deferred
advertising costs and amortized to advertising expense-non cash over the
three-year advertising agreement. The fair value of the warrant was determined
using the Black-Scholes option
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pricing model in accordance with Statement of Financial Standards No. 123,
"Accounting for Stock-Based Compensation".
We have recently been approached by a potential purchaser for the assets
associated with Armchair Millionaire, a site located within 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 or
results of operations.
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; 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. In the opinion of management, this information has
been prepared substantially on the same basis as the audited consolidated
financial statements appearing elsewhere in this prospectus, and all necessary
adjustments, consisting only of normal recurring adjustments, have been included
in the amounts stated below to present fairly the unaudited consolidated
quarterly results. The quarterly data should be read in conjunction with the
audited consolidated financial statements of iVillage and the notes to those
statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- ------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues....................... $ 891 $ 1,253 $ 1,518 $ 2,357 $ 2,200 $ 2,638 $ 4,288 $ 5,886
------- -------- ------- -------- --------- -------- --------- --------
Production, product and
technology................. 1,507 1,745 1,905 2,449 2,657 3,766 3,985 4,113
Sales and marketing.......... 1,507 1,957 1,935 3,372 4,870 7,184 7,877 8,592
General and administrative... 996 2,216 1,967 2,662 2,145 2,061 3,606 2,800
Depreciation and
amortization............... 510 687 1,034 655 1,120 1,538 1,386 1,639
------- -------- ------- -------- --------- -------- --------- --------
Total operating expenses... 4,520 6,605 6,841 9,138 10,792 14,549 16,854 17,144
------- -------- ------- -------- --------- -------- --------- --------
Loss from operations........... $(3,629) $ (5,352) $(5,323) $ (6,781) $ (8,592) $(11,911) $ (12,566) $(11,258)
------- -------- ------- -------- --------- -------- --------- --------
------- -------- ------- -------- --------- -------- --------- --------
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, iVillage has financed its operations primarily through
the private placement of its convertible preferred stock. As of December 31,
1998, iVillage had approximately $30.8 million in cash and cash equivalents.
Net cash used in operating activities increased to $32.3 million for the
year ended December 31, 1998 from $15.3 million for the
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year ended December 31, 1997 and $8.7 million for 1996. The increase in net cash
used resulted primarily from increasing net losses, offset by the timing of
payable settlements and increased depreciation and amortization expense.
Net cash used in investing activities decreased to $5.8 million for the
year ended December 31, 1998 from $6.9 million for the year ended December 31,
1997 and $0.7 million for 1996, resulting primarily from increased purchases of
property and equipment and the $2.6 million cash portion of the acquisition of
iVillage's health channel in 1997.
Net cash provided by financing activities increased to $64.5 million for
the year ended December 31, 1998 from $24.4 million for 1997 and $11.3 million
for 1996. The increase in 1998 was primarily due to $65.3 million of net cash
proceeds from the sale of shares of iVillage's series E convertible preferred
stock, series D convertible preferred stock and common stock as compared to the
$24.8 million of net cash proceeds from the sale of shares of iVillage's
series C convertible preferred stock in 1997, inclusive of convertible notes. In
1996, iVillage received net cash proceeds of $11.3 million from the sale of
shares of iVillage's series B and B-1 convertible preferred stock, inclusive of
convertible notes.
iVillage's capital requirements depend on numerous factors, including:
o market acceptance of iVillage's services;
o the amount of resources iVillage devotes to investments in the
iVillage.com network;
o the resources iVillage devotes to marketing;
o selling its services and brand promotions; and
o other factors.
iVillage has experienced a substantial increase in its expenditures since
its inception consistent with growth in iVillage's operations and staffing, and
anticipates that this will continue for the foreseeable future. Additionally,
iVillage will continue to evaluate possible investments in businesses, products
and technologies, and plans to expand its sales and marketing programs and
conduct more aggressive brand promotions. iVillage currently anticipates that
its available cash resources combined with the net proceeds from this offering
will be sufficient to meet its anticipated needs for working capital and capital
expenditures for at least the 12 months following the date of this prospectus.
We may need to raise additional funds, however, in order to fund more rapid
expansion, to develop new or enhance existing services or products, to respond
to competitive pressures or to acquire complementary products, businesses or
technologies. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders will
be reduced, our stockholders may experience additional dilution and such
securities may have rights, preferences or privileges senior to those of our
stockholders. We cannot assure you that additional financing will be available
on terms favorable to us, or at all. If adequate funds are not available or are
not available on acceptable terms, our ability to fund our expansion, take
advantage of unanticipated opportunities, develop or enhance services or
products or otherwise respond to competitive pressures would be significantly
limited. Our business, results of operations and financial condition could be
materially adversely affected by such limitation.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
is effective for financial statements for years beginning after December 15,
1998. SOP 98-1 provides guidance over accounting for computer software
development or obtained for internal use including the requirement to capitalize
specified costs and amortization of such costs. iVillage does not expect the
adoption of this standard to have a material effect on iVillage's capitalization
policy.
In April 1998, AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5, which is effective for fiscal years
beginning after December 15, 1998, provides guidance on the financial reporting
of start-up costs and organization
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costs. It requires costs of start up activities and organization costs to be
expensed as incurred. As iVillage has expensed these costs historically, the
adoption of this standard is not expected to have a significant impact on
iVillage's results of operations, financial position or cash flows.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS No. 133"), which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The adoption of SFAS No. 133 is not expected to
have an impact on iVillage's results of operations, financial position or cash
flows upon the adoption of this standard.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept or recognize only two digit entries in the date code field. These
systems and software products will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and/or software used by many companies and governmental agencies may
need to be upgraded to comply with such Year 2000 requirements or risk system
failure or miscalculations causing disruptions of normal business activities.
STATE OF READINESS
iVillage has made a preliminary assessment of the Year 2000 readiness of
its operating financial and administrative systems, including the hardware and
software that support iVillage's systems. iVillage's assessment plan consists
of:
o quality assurance testing of its internally developed proprietary
software;
o contacting third-party vendors and licensors of material hardware,
software and services that are both directly and indirectly related to
the delivery of iVillage's services to its users;
o contacting vendors of third-party systems;
o assessing repair or replacement requirements;
o implementing repair or replacement;
o implementation; and
o creating contingency plans in the event of Year 2000 failures.
iVillage's Year 2000 task force is currently conducting an inventory of and
developing testing procedures for all software and other systems that it
believes might be affected by Year 2000 issues. Since third parties developed
and currently support many of the systems that we use, a significant part of
this effort will be to ensure that these third-party systems are Year 2000
compliant. We plan to confirm this compliance through a combination of the
representation by these third parties of their products' Year 2000 compliance,
as well as specific testing of these systems. iVillage plans to complete this
process prior to the end of the third quarter of 1999. Until such testing is
completed and such vendors and providers are contacted, iVillage will not be
able to completely evaluate whether its systems will need to be revised or
replaced.
COSTS
To date, iVillage has spent an immaterial amount on Year 2000 compliance
issues but expects to incur an additional $350,000 to $500,000 in connection
with identifying, evaluating and addressing Year 2000 compliance issues. Most of
iVillage's expenses have related to, and are expected to continue to relate to,
the operating costs associated with time spent by employees and consultants in
the evaluation process and Year 2000 compliance matters generally. Such
expenses, if higher than anticipated, could have a material adverse effect on
iVillage's business, results of operations and financial condition.
RISKS
iVillage is not currently aware of any Year 2000 compliance problems
relating to its systems that would have a material adverse effect on iVillage's
business, results of operations and financial condition, without taking into
account iVillage's efforts to avoid or fix such problems. There can be no
assurance that iVillage will not discover Year 2000 compliance problems in its
systems that will require substantial revision. In addition, there can be no
assurance that third-party software, hardware or services incorporated into
iVillage's
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material systems will not need to be revised or replaced, all of which could be
time-consuming and expensive. The failure of iVillage to fix or replace its
internally developed proprietary software or third-party software, hardware or
services on a timely basis could result in lost revenues, increased operating
costs, the loss of customers and other business interruptions, any of which
could have a material adverse effect on iVillage's business, results of
operations and financial condition. Moreover, the failure to adequately address
Year 2000 compliance issues in its internally developed proprietary software
could result in claims of mismanagement, misrepresentation or breach of contract
and related litigation, which could be costly and time-consuming to defend.
iVillage is heavily dependent on a significant number of third-party
vendors to provide both network services and equipment. A significant Year
2000-related disruption of the network, services or equipment that third-party
vendors provide to iVillage could cause iVillage's members and visitors to
consider seeking alternate providers or cause an unmanageable burden on its
technical support, which in turn could materially and adversely affect
iVillage's business, financial condition and results of operations.
In addition, there can be no assurance that governmental agencies, utility
companies, Internet access companies, third-party service providers and others
outside of iVillage's control will be Year 2000 compliant. The failure by such
entities to be Year 2000 compliant could result in a systemic failure beyond the
control of iVillage, such as a prolonged Internet, telecommunications or
electrical failure, which could also prevent iVillage from delivering its
services to its customers, decrease the use of the Internet or prevent users
from accessing its Web sites which could have a material adverse effect on
iVillage's business, results of operations and financial condition.
CONTINGENCY PLAN
As discussed above, iVillage is engaged in an ongoing Year 2000 assessment
and has not yet developed any contingency plans. The results of iVillage's Year
2000 simulation testing and the responses received from third-party vendors and
service providers will be taken into account in determining the nature and
extent of any contingency plans.
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BUSINESS
iVILLAGE INC.
iVillage is a leading online women's network and one of the most
demographically targeted online communities on the World Wide Web. iVillage.com
is an easy-to-use, comprehensive online network of sites tailored to the
interests and needs of women aged 25 through 49. We provide advertisers and
merchants with targeted access to women using the Web.
iVillage's network of sites consists of 14 channels organized by subject
matter. The channels cover leading topics of interest to women online, such as
family, health, work, money, food, relationships, shopping, travel, pets and
astrology. We facilitate channel usage by providing common features and
functionality within each channel, including experts, chats, message boards and
services.
As of December 31, 1998, iVillage's membership and its core audience was
82% female and consisted of approximately 960,000 unique members as compared to
approximately 170,000 unique members as of January 31, 1998. For the month ended
December 31, 1998, iVillage.com had approximately 65 million page views and
2.7 million unique visitors.
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 to increase from approximately 69 million at the end of 1997 to
approximately 320 million by the end of 2002. According to International Data
Corporation, worldwide commerce revenue on the Internet is expected to increase
from approximately $12.4 billion at the end of 1997 to more than $425 billion in
2002. Jupiter Communications, a new media research firm that specializes in
online research and analysis, estimates that the amount of advertising dollars
spent on the Internet is expected to increase from approximately $1.9 billion in
1998 to $7.7 billion by 2002, a compound annual growth rate of 42%. The Internet
enables features and functions that are unavailable in traditional media,
permitting online retailers to interact effectively with customers and
advertisers to target specific demographic groups by capturing valuable data on
customer tastes, preferences and shopping and buying patterns.
WOMEN'S INCREASING USE OF THE INTERNET AND THEIR IMPORTANCE IN THE ECONOMY
Women represent an attractive demographic group for advertisers and
businesses. The number of female AOL subscribers increased from 16% of total
subscribers in 1994 to 51% in June 1998. According to Jupiter Communications,
45% of the Internet audience was female as of January 1998. These trends are
important to advertisers because women are estimated to have disproportionate
control or influence over consumer spending in the United States. For example,
according to a November 1997 Advertising Age article, women controlled or
influenced 80% of all purchase decisions, 80% of new vehicle purchases, 66% of
home computers, 46% of men's wear and 70% of appliance choices. We believe that
women are increasing their use of the Internet for commercial purposes. Although
women are underrepresented in the online spending category, accounting for only
25% of online sales in 1996, as reported by Jupiter 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
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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 WOMEN'S NETWORK
For advertisers to effectively reach women online, they need to address the
fact that women use the Internet differently than men. iVillage believes that
women want an environment built to meet their needs for problem-solving,
time-efficiency, integration of information, peer advice and simple navigation.
According to an International Data Corporation article, women appear to spend
less time "surfing" the Internet than men. 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.
THE iVILLAGE SOLUTION
iVillage.com is one of the largest online women's networks and one of the
most demographically targeted online communities on the Web. iVillage focuses on
the needs of women online and has created an environment that solves everyday
problems quickly in those areas of life most important to women, including
family, parenting, work, money and health. The user's experience on iVillage.com
centers on solving these problems in one destination through targeted community,
access to experts, useful interactive tools and commerce opportunities.
iVillage believes its success to date can be attributed to the following
factors:
FOCUS ON HIGHLY TARGETED DEMOGRAPHIC GROUP
iVillage.com is primarily tailored to the interests and needs of women
online between the ages of 25 and 49. iVillage believes that these women want:
o powerful, quick and easily accessible problem-solving content;
o emotional support, a sense of identification and access to sympathetic
listeners; and
o a consistent navigation and programming experience.
iVillage believes that its network creates the experience women are seeking
and distinguishes iVillage.com from AOL, other women's networks and other online
services. iVillage.com offers a series of integrated tools, community resources,
experts and information databases to help women solve their everyday problems
quickly and effectively. For example, a woman who learns that she has a disease
can quickly:
o access other members who have lived through this experience and can
provide both guidance and emotional relief;
o access Healthwise Knowledgebase, a medical database to research the
topic; and
o select and purchase books on the topic.
iVillage.com provides a place where women can find support from like-minded
women and the comfort of knowing that other women have shared similar
experiences and have come through them successfully. This program enables women
to work together towards breaking the cycle of dieting and weight gain.
iVillage.com also offers daily polls that provide women with an immediate sense
of belonging and connection.
iVillage.com offers a consistent navigation and programming experience
across all
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channels and functions. Each channel is organized in a consistent manner around
tools, experts, resources and community. During December 1998, iVillage.com's
home page on both the Internet and AOL provided users with links each week to
approximately 50 experts, 700 chats and 1,500 message boards.
ACTIVE MEMBERSHIP AND COMMUNITY PARTICIPATION
iVillage encourages active participation in its community and offers a
number of programs to increase levels of participation. Believing that members
form iVillage.com's core audience and are its most valuable customers, iVillage
created a membership services group in January 1998. iVillage has built an
organization of over 1,000 community leaders who volunteer a significant amount
of time hosting message boards and chats and contributing to iVillage.com's
proprietary content and innovative bottoms-up programming. iVillage.com also
sends approximately 5.9 million electronic newsletters per week to its members,
visitors and newsletter subscribers.
POSITIVE ENVIRONMENT FOR ADVERTISING AND COMMERCE
iVillage believes that iVillage.com appeals to advertisers and consumers
because it combines the following attributes:
o a high degree of member involvement within the network, through polls,
message boards, chats, community challenges and personalized interactive
services;
o an interactive sponsorship model that integrates advertising and commerce
into the content of each of the sites;
o a highly-targeted demographic group; and
o a consistency of brand promotion and navigation throughout the network.
iVillage believes that this combination has resulted in effective CPMs
above the industry average, and above the average for other women's sites. In
addition, iVillage.com offers a scalable business platform from which iVillage
can generate multiple revenue streams, including:
o banner advertising;
o sponsorship;
o production; and
o e-commerce.
BUSINESS STRATEGY
iVillage's objective is to be the premier site for women online. We have
made a number of recent executive hires in an effort to strengthen our
management infrastructure in order to successfully manage our growth and
implement our strategy. Key elements of iVillage's strategy are as follows:
BUILD STRONG BRAND RECOGNITION
iVillage believes that building brand recognition of iVillage.com is
critical to attracting and expanding its global Internet user base. iVillage's
market leadership position has been driven by partnership and distribution
agreements with other leading Internet-based companies. iVillage believes
aggressive brand-building will become increasingly important to sustain its
leadership position and has begun to allocate some of its branding expenditures
toward offline branding on television and radio, through direct media spending
and through strategic alliances with traditional media partners. These alliances
are relatively new and iVillage is just beginning to see their benefits.
iVillage believes that it can build offline brand awareness and attract traffic
by leveraging the reach of traditional media partners. For example, in November
1998 iVillage entered into a contract with NBC pursuant to which NBC will
promote iVillage.com during prime time programs as well as through its Web
sites. iVillage also entered into an agreement in October 1998 with AT&T where
AT&T will promote iVillage through TV and mass media marketing.
iVillage also plans to build brand recognition and develop new commerce
opportunities through the marketing and packaging of its content. For example,
iVillage currently runs a syndicated column with Copley News Services based upon
its content and has arranged to publish four books under the Parent Soup brand
in order to reach offline audiences.
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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.
PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES
iVillage plans to bolster its traffic, market share and revenues through
strategic acquisitions that offer opportunities to increase market share in
iVillage's content categories, offer high traffic or are sites categorized by
high retention statistics. iVillage also intends to form alliances with larger
companies to leverage their brands, while incorporating content that is
consistent with the network. iVillage may also expand its revenue opportunities
through alliances with other retailers, online service and content providers,
commerce providers and advertisers.
INCREASE SPONSOR AND ADVERTISING REVENUES
iVillage views its relationships with its sponsors and advertisers as
critical to its success. iVillage has been a pioneer in developing innovative
sponsorship advertising relationships with leading brand marketers which go
beyond traditional banner advertising to support broad marketing objectives,
including brand promotion, awareness, product introductions, online research and
the integration of advertising with editorial content. iVillage plans to
continue to seek additional sponsorship arrangements, which have longer-term
contracts and higher dollar values than typical banner deals and independence
from page views as the sole measurement basis. In addition, iVillage intends to
continue to attract banner advertising and has recently created a discrete sales
force to concentrate on this area of the business, which is sold primarily
through agencies. iVillage has recently increased the size its sales force to
concentrate on increasing iVillage's advertising and sponsorship relationships
with leading brand marketers.
GENERATE E-COMMERCE REVENUES
iVillage intends to identify new commerce, revenue and acquisition
opportunities that enhance iVillage.com by offering transaction services in
categories that:
o have a high degree of relevance to iVillage.com members;
o are appropriate for the Internet; and
o fit with a current or complementary iVillage.com content site.
iVillage also generates e-commerce revenues through agreements with leading
merchants interested in targeting iVillage.com members. These merchants receive
exposure through banner advertising, the integration of advertising with
editorial content and promotional offers in exchange for which iVillage collects
a fixed fee and a share of revenue from sales to iVillage.com users. iVillage
also plans to create relationships with key retailers and manufacturers
interested in building new channels while protecting their core distribution
channels. In addition to enhancing user retention, these retailing opportunities
can be used to identify valuable purchasing trends that can be used in future
advertising and commerce.
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THE iVILLAGE NETWORK
iVillage's network is organized around 14 content specific channels.
iVillage.com is a single point of entry to the iVillage network of sites and is
updated daily to promote content and community, including channel highlights.
The following table provides a brief description of each channel's features as
of February 22, 1999:
<TABLE>
<CAPTION>
CHANNEL DESCRIPTION
- ----------------------- -------------------------------------------------------
<S> <C>
[logo reading A site providing users with horoscopes, celebrity
"astrology net"] profiles, romance charts and monthly guidance.
[logo reading A book and reading site for readers interested in a
"book club"] 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.
[logo reading A career planning site that provides women with tools
"career"] and resources relating to professional development and
career-related issues.
[logo reading A fitness and beauty site which includes Body
"fitness & beauty"] Calculators, Nutrition Experts and Community Challenges
to improve one's fitness level.
[logo reading A food site providing information on meal planning,
"food"] nutrition and recipes and includes Food Experts and
Cooking Basics.
[logo reading A health site to assist users in becoming better health
"health"] care decision makers that includes on AOL and the Web,
approximately 200 bulletin boards and approximately 150
weekly chats on AOL.
[logo reading A financial planning site providing users with
"MONEY"] information on savings and investment strategies and
includes Five Steps to Financial Freedom, The Model
Portfolio and an investment center sponsored by Charles
Schwab.
[logo reading A parenting site providing users with a branded online
"parents up"] community where parents share parenting solutions, talk
with experts and find answers and support.
[logo reading A parenting community center site that includes, on AOL
"Parents Place"] and the Web, approximately 700 bulletin boards and
approximately 80 weekly chats in addition to
information regarding childhood diseases.
[logo reading A site designed in partnership with Ralston Purina
"pets"] Company that provides information on caring for your
pet, selecting a breed and features an automated
adoption and veterinarian-finder tool sponsored by the
American Humane Association and American Animal
Hospital Association.
</TABLE>
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<TABLE>
<S> <C>
[logo reading A site offering users information and conversation on
"relationships"] love, marriage, sex and family.
[logo reading A one-stop online shopping destination offering users
"shopping"] easy access to retail Web sites such as Virtual
Vineyards, Gymboree, Music Boulevard, Godiva and iBaby.
[logo reading A travel site that offers tools for planning a
"travel"] vacation, articles on travel-related issues, a link to
a travel reservation center and a currency converter.
[logo reading A site providing women who work from home with tools
"work from home"] and resources such as Home Office Basics, a Tax Guide
and a Software Library.
</TABLE>
iVillage believes that user support is critical in order to attract and
retain users. iVillage provides user support primarily through e-mail-based
correspondence. Help and feedback buttons are prominently displayed throughout
iVillage.com, and iVillage's user support staff attempts to respond to all
e-mail queries within 24 hours. In addition, community leaders provide on-site
and e-mail support for broad-ranging issues. iVillage does not charge for these
services.
SPONSORSHIP AND ADVERTISING REVENUES
iVillage has derived a significant amount of its revenues to date from the
sale of sponsorships and advertisements. For the years ended December 31, 1998
and December 31, 1997, sponsorship and advertising revenues represented 80% and
93%, respectively, of iVillage's revenues.
iVillage's strategy is focused in part on generating a majority of its
advertising revenues from sponsors and merchants who seek a cost-effective means
to reach women online. iVillage is aggressively building its leadership position
as the preeminent women's brand to the advertising community. iVillage's
sponsorship arrangements typically differ from traditional banner advertising in
that they are designed to achieve broad marketing objectives such as brand
promotion, awareness, product introductions, online research and the integration
of advertising with editorial content. Sponsorships allow iVillage.com to cater
to the specific goals of advertisers in the areas of impressions, product
research, market research, new product launches, list development, product
information, repositioning, new account openings, lead generation and
transactions. Sponsors also have the opportunity to talk one-on-one with members
on the network's message boards, chats, polls and special events, which allow
sponsors the opportunity to gain insights into their customers. iVillage's
sponsorship arrangements generally have longer terms than typical banner
advertising placements and provide for CPMs per advertiser and independence from
page-views as the measure of value. In addition, iVillage develops extensive
editorial and marketing content to support the marketing initiatives of
advertisers. iVillage's sponsorship agreements are typically exclusive and are
for a period of one to three years.
To a lesser extent, iVillage also derives a portion of its sponsorship and
advertising revenues from banner advertisements that are prominently displayed
at the top of pages throughout the iVillage.com network. From each banner
advertisement, viewers can hyperlink directly to the advertiser's own Web site,
thus providing the advertiser the opportunity to directly interact with an
interested customer. iVillage has recently created a discrete sales force to
concentrate on banner advertising, which is sold primarily through agencies. As
a result of its sales and advertising strategy, iVillage believes that it has
CPMs significantly above the industry average, and above the reported average
for other women's sites.
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During the years ended December 31, 1997 and December 31, 1998,
iVillage's five largest advertisers accounted for approximately 26% and 17%,
respectively, of iVillage's revenues. No advertiser accounted for more than 10%
of iVillage's revenues during either year. The following is a select list of
iVillage's advertisers:
Amazon.com, Inc.
Astra Pharmaceuticals, L.P.
Charles Schwab & Co., Inc.
First USA, Inc.
Ford Motor Media
Glaxo Wellcome Inc.
Green Tree Nutrition, Inc.
Kimberly-Clark Corporation
MovieStreet, Inc.
MyBasics.com
Ortho-McNeil, Ortho Dermatological & McNeil-PPC, Inc.
The Hertz Corporation
Westpoint Stevens, Inc.
MEMBERSHIP
iVillage believes a large and active membership base is critical to its
success. Membership is free and available to iVillage.com visitors who disclose
their name, e-mail address, zip code, age and gender and choose a member name
and password to be used throughout members-only areas. Members form
iVillage.com's core audience and are its most valuable users. iVillage has
launched an aggressive member-acquisition campaign, which includes the creation
of free services and support for members.
Some features of iVillage's Web sites are restricted to 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. When a user registers as an iVillage.com member, iVillage
requests the user to provide, among other things, his or her name, address,
e-mail address, zip code, gender and a private password. iVillage's current
policy is to never sell to any third party any member's personal identifying
information, such as his or her name or address, unless the member has provided
written consent. In 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.
E-COMMERCE
OVERVIEW
iVillage has identified the opportunity to generate new commerce revenues
by selling products or services that:
o have a high degree of relevance to its members;
o fit within a current content area or provide an opportunity for future
development; and
o are appropriate for the Internet.
iVillage also generates commerce revenues through agreements with leading
merchants from which iVillage collects a fixed fee and a share of sales from its
users.
iBABY
iBaby offers more than 14,000 products from over 500 manufacturers
representing an extensive assortment of products for children under three years
of age. The site's comprehensive selection, combined with easy site navigation
and time-saving features such as a baby registry, superior product search and a
gift-finder service, makes iBaby convenient for new and expectant parents. iBaby
had 25 full-time employees as of January 31, 1999.
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Please see note 5 of notes to iVillage's consolidated financial statements.
iBaby targets parents through newsletters, message boards, content
integration and banner ads. iBaby has distribution agreements with online
services such as AOL and the Microsoft Network.
Online orders are taken 24 hours a day, seven days per week and products
are shipped within 48 hours of placement of most orders. In accordance with an
inventory and services agreement between iBaby and Kid's Warehouse, Kid's
Warehouse sells inventory to iBaby and provides space to iBaby for storage.
Substantially all of iBaby's products are currently sourced through Kid's
Warehouse. This arrangement is expected to continue at least for an additional
year after iVillage's acquisition of the minority interest in iBaby. Although
iBaby holds no inventory, iVillage anticipates that it may maintain in the
future an inventory of a small amount of the most popular products.
ASTROLOGY.NET
Astrology.Net is a leading destination for women online seeking daily
horoscopes, astrology content and personalized forecasts, serving more than one
million unique visitors in January 1999. Through its network of sites organized
by topics of interest to women such as family, love, money and career,
Astrology.Net provides a timely, personalized experience for the user,
stimulates commerce sales of monthly and annual forecasts by subject and creates
an advertising environment that is appealing to advertisers due to targeting
possibilities within the site and through e-mail communication.
Astrology.Net brings iVillage a content and commerce site that is appealing
to our core demographic of women, represents one of the best customer
acquisition tools as demonstrated by our strong clickthrough performance in
online media, and a vehicle to drive repeat visits to iVillage through the use
of daily horoscopes. Astrology.Net has also created an interactive commerce
system that provides instantaneous, digital astrology reports. The system
consists of software which operates the Web site and is capable of generating
customized astrology reports based on input from users. iVillage intends to use
this e-commerce model to enter other businesses with similar characteristics
that appeal to its users.
ALLIANCES
iVillage pursues strategic relationships to increase its access to online
customers, build brand recognition and expand iVillage's online presence.
Historically, iVillage has pursued strategic alliances to reach online
customers. iVillage currently plans to shift its focus to building offline brand
recognition and to increasing its access to offline customers. iVillage's
principal strategic alliances and relationships include the following:
MEDIA ARRANGEMENT
In November 1998, iVillage entered into an agreement with NBC pursuant to
which NBC will promote iVillage.com on television, primarily during prime-time
programs, as well as through its Web sites. In addition, NBC has agreed to
promote the content centers programmed by iVillage on Snap! LLC. On March 9,
1999, iVillage and NBC entered into an agreement to amend, subject to closing
conditions, the November 11, 1998 advertising and promotional agreement with NBC
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 annum during
2000 and 2001. In addition, iVillage will issue 4,889,030 shares of series E
convertible preferred stock 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 in twelve equal installments, payable each quarter
beginning April 1, 1999. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Recent Events".
SPONSORSHIP ARRANGEMENTS
In October 1998, iVillage entered into a two-year agreement with AT&T under
which iVillage will promote and market specified AT&T telecommunication services
in exchange for minimum payments based upon delivered impressions. In return,
AT&T will display a text link for iVillage.com on the AT&T WorldNet Service and
promote and market iVillage.com
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through AT&T television, mass media marketing or other mass media.
iVillage entered into an Online Services Agreement with Charles Schwab &
Co., Inc. in December 1997, under which Schwab was granted the right to an
exclusive sponsorship of all brokerage and mutual fund categories on all money,
financial or investing related sites. iVillage and Schwab also developed The
Investor Center, a co-branded site. The agreement's term is for a period of
three years; however, Schwab may terminate the agreement by providing notice to
iVillage at least ninety days prior to each one-year anniversary of the
agreement.
iVillage entered into an agreement with Amazon.com, Inc. in February 1998,
under which Amazon.com, Inc. was granted the right to become the exclusive book
sponsor and retailer throughout the iVillage.com network. In addition,
iVillage.com users are offered book-related features and content across all the
iVillage.com channels. Each of the channels provides recommended reading lists,
book reviews, online book chats and access to an interactive Book Club. The
agreement expires on July 1, 1999 and may be renewed for additional 12-month
periods upon the mutual agreement of iVillage and Amazon.com, Inc.
In October 1998, iVillage entered into an agreement with Ralston Purina
under which the two parties agreed to create the pet channel and an online pet
store. In addition, Ralston Purina agreed to provide content, experts, customer
service and distribution for the pet channel and to assist iVillage in the
marketing, distribution and fulfillment of Ralston Purina products within the
pet channel. The agreement's term is for a period of two years.
DISTRIBUTION ARRANGEMENTS
iVillage believes that its most effective means of generating traffic and
building brand recognition has resulted from its online media and distribution
relationships. iVillage considers branding an important aspect of its
distribution arrangements and seeks distribution relationships where its brand
is promoted. iVillage has also entered into distribution and content
relationships with a number of major online service companies on the Internet.
iVillage and Snap entered into a two-year promotion agreement in November
1998, under which iVillage has been granted the exclusive right to program the
content on the front pages of the Health Center, with health-related content
from iVillage.com and Snap's Family Center with content from Parent Soup. Snap
may, in its discretion, promote iBaby throughout the Kids and Family, Health,
Living and Shopping channels. In addition, iVillage's health channel and Parent
Soup content and links will be included as an initial default option for Snap's
"My Snap!" personalized home page. Snap is required to deliver a minimum number
of impressions during the term of the agreement and Snap's ability to display
content promoting other health and parenting sites is limited.
In December 1998, iVillage entered into an interactive services agreement
with AOL that supersedes all prior services agreements between iVillage and AOL
and expires December 31, 2000. Either party may extend the agreement for an
additional year. The agreement provides that some of iVillage's icons will be
placed within the AOL service and that iVillage will receive guaranteed
impressions. In consideration for these services, iVillage is obligated to pay
AOL minimum quarterly installments and to provide advertising to AOL. Please see
"Risk Factors--We may not attract a sufficient amount of traffic and advertising
without our channels being carried on AOL".
CONTENT CHANNELS
iVillage has entered into agreements with third parties in order to expand
its channel offerings. Such agreements provide iVillage with a cost-effective
means of acquiring content and provides iVillage's users with high utility.
In June 1998, iVillage entered into an agreement with Intel Corporation,
under which Intel purchased shares of iVillage's series D convertible preferred
stock. iVillage agreed to use the proceeds from Intel's purchase of series D
convertible preferred stock to add new features to the health site, such as a
health profiling tool, personal home health pages and a ranking of health
organizations. Personal Health Profile, which was introduced in June 1998,
allows users to assess potential health risks by entering lifestyle and
hereditary information. Customized information, from risk rankings to a disease
screening guide to tips
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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.
SALES, MARKETING AND PUBLIC RELATIONS
SALES
As of January 31, 1999, iVillage had a direct sales organization,
consisting of 13 sales professionals with an average of 15 years of experience,
11 of whom were hired since April 1998 and 25 sales operations staff. iVillage's
sales organization consults regularly with advertisers and agencies on design
and placement of its Web-based advertising and the production and management of
bridge sites, provides customers with advertising management analysis and
focuses on providing a high level of customer satisfaction. Ten sales
professionals focus on sponsorship relationships and two are responsible for
banner advertising. iVillage generally seeks to hire individuals with
significant experience in selling advertising and preexisting relationships with
advertisers in a variety of media.
MARKETING AND PUBLIC RELATIONS
iVillage employs a variety of methods to promote the iVillage.com brand and
to attract traffic and new members, including advertising on other Internet
sites, targeted publications, radio stations, cable television, cross
promotional arrangements to secure advertising and other promotional
considerations. iVillage distributes promotional materials at select targeted
events, such as PTA conferences, and engages in an ongoing public relations
campaign. To extend the iVillage.com brand, iVillage has also entered into
several strategic alliances with offline partners. Please see "--Alliances". In
addition, iVillage leverages other audience building strategies, including
working closely with search engine submissions, news group postings and cross-
promotion with affinity sites to properly index materials. iVillage's marketing
department consisted of 22 marketing professionals as of January 31, 1999.
iVillage has recently begun to market its brand offline. In November 1998,
iVillage entered into an agreement with NBC, under which iVillage will receive
advertising on the NBC network. iVillage has, from time to time, advertised on
cable television in New York, San Francisco and Chicago and intends to advertise
on the radio as well. iVillage focuses on leveraging its community leaders and
membership for offline brand building and membership acquisition. iVillage plans
to meet with local community leaders and leaders of local women's organizations
to identify sponsorship and grassroots marketing opportunities. In addition,
iVillage is identifying live events and conferences for sponsorships.
iVillage's internal public relations staff oversees a comprehensive public
relations program which iVillage believes is a key component of its marketing
and brand recognition strategy. Organized into two primary components that
promote iVillage and the iVillage.com brand, the program targets a
trade/business and consumer audience, respectively. iVillage has developed a
consumer outreach effort which centers on providing non-technology reporters
with "news-you-can-use" information taken directly from iVillage.com, to
demonstrate to readers/viewers the content's utility and service, and usage of
and traffic to the network. iVillage has also implemented national long-lead
consumer initiatives, such as radio media tours, regional broadcast media tours,
consumer publicity of iVillage's Parent Soup book series and other related
activities, and multiple daily media advisories sent to consumer outlets
throughout the United States.
OPERATING INFRASTRUCTURE
iVillage's operating infrastructure has been designed and implemented to
support the delivery of millions of page views a day. Web pages are generated
and delivered, in response to end-users requests, by any one of nearly 20
servers. Key attributes of this infrastructure include the ability to support
growth, performance and service availability.
iVillage's servers run on the Sun Solaris and Microsoft NT operating
systems and use
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Netscape Enterprise, Apache and Microsoft Corporation's IIS Web server software.
iVillage maintains all of its production servers at the New Jersey Data
Center of Exodus Communications, Inc. iVillage's operations are dependent upon
Exodus's ability to protect its systems against damage from fire, hurricanes,
power loss, telecommunications failure, break-ins and other events.
Exodus provides comprehensive facilities management services including
human and technical monitoring of all production servers 24 hours per day, seven
days per week. Exodus provides the means of connectivity for iVillage's servers
to end-users via the Internet through multiple connections. The facility is
powered by multiple uninterruptible power supplies. Please see "Risk Factors--We
may be unable to respond to the rapid technological change in our industry" and
"--Internet security concerns could hinder e-commerce".
All of iVillage's production data are copied to backup tapes each night and
stored at a third party, off-site storage facility. iVillage is in the process
of developing a comprehensive disaster recovery plan to respond to system
failures. iVillage keeps all of its production servers behind firewalls for
security purposes and does not allow outside access, at the operating systems
level, except via special secure channels. Strict password management and
physical security measures are followed. Computer security response team alerts
are read, and, where appropriate, recommended action is taken to address
security risks and vulnerabilities.
Our Web sites must accomodate a high volume of traffic and deliver
frequently updated information. Components or features of our Web sites have in
the past suffered outages or experienced slower response times because of
equipment or software downtime. This has not had a material effect on our
business.
COMPETITION
The market for members, visitors and Internet advertising is new and
rapidly evolving, and competition for members, visitors and advertisers is
intense and is expected to increase significantly in the future. With no
substantial barriers to entry, iVillage expects that competition will continue
to intensify.
iVillage believes that the primary competitive factors in creating
community on the Internet are functionality, brand recognition, member affinity
and loyalty, demographic focus, variety of value-added services, ease-of-use,
quality of service, reliability and critical mass. Other companies or sites
which are primarily focused on targeting women online are Women.com networks, a
joint venture between Women.com networks and The Hearst Corp., Microsoft
Corporation's womencentral.msn.com, condenet.com and Oxygen Media's Web sites.
iVillage will likely also face competition in the future from developers of Web
directories, search engine providers, shareware archives, content sites,
commercial online services, sites maintained by Internet service providers and
other entities that attempt to or establish communities on the Internet by
developing their own or purchasing one of iVillage's competitors. In addition,
iVillage could face competition in the future from traditional media companies,
a number of which, including Disney, CBS and NBC, have recently made significant
acquisitions of or investments in Internet companies. Further, there can be no
assurance that iVillage's competitors and potential competitors will not develop
communities that are equal or superior to those of iVillage or that achieve
greater market acceptance than iVillage's community.
iVillage also competes with traditional forms of media such as newspapers,
magazines, radio and television, for advertisers and advertising revenues.
iVillage believes that the principal competitive factors in attracting
advertisers include the amount of traffic on its Web sites, brand recognition,
customer service, the demographics of iVillage's members and visitors,
iVillage's ability to offer targeted audiences and the overall
cost-effectiveness of the advertising medium offered by iVillage. iVillage
believes that the number of Internet companies relying on Web-based advertising
revenues will increase greatly in the future. Accordingly, iVillage will likely
face increased competition, resulting in increased pricing pressures on its
advertising rates which could in turn have a material adverse effect on
iVillage's business, results of operations and financial condition.
Many of iVillage's current and potential competitors, including developers
of Web
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directories and search engines, have longer operating histories, significantly
greater financial, technical and marketing resources, greater name recognition
and larger existing customer bases than iVillage. Such competitors are able to
undertake more extensive marketing campaigns for their brands and services,
adopt more aggressive advertising pricing policies and make more attractive
offers to potential employees, distribution partners, commerce companies,
advertisers and third-party content providers. There can be no assurance that
Internet content providers and Internet service providers, including developers
of Web directories, search engines, sites that offer professional editorial
content and commercial online services, will not be perceived by advertisers as
having more desirable Web sites for placement of advertisements. In addition,
many of iVillage's current advertising customers and strategic partners also
have established collaborative relationships with certain of iVillage's
competitors or potential competitors, and other high-traffic Web sites.
Accordingly, there can be no assurance that:
o iVillage will be able to grow its membership, traffic levels and
advertiser customer-base at historical levels; or
o retain its current members, traffic levels or advertiser customers; or
o competitors will not experience greater growth in traffic than iVillage
as a result of such relationships which could have the effect of making
their Web sites more attractive to advertisers; or
o that iVillage's strategic partners will not sever or will elect not to
renew their agreements with iVillage.
There can be no assurance that iVillage will be able to compete
successfully against its current or future competitors or that competitive
pressures faced by iVillage will not have a material adverse effect on
iVillage's business, results of operations and financial condition.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS
AND DOMAIN NAMES
iVillage regards its copyrights, service marks, trademarks, trade dress,
trade secrets, proprietary technology and similar intellectual property as
critical to its success, and relies on trademark and copyright law, trade secret
protection and confidentiality and/or license agreements with its employees,
customers, independent contractors, partners and others to protect its
proprietary rights. iVillage strategically pursues the registration of its
trademarks and service marks in the United States, and has applied for and
obtained registration in the United States for certain of its trademarks and
service marks, including "iVillage". Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which iVillage's products and services are made available online.
iVillage has licensed in the past, and expects that it may license in the
future, certain of its proprietary rights, such as trademarks or copyrighted
material, to third parties. While iVillage attempts to ensure that the quality
of its brand is maintained by such licenses, there can be no assurance that such
licensees will not take actions that might materially adversely affect the value
of iVillage's proprietary rights or reputation, which could have a material
adverse effect on iVillage's business, financial condition and results of
operations. There can be no assurance that the steps taken by iVillage to
protect its proprietary rights will be adequate or that third parties will not
infringe or misappropriate iVillage's copyrights, trademarks, trade dress and
similar proprietary rights. In addition, there can be no assurance that other
parties will not assert claims of infringement of intellectual property or alter
proprietary rights against iVillage.
iVillage has been subject to claims and expects to be subject to legal
proceedings and claims from time to time in the ordinary course of its business,
including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by iVillage and its licensees.
Such claims, even if not meritorious, could result in the expenditure of
significant financial and managerial resources. Further, if such claims are
successful, iVillage may be required to change its trademarks, alter its content
and pay financial damages. There can be no assurance that such changes of
trademarks, alteration of content or payment of financial damages will not
adversely affect iVillage's business.
iVillage's ability to use and successfully develop its channels will depend
upon its ability to continue to use, develop and protect its
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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 by March 31, 1999. iVillage is in the process
of developing a new, proprietary brand for its channel concerning health-related
matters.
iVillage filed a service mark application for the mark "PARENTSPLACE.COM".
On July 22, 1998, Jewish Family and Children's Services filed a Notice of
Opposition in the Trademark Trial and Appeal Board of the U.S. Patent and
Trademark Office. On January 22, 1999, we filed an Answer to the Notice of
Opposition, denying that there was any likelihood of confusion between our mark,
"PARENTSPLACE.COM", and the mark used by Children's Services. 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.
On January 28, 1999, an attorney for Dailey & O'Brien sent a formal cease
and desist letter, requesting that we stop using "MONEYLIFE" on our money
channel and provide certain information concerning our use of the term. On
February 22, 1999, a complaint was filed in the U.S. District Court for the
Eastern District of Virginia by Dailey & O'Brien alleging, among other things,
trademark infringement. On March 8, 1999, the complaint was dismissed by the
plaintiff. We have reached an agreement with Dailey & O'Brien granting us a
license to use the term "MONEYLIFE". There can be no assurance that other
entities are not using the term "MONEYLIFE". We are not able at this time to
evaluate the likelihood of an unfavorable outcome in the event that claims are
asserted by any other entity, or to estimate the amount or range of potential
loss.
iVillage may be required to obtain licenses from others to refine, develop,
market and deliver new services. There can be no assurance that iVillage will be
able to obtain any such license on commercially reasonable terms or at all or
that rights granted pursuant to any licenses will be valid and enforceable.
HUMAN RESOURCES
As of January 31, 1999, iVillage employed 200 full-time employees, of whom
64 were in sales and marketing, 63 were in editorial and community, 32 were in
administration and 41 were in operations and support. As iVillage continues to
grow and introduce more products, it expects to hire more personnel,
particularly in the areas of product development and sponsorship. None of
iVillage's current employees is represented by a labor union or is the subject
of a collective bargaining agreement. iVillage believes that relations with its
employees are good.
FACILITIES
iVillage is headquartered in New York, New York, where it leases an
aggregate of approximately 31,000 square feet of space primarily in two
buildings located across the street from each other. These leases are short
term, expiring between 1999 and 2001, and cover three floors at 170 Fifth Avenue
that are approximately 3,650 square feet each and two floors at 149 Fifth Avenue
that are approximately 10,000 square feet each. iVillage currently anticipates
that it will require additional space as more personnel are hired.
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iVillage is actively searching for larger space in New York City to serve as a
permanent space for the long-term future of iVillage.
iVillage leases a sales office located at 645 North Michigan Avenue,
Chicago, Illinois on a month-to-month basis. In addition, iBaby is currently
leasing approximately 5,115 square feet on a month-to-month basis at 8400
Miramar Road, San Diego, California.
LEGAL PROCEEDINGS
On January 8, 1999, a complaint was filed in the Chancery Court for
Williamson County, Tennessee by a former employee against iVillage and three of
its officers. The complaint alleges breach of an alleged employment agreement
and fraudulent inducement to accept a job in New York and to move from Tennessee
to New Jersey. In addition to unspecified damages, the complaint seeks an award
of options to purchase shares of common stock, which number presumably would be
equivalent to 33,333.
On January 29, 1999, the case was removed from the Chancery Court to the
U.S. District Court for the Middle District of Tennessee. On February 2, 1999,
iVillage filed a motion to dismiss the case based on lack of personal
jurisdiction, and, in the event that the motion is denied, to transfer the case
to the U.S. District Court for the Southern District of New York. The motion to
dismiss is scheduled for oral argument on March 12, 1999. We believe that the
suit is without merit and intend to vigorously defend against such claims.
This litigation, whether or not determined in our favor or settled by us,
may be costly and may divert the efforts and attention of our management from
normal business operations.
iVillage is not currently subject to any other material legal proceedings
other than as set forth in "--Intellectual Property, Proprietary Rights and
Domain Names". iVillage may from time to time become a party to various legal
proceedings arising in the ordinary course of its business.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the directors and executive officers of
iVillage, their ages and the positions held by them with iVillage as of February
22, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ---------------------------------------------
<S> <C> <C>
Candice Carpenter........ 46 Co-Chairperson of the Board and Chief
Executive Officer
Nancy Evans.............. 48 Co-Chairperson of the Board and Editor-
in-Chief
Craig T. Monaghan........ 42 Chief Financial Officer
Allison Abraham.......... 36 Chief Operating Officer
John W. Glascott......... 45 Senior Vice President, Sponsorship
Caterina A. Conti........ 36 General Counsel and Secretary
Donna M. Introcaso....... 41 Senior Vice President,
Human Resources
Sanjay Muralidhar........ 36 Vice President, Finance
Scott Levine............. 34 Vice President, Controller and Chief
Accounting Officer
Alan Colner**............ 44 Director
Jay C. Hoag*............. 40 Director
Habib Kairouz**.......... 32 Director
Lennert J. Leader*....... 43 Director
Michael Levy**........... 52 Director
Douglas McCormick........ 49 Director
Daniel Schulman.......... 41 Director
Martin Yudkovitz*........ 44 Director
</TABLE>
- ------------------
* Member of the audit committee.
** Member of the compensation committee.
CANDICE CARPENTER is a founder of iVillage and has been Chairperson of the
Board and Chief Executive Officer since inception of iVillage in June 1995 and
Co-Chairperson of the Board since December 1998. Prior to founding iVillage,
Ms. Carpenter was President of Q2, the upscale QVC, Inc. shopping channel, from
1993 through 1995. Ms. Carpenter was also a consultant to AOL and Discovery
Communications, Inc. in 1995. From 1989 to 1993, Ms. Carpenter was President of
Time Life Inc.'s Time Life Video and Television and previously was Vice
President in Consumer Marketing at American Express Company. Ms. Carpenter
received an M.B.A. from Harvard Business School and a B.A. from Stanford
University.
NANCY EVANS is a founder of iVillage and has been Editor-in-Chief since
inception in June 1995 and Co-Chairperson of the Board since December 1998.
Ms. Evans is primarily responsible for the editorial quality and content for all
of iVillage's editorial products online, in print or on television. Prior to
founding iVillage, Ms. Evans created Family Life magazine in 1991, which she
published in partnership with Jann Wenner. From 1987 to 1991, Ms. Evans served
as President and Publisher of Doubleday. Prior to her employment at Doubleday,
Ms. Evans was Vice President and Editor-In-Chief of the Book-of-the-Month Club,
where she launched the Children's Book-of-the-Month Club. Ms. Evans graduated
from Skidmore College with a B.A. and is also a graduate fellow at Columbia
University.
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CRAIG T. MONAGHAN has been Chief Financial Officer of iVillage since June
1998. From 1991 to June 1998, Mr. Monaghan held various positions at Reader's
Digest Association Inc., including Vice President and Treasurer, Vice President,
Business Development and Controller, Reader's Digest Europe. Prior to joining
Reader's Digest, Mr. Monaghan served as Director of International Finance and
Director of Corporate Finance at Bristol-Myers Squibb Company. Mr. Monaghan
received an M.B.A. from The Wharton School at the University of Pennsylvania and
a B.S. in Engineering from Lehigh University.
ALLISON ABRAHAM has been Chief Operating Officer since November 1998. From
June 1998 to October 1998, Ms. Abraham was the Executive Vice President of
iVillage. From August 1996 to May 1998, Ms. Abraham was President and Chief
Operating Officer of OnCart, an online grocery shopping service. From 1992 to
1996, she served as Vice President of Marketing for Ameritech Corporation, a
telephone and cellular telecommunications company, as well as other sales and
marketing positions. From 1988 to 1992, Ms. Abraham was employed by American
Express Travel Related Services, where she focused on loyalty programs and new
product development. Ms. Abraham received an M.B.A. from The Darden School at
the University of Virginia and a B.A. from Tufts University.
JOHN W. GLASCOTT has been Senior Vice President, Sponsorship since April
1998. From September 1996 to March 1998, Mr. Glascott was Senior Vice President
and Director of Corporate Marketing and Sales for Hearst Magazines. From August
1994 to September 1996, Mr. Glascott was a publisher and partner of SmartHealth
at Meigher Communications L.P., a magazine publisher. Prior to such time,
Mr. Glascott held various sales management positions at Whittle Communications
L.P., a media company, from 1982 to 1994. Mr. Glascott received an M.B.A. from
New York University and a B.A. from Ohio Wesleyan University.
CATERINA A. CONTI has been General Counsel and Secretary since November
1998. From January 1998 to November 1998, Ms. Conti was a partner with the law
firm of Orrick, Herrington & Sutcliffe LLP. From December 1995 to January 1998,
she was an associate with the same firm. From September 1988 to December 1995,
Ms. Conti was an associate with the law firm of Kelley Drye & Warren LLP.
Ms. Conti received her J.D. from St. John's University School of Law and her
B.S. from St. John's University.
DONNA M. INTROCASO has been Senior Vice President, Human Resources since
February 1999. From October 1998 to February 1999, Ms. Introcaso was Vice
President, Human Resources. From March 1996 to September 1998, Ms. Introcaso was
Vice President of Human Resources for WinStar Communications, Inc., a
telecommunications company, where she focused on executive compensation and
employee benefit programs. From April 1995 until February 1996, Ms. Introcaso
was the Director of Human Resources at iGuide, an on-line Internet service
provider. From July 1991 to March 1995, she was the manager of Human Resources
of Wm. H. McGee and Co., Inc., a marine insurance company. Ms. Introcaso
received her M.B.A from Cornell University and her B.A. from the College of
Notre Dame.
SANJAY MURALIDHAR has been Vice President, Finance and Assistant Secretary
since September 1998. From 1992 to 1998, Mr. Muralidhar held various positions
at Reader's Digest Association Inc., including Vice President, Finance-Reader's
Digest U.S.A., Vice President, Controller of QSP Inc., a division of Reader's
Digest and Director, Corporate Financial Planning. Prior to joining Reader's
Digest, Mr. Muralidhar held various positions in Financial Analysis and
Corporate Finance at Bristol-Myers Squibb Company between 1987 and 1992.
Mr. Muralidhar received an M.B.A. from The Wharton School at the University of
Pennsylvania and a Bachelor of Commerce from Bombay University.
SCOTT LEVINE has been Vice President, Controller and Chief Accounting
Officer since February 1999. From July 1998 to February 1999, Mr. Levine was
Controller for Fundtech Ltd., a financial software company. From April
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1997 to July 1998, Mr. Levine was the Controller of AmeriCash, Inc., an operator
of a network of automated teller and electronic commerce machines. From 1993 to
1997, Mr. Levine was employed by Coopers & Lybrand L.L.P. Mr. Levine is a
Certified Public Accountant and received his M.B.A. from Baruch College and his
B.A. from State University of New York, Buffalo.
ALAN COLNER has been a director of iVillage since February 1999. Since
August 1996, Mr. Colner has served as Managing Director, Private Equity
Investments at Moore Capital Management, Inc. Before joining Moore, he was a
Managing Director of Corporate Advisors, L.P., the general partner of Corporate
Partners, a private equity fund affiliated with Lazard Freres & Co. LLC. Mr.
Colner also serves as a director of several privately held companies. Mr. Colner
received an M.B.A. from the Stanford University Graduate School of Business and
a B.A. from Yale University.
JAY C. HOAG has been a director of iVillage since February 1999. Since June
1995, Mr. Hoag has been a General Partner of Technology Crossover Ventures, a
venture capital firm. From 1982 to 1994, Mr. Hoag served in a variety of
capacities at Chancellor Capital Management, Inc. Mr. Hoag is currenty a
director of ONYX Software Corporation, a provider of customer management
software. He also serves as a director of several privately held companies.
Mr. Hoag received his M.B.A. from the University of Michigan and a B.A. in
Economics and political science from Northwestern University.
HABIB KAIROUZ has been a director of iVillage since March 1998. Currently,
Mr. Kairouz is Managing Director of Rho Management Company, Inc., an investment
company, and has been with Rho since 1993. He also serves as a director at
Bellwether Exploration Company, Inc., an oil drilling company, and a number of
other private companies. Mr. Kairouz received a B.S. in Engineering and a B.A.
in Economics from Cornell University and an M.B.A. in Finance from Columbia
University.
LENNERT J. LEADER has been a director of iVillage since July 1998.
Currently, Mr. Leader is President of AOL Investments, a division of America
Online, Inc. Mr. Leader served as Senior Vice President, Chief Financial Officer
and Treasurer of AOL from September 1989 until July 1998 and was Chief
Accounting Officer from October 1993 until July 1998. Prior to joining AOL, Mr.
Leader was Vice President, Finance, of LEGENT Corporation, a computer software
and services company, from March 1989 to September 1989, and Chief Financial
Officer of Morino, Inc., a computer software and services company, from 1986 to
March 1989 and its Director of Finance from 1984 to 1986. Prior to joining
Morino, Inc. in 1984, he was an audit manager at Price Waterhouse. Mr. Leader
graduated with a B.S. in Accounting in 1977 from the University of Baltimore.
MICHAEL LEVY has been a director of iVillage since November 1998. Mr. Levy
currently serves as President and Chief Executive Officer at Sportsline USA,
Inc., a position he has held since February 1994. Prior to joining Sportsline
USA, Inc., Mr. Levy was a private investor. Mr. Levy received a B.S. in
Electrical Engineering from the Georgia Institute of Technology.
DOUGLAS MCCORMICK has been a director of iVillage since February 1999. From
1993 to 1998, Mr. McCormick was President and Chief Executive Officer of
Lifetime Television, a joint venture of The Hearst Corporation and The Walt
Disney Company. Mr. McCormick held various positions at Lifetime from 1984 to
1994 in the sales, marketing and research areas. Mr. McCormick received an
M.B.A. from the Columbia University School of Business and a B.A. in
speech/communications from the University of Dayton.
DANIEL H. SCHULMAN has been a director of iVillage since February 1999.
Since October 1998, Mr. Schulman has been an Executive Vice President at AT&T
Corp. and was President of AT&T WorldNet Services from January 1997 to October
1998. From January 1996 to January 1997, Mr. Schulman was a Vice President of
Business Services at AT&T Corp. From December 1994 to January 1996, he served as
a Marketing Vice President at AT&T Corp. and also was a General Manager at AT&T
Corp. from June 1993 to December 1994. Mr. Schulman received an M.B.A. from New
York University and a B.S. from Middlebury College.
MARTIN YUDKOVITZ has been a director of iVillage since February 1999. Since
December 1995, Mr. Yudkovitz has been the President
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and Chief Executive Officer of NBC Multimedia, Inc., a division of the National
Broadcasting Company, Inc. In January 1997, Mr. Yudkovitz also became the Senior
Vice President of Business Development, Broadcast Network Applications for NBC.
From 1994 to 1999, Mr. Yudkovitz was Senior Vice President of NBC Multimedia.
From 1992 to 1994, he served as Senior Vice President of Strategic Development
at NBC. His other positions at NBC have included Vice President of Business
Affairs for NBC's 1992 Olympics Unit; First General Counsel and Vice President
for Business Affairs at CNBC and Senior Counsel to NBC's 1988 Seoul Olympics
Unit in NBC Sports. Mr. Yudkovitz joined NBC in January 1984 in the law
department. Mr. Yudkovitz received his J.D. from Columbia University and his
B.A. from Rutgers University.
BOARD COMPOSITION
In accordance with the terms of iVillage's Amended and Restated Certificate
of Incorporation, effective upon the closing of this offering, the terms of
office of the members of the board of directors will be divided into three
classes, which will be determined prior to completion of this offering. At each
annual meeting of stockholders after the initial classification, the successors
to directors whose term will then expire will be elected to serve from the time
of election and qualification until the third annual meeting following election.
In addition, iVillage's Bylaws provide that the authorized number of directors
may be changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors. This classification
of the board of directors may have the effect of delaying or preventing changes
in control or management of iVillage. The composition of the board of directors
is expected to change in connection with this offering. Please see "Certain
Transactions".
Each officer is elected by, and serves at the discretion of, the board of
directors. Each of iVillage's officers and directors, other than nonemployee
directors, devotes full time to the affairs of iVillage. iVillage's nonemployee
directors devote such time to the affairs of iVillage as is necessary to
discharge their duties. There are no family relationships among any of the
directors, officers or key employees of iVillage.
BOARD COMMITTEES
The audit committee of the board of directors reviews the internal
accounting procedures of iVillage and consults with and reviews the services
provided by iVillage's independent accountants. The audit committee currently
consists of Jay C. Hoag, Lennert J. Leader and Martin Yudkovitz.
The compensation committee of the board of directors reviews and recommends
to the Board the compensation and benefits of all executive officers of
iVillage, administers iVillage's stock option plan and establishes and reviews
general policies relating to compensation and benefits of employees of iVillage.
The compensation committee currently consists of Alan Colner, Habib Kairouz and
Michael Levy. Except as set forth in "Certain Transactions", no interlocking
relationships exist between iVillage's board of directors or compensation
committee and the board of directors or compensation committee of any other
company, nor has any such interlocking relationship existed in the past.
The composition of the audit committee and the compensation committee is
subject to change prior to completion of this offering.
DIRECTOR COMPENSATION
Directors do not currently receive cash compensation from iVillage for
their service as members of the board of directors, although they are reimbursed
for certain expenses in connection with attendance at board and committee
meetings. iVillage does not provide additional compensation for committee
participation or special assignments of the board of directors. From time to
time, certain directors of iVillage have received grants of options to purchase
shares of iVillage's common stock pursuant to the 1995 Amended and Restated
Employee Stock Option Plan. Beginning on the date of this offering, nonemployee
directors of iVillage will be eligible to receive nondiscretionary, automatic
grants of options to purchase shares of iVillage's common stock pursuant to the
1999 Director Option Plan. Please see "--Stock Option Plans" and "Certain
Transactions".
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EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 for iVillage's Chief Executive Officer and its
four most highly compensated executive officers, other than its Chief Executive
Officer, whose salary and bonus for such fiscal year were in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
----------------------- OPTIONS/SARS
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) (#)(1)
- ----------------------------------- ---------- --------- ------------
<S> <C> <C> <C>
Candice Carpenter
Chief Executive Officer.......... $225,000 $ -- 153,333
Nancy Evans
Editor-in-Chief.................. 195,000 -- 76,667
John W. Glascott
Senior Vice President,
Sponsorship...................... 155,906 50,000 66,667
Stephen Lake
Vice President, Business
Development...................... 146,250 -- 8,333
Steven Elkes
Vice President, Business
Affairs.......................... 158,968 12,150 16,667
</TABLE>
- ------------------
(1) Options were granted under iVillage's 1995 Amended and Restated Employee
Stock Option Plan and vest 1/4 of the total after one year and 1/4 of the
total at the end of each year thereafter.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to iVillage's Chief
Executive Officer and its four most highly compensated executive officers, other
than its Chief Executive Officer, for the year ended December 31, 1998. iVillage
has never granted any stock appreciation rights. The exercise price per share of
each option was equal to the fair market value of the common stock on the date
of grant as determined by the board of directors. The potential realizable value
is calculated based on the term of the option at its time of grant (seven
years). It is calculated assuming that the fair market value of common stock on
the date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option and that the option is exercised and sold on
the last day of its term for the appreciated stock price. These numbers are
calculated based on the requirements of the Securities and Exchange Commission
and do not reflect iVillage's estimate of future stock price growth.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
PERCENT OF TOTAL STOCK
NUMBER OF OPTIONS PRICE APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR
UNDERLYING EMPLOYEES IN PRICE PER OPTION TERM
OPTIONS FISCAL SHARE EXPIRATION --------------------
NAME GRANTED (#) YEAR (%)(1) ($/SH) DATE 5%($) 10%($)
- -------------------- ----------- ---------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Candice Carpenter... 153,333 10% $6.00 5/25/05 $374,532 $872,820
Nancy Evans......... 76,667 5 6.00 5/25/05 187,266 436,410
John W. Glascott.... 66,667 4 6.00 4/4/05 162,840 379,487
Stephen Lake........ 8,333 1 6.00 5/25/05 20,355 47,436
Steven Elkes........ 16,667 1 6.00 4/1/05 40,710 94,872
</TABLE>
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<PAGE>
- ------------------
(1) Based on options to purchase an aggregate of 1,515,143 shares of common
stock granted under the 1995 Amended and Restated Employee Stock Option Plan
and the 1997 Amended and Restated Acquisition Stock Option Plan by iVillage
in the year ended December 31, 1998 to employees, consultants and directors
of iVillage.
FISCAL YEAR END OPTION VALUES
The following table provides certain summary information concerning stock
options held as of December 31, 1998 by iVillage's Chief Executive Officer and
its four most highly compensated executive officers, other than its Chief
Executive Officer. No options were exercised during fiscal 1998 by any of the
officers. The value of unexercised in-the-money options at fiscal year-end is
based on $9.45 per share, the assumed fair market value of the common stock at
December 31, 1998, less the exercise price per share.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF
UNEXERCISED OPTIONS UNEXERCISED IN-THE-MONEY
AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Candice Carpenter... 23,333 223,333 $ 101,500 $ 833,500
Nancy Evans......... -- 76,667 -- 264,500
John W. Glascott.... -- 66,667 -- 230,000
Stephen Lake........ 14,583 52,083 63,438 219,063
Steven Elkes........ 9,583 40,417 41,688 160,813
</TABLE>
STOCK OPTION PLANS
iVillage's currently active stock option plans include: the 1995 Amended
and Restated Employee Stock Option Plan, the 1997 Amended and Restated
Acquisition Stock Option Plan, and subject to stockholder approval, the 1999
Employee Stock Option Plan, the 1999 Acquisition Stock Option Plan and the 1999
Director Option Plan. Each of the plans, except for the 1999 Director Option
Plan, provides for:
o the grant of incentive stock options and non-qualified stock options;
o the administration of the plan by the board of directors and the
compensation committee; and
o the exercise price of options granted under the plan to be as determined
by the board, except that the exercise price of incentive stock options
must be at least as equal to the fair market value of iVillage's common
stock on the date of grant.
Each of the plans provides for option vesting to accelerate and become
fully vested in the event of a change of control of iVillage and the options are
not assumed or substituted by a successor corporation.
Under the 1999 Director Option Plan, commencing with the 2000 annual
meeting of stockholders, each nonemployee director will automatically be granted
a nonstatutory option to purchase 1,666 shares of common stock, provided that he
or she shall have served on the board of directors for at least the preceding
six months. The exercise price of each of these options will be equal to the
fair market value of the common stock on the date of grant. Each option granted
will vest on a cumulative monthly basis over a four-year period. As of
February 15, 1999, 133,333 shares were authorized under the 1999 Director Option
Plan, options to purchase an aggregate of 33,333 shares had been granted and
100,000 shares were available for future grant.
As of February 15, 1999, under the 1995 Amended and Restated Employee Stock
Option Plan, options to purchase 1,689,049 shares were outstanding and no shares
were available for future grant. Under the 1997 Amended and Restated Acquisition
Stock Option Plan, options to purchase 372,226 shares were outstanding and no
shares were available for future grant. As of February 15, 1999, under the 1999
Employee Stock Option Plan, 796,951 shares
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<PAGE>
were authorized, options to purchase 616,889 shares had been granted, or are
expected to be granted prior to the effective date of this prospectus, and
180,062 shares were available for future grant. As of February 15, 1999, under
the 1999 Acquisition Stock Option Plan, 333,333 shares were authorized and
options to purchase 181,208 shares had been granted.
1999 EMPLOYEE STOCK PURCHASE PLAN
The 1999 Employee Stock Purchase Plan is intended to qualify under Section
423 of the Internal Revenue Code and will be administered by the board of
directors or by the compensation commitee. Any employee who is currently
employed for at least 20 hours per week and more than five (5) months in any
calendar year with or by iVillage or a majority-owned subsidiary of iVillage,
will be eligible to participate. A total of 83,333 shares are authorized and
reserved for issuance under the plan.
Under the plan, iVillage will withhold a specified percentage, which shall
not exceed 15% of each salary payment to participating employees over certain
offering periods. Unless determined otherwise, each offering period will run for
24 months and will be divided into four consecutive purchase periods of
approximately six months. The first offering period and the first purchase
period will commence three months after the date of this prospectus. In the
event of a change of control of iVillage, the offering and purchase periods will
be shortened unless the rights to purchase stock are assumed by the succesor or
acquiring company. The price at which common stock will be purchased under the
plan is equal to 85% of the fair market value of the common stock on the first
day of the applicable offering period or the last day of the applicable purchase
period, whichever is lower.
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<PAGE>
CERTAIN TRANSACTIONS
In August 1995, iVillage issued to Candice Carpenter and Nancy Evans
666,668 and 333,333 shares of common stock, respectively, at a purchase price of
$.0015 per share. Ms. Carpenter and Ms. Evans currently serve as officers and
directors of iVillage.
In August 1995, iVillage entered into a promissory note agreement with AOL,
a principal stockholder of iVillage, whereby iVillage issued a note in the
principal amount of $500,000, with interest payable at the rate of 8% per annum.
In September 1995, iVillage and AOL entered into a securities purchase
agreement pursuant to which:
o iVillage issued 1,000,000 shares of series A convertible preferred stock
to AOL in exchange for the cancellation of the $500,000 note and the
payment by AOL to iVillage of $496,494; and
o AOL agreed to make an additional loan to iVillage in the form of a
convertible secured note in an aggregate principal amount not to exceed
$1 million, whereby iVillage received $650,000.
In connection with such agreement, iVillage also issued to AOL a stock
subscription warrant representing the right to purchase 52,100 shares of
iVillage's series B convertible preferred stock at an exercise price of $2.50
per share or 17,366 shares, on a post-split basis, at an exercise price of $7.50
per share. In February 1996, the note whereby iVillage received $650,000 in
September 1995 was cancelled in exchange for a new convertible secured note in
an aggregate principal amount not to exceed $1.75 million, whereby iVillage
received $1.1 million. Upon completion of this offering, the series A
convertible preferred stock will automatically convert into an aggregate of
333,333 shares of common stock.
In September 1995, iVillage entered into an information provider agreement
with AOL, whereby AOL agreed to carry iVillage's programming material on AOL for
a period of one year. As a result of this agreement, AOL received a percentage
of iVillage's revenues and paid iVillage a usage fee based upon hours of
viewership of the iVillage site on the AOL network.
In April 1996, iVillage issued to AOL a promissory note in the principal
amount of $500,000 with interest payable at the rate of 10% per annum.
In May 1996, iVillage entered into another information provider agreement
with AOL, pursuant to which AOL agreed to carry up to four additional iVillage
channels for a period of two years. As an inducement to, and in consideration
of, AOL entering into such agreement, iVillage issued to AOL a warrant to
purchase 800,000 shares of series B convertible preferred stock at an exercise
price of $2.50 per share or 266,666 shares, on a post-split basis, at an
exercise price of $7.50 per share.
In May 1996, iVillage issued shares of series B convertible preferred stock
and series B-1 convertible preferred stock to certain investors, including AOL,
at a purchase price of $2.50 per share. iVillage issued to AOL 797,130 shares of
series B convertible preferred stock and 300,000 shares of series B-1
convertible preferred stock. iVillage issued such shares to AOL in exchange for
the cancellation of the notes whereby iVillage received $1.1 million and
$500,000 in February and April 1996, respectively. Upon completion of this
offering, the series B convertible preferred stock and series B-1 convertible
preferred stock will automatically convert into an aggregate of 1,810,407 shares
of common stock.
In February 1997, iVillage entered into a note and warrant purchase
agreement with AOL and several other investors. iVillage issued to AOL a
convertible secured promissory note in an aggregate principal amount of
$900,000. In connection with the issuance of these notes, iVillage issued a
stock subscription warrant to AOL, representing the right to purchase 66,875
shares of common stock at an exercise price of $5.86 per share.
In April 1997, iVillage issued to AOL a convertible secured promissory note
in an aggregate principal amount of $1 million. In April 1997, AOL exchanged the
note issued to it in February 1997 for an amended and restated convertible
secured promissory note in an
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<PAGE>
aggregate principal amount of approximately $1.3 million.
In May 1997, iVillage issued shares of series C convertible preferred stock
to certain investors, including AOL, CIBC Wood Gundy Ventures, Inc., Cox
Interactive Media, Inc. and Rho Management Trust I, at a purchase price of
$1.954 per share. AOL converted the note it received in April 1997 for
approximately $1.3 million and $200,000 of the note for $1 million it received
in April 1997 for 793,245 shares of series C convertible preferred stock. Upon
completion of this offering, the series C convertible preferred stock will
automatically convert into an aggregate of 4,397,815 shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES C
NAME OF INVESTOR PREFERRED STOCK
- ---------------------------------- ----------------
<S> <C>
ENTITIES AFFILIATED WITH DIRECTORS
America Online, Inc............... 1,202,661
Rho Management Trust I............ 3,070,624
</TABLE>
In connection with the acquisition of Health ResponseAbility Systems, Inc.
in May 1997, iVillage issued to AOL 203,000 shares of common stock for AOL's
equity rights in Health ResponseAbility Systems.
In July 1997, iVillage entered into an interactive services agreement with
AOL, in which some of iVillage's icons are placed within the AOL service. In
consideration for AOL carrying certain channels of iVillage, iVillage received a
guaranty of a minimum number of impressions per year. Lennert Leader, a director
of iVillage, currently serves as President of AOL Investments.
In July 1997, iVillage entered into a one-year agreement with Tenet
Healthcare Corporation, a principal stockholder of iVillage, in which Tenet
sponsored one of iVillage's channels and developed content for use on the
channel in exchange for a fee paid in quarterly installments. For the year ended
December 31, 1998, this agreement generated revenues of approximately $247,000.
In December 1997, AOL converted the remaining $800,000 aggregate principal
amount of the note it received in April 1997 into 409,416 shares of series C
convertible preferred stock.
In January 1998, iVillage entered into a shopping channel promotional
agreement with AOL, in which AOL agreed to promote iVillage and its services on
the AOL shopping channel and provide access to iVillage's online sites. The
shopping channel agreement expires on October 1, 1999. iVillage makes payments
to AOL in monthly installments for AOL's promotion of iVillage.
In February 1998, iVillage issued 284,317 shares of common stock to Tenet.
In February 1998, March 1998 and May 1998, iVillage issued shares of
series D convertible preferred stock to certain entities affiliated with
directors of iVillage and certain 5% stockholders of iVillage at a purchase
price of $2.50 per share. The number of shares of series D convertible preferred
stock issued to each entity is set forth below. Upon completion of this
offering, the series D convertible preferred stock will automatically convert
into an aggregate of 4,333,333 shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES D
NAME OF INVESTOR PREFERRED STOCK
- ---------------------------------- ----------------
<S> <C>
ENTITIES AFFILIATED WITH DIRECTORS
America Online, Inc............... 1,200,000
Rho Management Trust I............ 1,080,000
TCV II Strategic Partners, L.P.... 104,429
TCV II (Q.), L.P.................. 588,488
TCV II, V.O.F..................... 24,864
Technology Crossover Ventures II,
C.V............................. 116,861
Technology Crossover Ventures II,
L.P............................. 765,398
OTHER 5% STOCKHOLDERS
Tenet Healthcare Corporation...... 1,333,334
</TABLE>
On June 5, 1998, Candice Carpenter executed a promissory note in favor of
iVillage for borrowings up to a maximum principal amount of $500,000, of which
$500,000 was outstanding at December 31, 1998. Subject to prepayment or
acceleration, any loans made to Ms. Carpenter under the note mature on
December 31, 2001. Borrowings made under the note bear interest at 5.58% per
annum and is payable on an annual basis on December 31 of each year commencing
on December 31, 1998. The note is collateralized by a pledge by Ms. Carpenter of
166,666 shares of common stock.
In September 14, 1998, iVillage entered into a sponsorship agreement with
Re.Store,
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<PAGE>
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 balance of $234,375 has been 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 is a director of MyBasics.com.
In November 1998, iVillage entered into a one-year content distribution
agreement with Cox Interactive Media, a principal stockholder of iVillage,
whereby iVillage agreed to provide content for Cox's Web sites in return for
displaying the iVillage logo on the Cox Web sites and establishing links on Cox
Web sites to iVillage's network.
In December 1998, iVillage issued shares of series E convertible preferred
stock to certain entities affiliated with directors of iVillage and certain 5%
stockholders of iVillage at a purchase price of $2.85 per share. The number of
shares of series E convertible preferred stock issued to each entity is set
forth below. Upon completion of this offering, the series E convertible
preferred stock will automatically convert into an aggregate of 3,910,316 shares
of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF SERIES E
NAME OF INVESTOR PREFERRED STOCK
- ---------------------------------- ----------------
<S> <C>
ENTITIES AFFILIATED WITH DIRECTORS
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
OTHER 5% STOCKHOLDERS
Tenet Healthcare Corporation...... 701,754
</TABLE>
In December 1998, iVillage entered into an interactive services agreement
with AOL, in which some of iVillage's icons are placed within the AOL service.
The AOL agreement supersedes all prior services agreements between iVillage and
AOL and expires December 21, 2000. Either party may extend the agreement for an
additional year. In consideration for AOL carrying certain channels, iVillage
received a guaranty of a minimum number of impressions. iVillage is obligated to
pay AOL in quarterly installments, provide AOL with or purchase from AOL
advertising and provide in-kind commitments to AOL consisting of specific
references to AOL through specified media.
Subject to the consummation of this offering, on February 4, 1999, Candice
Carpenter and Nancy Evans were granted incentive stock options under the 1999
Employee Stock Option Plan to purchase 333,333 and 116,666 shares of common
stock, respectively, at an exercise price equal to the initial public offering
price of the common stock in this offering. The stock options granted to Ms.
Carpenter vest 20% upon each of the second and third anniversaries of the date
of grant and 30% upon each of the fourth and fifth anniversaries of the date of
grant. Ms. Evans' options vest at the rate of 25% per year beginning on the
second anniversary of the date of grant.
Upon being elected to the board of directors, Douglas McCormick 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 the initial public offering price of the common stock in this
offering. One-third of the options vested upon the date of grant and one-third
vest upon each of the second and third anniversaries of the date of grant.
On March 9, 1999, iVillage and NBC entered into an agreement to amend,
subject to closing conditions, the November 11, 1998 advertising and promotional
agreement with NBC as follows:
a. 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.
b. Upon closing, iVillage will issue, subject to certain anti-dilution
protection, 4,889,030 shares of series E convertible preferred stock and
warrants to purchase up to 970,874 shares of
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<PAGE>
series E convertible preferred stock at $5.15 per share during 2000 and
813,008 shares at $6.15 per share during 2001 in exchange for a
promissory note in the approximate amount of $15.5 million at 5%
interest per annum. The principal amount of the note and interest is
payable in twelve equal installments of approximately $1.4 million,
payable each quarter beginning April 1, 1999.
c. iVillage has also agreed to pay $1.1 million during 1999 for prominent
placement on the NBC.com Web site.
On September 19, 1995, Candice Carpenter and Nancy Evans and certain other
stockholders executed a voting trust agreement whereby each deposited his or her
shares of common stock with Ms. Carpenter, as trustee, in exchange for the
receipt of voting trust certificates. The voting trust agreement provides the
trustee with the unqualified right and power to vote and to act in the same
manner as if she was the absolute owner of the common stock, except the trustee
has no rights with respect to any pledge or transfer of the common stock. The
depositors are entitled to all distributions paid upon the common stock and may
transfer the voting trust certificates, subject to any other agreement
restricting their transfer. The voting trust agreement may be terminated by the
trustee 10 days after written notice of termination is mailed to the depositors
or by written agreement among all the depositors.
Pursuant to the Fourth Amended and Restated Stockholders' Agreement dated
December 4, 1998, the holders of iVillage's preferred stock agreed to vote their
shares to fix the number of directors at fifteen. Pursuant to this agreement,
the board was to consist of:
o one director designated by the holders of iVillage's series A convertible
preferred stock;
o two directors to be designated by the holders of iVillage's series B
convertible preferred stock;
o two directors to be designated by the holders of iVillage's series C
convertible preferred stock;
o one director to be designated by the holders of iVillage's series D
convertible preferred stock;
o one director to be designated by NBC; two directors to be designated by
Candice Carpenter, Nancy Evans and Robert Levitan;
o one director to be designated jointly by the chairman of the board and
all holders of iVillage's outstanding capital stock;
o one director to be designated by Rho Management Trust I; and
o two directors, or two-sevenths of the board of directors if the board
consists of more than seven directors, to be designated by certain of the
stockholders each of whom hold at least two and one-half percent of the
outstanding capital stock of iVillage immediately prior to this offering,
which right to designate shall commence upon this offering for a period
of six months after this offering.
The agreement terminates upon completion of an initial public offering at an
offering price to the public of not less than $11.79 per share and with
aggregate proceeds to iVillage of not less than $20,000,000.
iVillage has entered into indemnification agreements with its officers and
directors containing provisions which may require iVillage, among other things,
to indemnify its officers and directors against certain liabilities that may
arise by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the common stock, as of February 22, 1999 and as adjusted to
reflect the sale of common stock offered by iVillage in this offering, for:
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 February 22, 1999 but
excludes shares of common stock underlying options or warrants held by any other
person. Percentage of beneficial ownership is based on 19,560,776 shares of
common stock outstanding as of February 22, 1999, after giving effect to the
conversion of the convertible preferred stock, and 23,210,776 shares of common
stock outstanding after completion of this offering. "Shares Beneficially Owned"
includes "Shares Issuable Upon Exercise of Stock Options or Warrants".
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES ISSUABLE BENEFICIALLY OWNED
SHARES UPON EXERCISE OF --------------------------------------------
BENEFICIALLY STOCK OPTIONS PRIOR TO AFTER
OWNED OR WARRANTS OFFERING OFFERING
------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
NAME OF BENEFICIAL OWNER
America Online, Inc. .............. 2,363,174 350,908 11.9% 10.0%
22000 AOL Way
Dulles, Virginia 20166-9323
National Broadcasting Company, 1,629,676 -- 8.3 7.0
Inc. ............................
30 Rockefeller Plaza
New York, New York 10112
Rho Management Trust I(1) ......... 1,542,567 -- 7.9 6.6
767 Fifth Avenue
New York, New York 10153
Candice Carpenter.................. 690,001 23,333 3.5 3.0
Nancy Evans........................ 333,333 -- 1.7 1.4
Alan Colner(2)..................... 743,293 -- 3.8 3.2
Jay C. Hoag(3)..................... 594,632 -- 3.0 2.6
Habib Kairouz(4)................... 1,542,567 -- 7.9 6.6
Lennert J. Leader(5)............... 2,363,174 350,908 11.9 10.0
Michael Levy....................... 50,000 50,000 * *
Douglas McCormick.................. 11,111 11,111 * *
Daniel Schulman.................... 5,556 5,556 * *
Martin Yudkovitz(6)................ 1,629,676 -- 8.3 7.0
Steven Elkes....................... 15,000 10,883 * *
Stephen Lake....................... 29,166 29,166 * *
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES ISSUABLE BENEFICIALLY OWNED
SHARES UPON EXERCISE OF --------------------------------------------
BENEFICIALLY STOCK OPTIONS PRIOR TO AFTER
OWNED OR WARRANTS OFFERING OFFERING
------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
John W. Glascott................... 16,666 16,666 * *
All directors and executive
officers as a group
(17 persons) .................... 6,344,777 452,018 31.7 26.8
</TABLE>
- ------------------------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1) Rho Management Partners L.P., a Delaware limited partnership, may be deemed
the beneficial owner of the 1,542,567 shares registered in the name of Rho
Management Trust I, according to an investment advisory relationship by
which Rho Management Partners L.P. exercises voting and investment control
over such shares.
(2) Mr. Colner is Managing Director, Private Equity Investments at Moore
Management, Inc., the investment advisor to Moore Global Investments, Ltd.
and Remington Investment Strategies, L.P. Mr. Colner does not have voting
or investment power with respect to the shares of common stock owned by
Moore or Remington. Mr. Colner disclaims beneficial ownership of the shares
of common stock beneficially owned by Moore Global Investments, Ltd.
(3) Mr. Hoag is the General Partner of Technology Crossover Ventures II, L.P.
In this capacity and in his capacity as a Managing Member of Technology
Crossover Management II, L.L.C., the General Partner of each of the
following funds, Mr. Hoag may be deemed to have beneficial ownership of
38,810 shares owned by TCV II Strategic Partners, L.P., 218,695 shares
owned by TCV II (Q), L.P., 9,240 shares owned by TCV II V.O.F., 43,430
shares owned by Technology Crossover Ventures II, C.V. and 284,457 shares
owned by Technology Crossover Ventures II, L.P. Mr. Hoag disclaims
beneficial ownership of such shares, except to the extent of his pecuniary
interest therein arising from his interest in Technology Crossover
Management II, L.L.C.
(4) Mr. Kairouz is Managing Director of Rho Management Company, Inc., an
affiliate of Rho Management Partners L.P. In such capacity, Mr. Kairouz may
be deemed to have beneficial ownership of the 1,542,567 shares owned by Rho
Management Trust I. Mr. Kairouz disclaims beneficial ownership of the
shares reported by Rho Management Trust I, other than 16,222 shares in
which Mr. Kairouz has a pecuniary interest.
(5) Consists of 2,363,174 shares of common stock beneficially owned by America
Online, Inc., including 350,908 shares of common stock issuable upon the
exercise of warrants. Mr. Leader shares voting power with America Online,
Inc. Mr. Leader disclaims beneficial ownership of the shares of common
stock beneficially owned by America Online, Inc.
(6) Mr. Yudkovitz is President and Chief Executive Officer of NBC Multimedia,
Inc., a division of the National Broadcasting Company, Inc. Mr. Yudkovitz
does not have voting or investment power with respect to the shares of
common stock owned by NBC. Mr. Yudkovitz disclaims beneficial ownership of
the shares of common stock beneficially owned by NBC.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
iVillage's certificate of incorporation, which will become effective upon
the closing of this offering, authorizes the issuance of up to 65,000,000 shares
of common stock, par value $0.01 per share, and 5,000,000 shares of preferred
stock, par value $0.01 per share, the rights and preferences of which may be
established from time to time by iVillage's board of directors. As of
December 31, 1998, 2,113,385 shares of common stock were outstanding and
43,702,139 shares of convertible preferred stock convertible into 14,785,205
shares of common stock upon the completion of this offering were issued and
outstanding. As of December 31, 1998, iVillage had 75 stockholders.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences that may be applicable to any preferred stock
outstanding at the time, holders of common stock are entitled to receive ratably
dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of iVillage, holders of common stock
would be entitled to share in iVillage's assets remaining after the payment of
liabilities and liquidation preferences on any outstanding preferred stock.
Holders of common stock have no preemptive or conversion rights or other
subscription rights and there are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are, and
the shares of common stock offered by iVillage in this offering, when issued and
paid for, will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the board of directors will be
authorized, subject to Delaware law, without stockholder approval, from time to
time to issue up to an aggregate of 5,000,000 shares of preferred stock in one
or more series. The board of directors can fix the rights, preferences and
privileges of the shares of each series and any qualifications, limitations or
restrictions. Issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire a majority of the
outstanding voting stock of iVillage. iVillage has no present plans to issue any
shares of preferred stock.
WARRANTS
Upon the completion of this offering, iVillage will have outstanding
warrants to purchase 425,998 shares of common stock at a weighted average
exercise price of $6.54 per share. These warrants have net exercise provisions
under which the holder may, in lieu of payment of the exercise price in cash,
surrender the warrant and receive a net amount of shares, based on their fair
market value of iVillage's common stock at the time of the exercise of the
warrant, after deducting the aggregate exercise price. These warrants expire on
dates ranging from September 2000 to May 2003.
REGISTRATION RIGHTS
According to the terms of the Fourth Amended and Restated Rights Agreement,
after the closing of the offering, the holders of 40% of the outstanding shares
of common stock, including shares issuable upon the exercise of warrants to
purchase common stock, will be entitled to demand that iVillage file a
registration statement with respect to the registration of such shares under the
Securities Act. iVillage is not required to effect:
o more than four registrations;
o a registration during any period in which any other registration
statement has been filed or has been declared effective within the prior
180 days;
o a registration within 60 days following the determination of the board of
directors of iVillage to file a registration statement; or
o a registration for a period not to exceed 60 days, if the board of
directors of iVillage has made a good faith determination that it would
be seriously detrimental to iVillage or the holders of registration
rights for a registration statement to be filed.
In addition, one stockholder is entitled to one separate demand
registration right with respect to the registration of its 1,629,676 shares of
common stock under the Securities Act, subject to the limitations set forth
above. Furthermore, according to the terms of the
58
<PAGE>
registration rights agreement, after the closing of this offering, the holders
of 19,938,441 shares of common stock, including shares issuable upon the
exercise of warrants to purchase common stock, will be entitled to piggyback
registration rights in connection with any registration by iVillage of its
securities for its own account or the account of other securityholders. In the
event that iVillage proposes to register any shares of common stock under the
Securities Act, the holders of the piggyback registration rights are entitled to
receive notice and are entitled to include their shares in the registration
statement.
At any time after iVillage becomes eligible to file a registration
statement on Form S-3, certain holders of demand registration rights may require
iVillage to file an unlimited number of registration statements on Form S-3
under the Securities Act with respect to their shares of common stock. iVillage
is not required to effect more than one such registration in any six-month
period.
The registration rights of any holder terminate when the shares held by the
holder may be sold under Rule 144 during any three-month period. iVillage is
generally required to bear all of the expenses of all registrations under the
registration rights agreement, except underwriting discounts and commissions.
The registration rights agreement also contains a commitment of iVillage to
indemnify the holders of registration rights.
CERTAIN CHARTER AND BYLAWS PROVISIONS AND DELAWARE ANTI-TAKEOVER STATUE
iVillage is subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. This section prevents Delaware corporations from
engaging under certain circumstances, in a "business combination", which
includes a merger or sale of more than 10% of the corporation's assets, with any
"interested stockholder", or a stockholder who owns 15% or more of the
corporation's outstanding voting stock, as well as affiliates and associates of
any such persons, for three years following the date such stockholder became an
"interested stockholder" unless:
o the transaction in which such stockholder became an "interested
stockholder" is approved by the board of directors prior to the date the
"interested stockholder" attained such status;
o upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers; or
o on or after the date the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.
iVillage's certificate of incorporation provides that, upon the closing of
this offering, the board of directors will be divided into three classes of
directors with each class serving a staggered three-year term. The
classification system of electing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of iVillage
and may maintain the incumbency of the board of directors, as the classification
of the board of directors generally increases the difficulty of replacing a
majority of the directors. iVillage's certificate of incorporation eliminates
the right of stockholders to act by written consent without a meeting and
iVillage's bylaws eliminate the right of stockholders to call special meetings
of stockholders. The amended and restated certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors. The
authorization of undesignated preferred stock makes it possible for the board of
directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control of iVillage.
These and other provisions may have the effect of deferring hostile takeovers or
delaying changes in control or management of iVillage. The amendment of any of
these provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Continental Stock
Transfer & Trust Company.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of 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.
Upon completion of this offering, we will have outstanding an aggregate of
23,210,776 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Of these shares,
all of the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are purchased by "affiliates" as that term is defined in Rule 144 under the
Securities Act. The remaining 19,560,776 shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. Restricted securities may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 or 701 under the Securities Act, which rules are summarized below.
LOCK-UP AGREEMENTS
All of our officers, directors and stockholders have signed lock-up
agreements under which they agreed not to transfer or dispose of, directly or
indirectly, any shares of common stock or any securities convertible into or
exercisable or exchangeable for shares of common stock, for a period of 180 days
after the date of this prospectus. Transfers or dispositions can be made sooner:
o with the prior written consent of Goldman, Sachs & Co.;
o in the case of certain transfers to affiliates;
o as a bona fide gift; or
o to any trust.
Subject to the provisions of Rule 144, 144(k) and 701, restricted shares
totaling 19,069,982 will be available for sale in the public market, subject in
the case of shares held by affiliates to compliance with volume restrictions,
180 days after the date of this prospectus.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
o 1% of the number of shares of common stock then outstanding, which will
equal approximately 232,108 shares immediately after this offering; or
o the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.
RULE 144(K)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner other than an affiliate, is entitled to sell such shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144. Therefore, unless otherwise restricted,
"144(k) shares" may be sold immediately upon the completion of this offering.
60
<PAGE>
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
any of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with certain restrictions,
including the holding period, contained in Rule 144.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 19,938,441 shares of our
common stock, or their transferees, including shares issuable upon the exercise
of warrants to purchase common stock, will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock--Registration Rights".
STOCK OPTIONS
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering 3,408,227 shares of common stock reserved for
issuance under our 1995 Amended and Restated Employee Stock Option Plan, 1997
Amended and Restated Acquisition Stock Option Plan, 1999 Employee Stock Option
Plan, 1999 Aquisition Stock Option Plan, 1999 Employee Stock Purchase Plan and
the 1999 Director Stock Option Plan. As of December 31, 1998, options to
purchase 2,174,941 shares of common stock were issued and outstanding.
Upon the expiration of the lock-up agreements described above, at least
869,359 shares of common stock will be subject to vested options, based on
options outstanding as of December 31, 1998. Such registration statement is
expected to be filed and are effective as soon as practicable after the
effective date of this offering. Accordingly, shares registered under such
registration statement will, subject to vesting provisions and Rule 144 volume
limitations applicable to our affiliates be available for sale in the open
market immediately after the 180-day lock-up agreements expire.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
iVillage by Orrick, Herrington & Sutcliffe LLP, New York, New York. Certain
legal matters will be passed upon for the underwriters by Hale and Dorr LLP,
Boston, Massachusetts. A partner of Orrick, Herrington & Sutcliffe LLP owns an
aggregate of 13,225 shares of iVillage's series C and series E convertible
preferred stock.
EXPERTS
The consolidated balance sheets of iVillage Inc. and subsidiaries as of
December 31, 1997 and 1998 and the consolidated statements of operations,
stockholders' equity and cash flows for the three years in the period ended
December 31, 1998 and the balance sheets of Health ResponseAbility Systems, Inc.
as of December 31, 1995 and 1996 and the statements of operations, stockholders'
(deficit) equity and cash flows for the two years then ended have been included
in reliance on the reports of PricewaterhouseCoopers LLP, iVillage's independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
61
<PAGE>
AVAILABLE INFORMATION
iVillage has filed with the Securities and Exchange Commission, a
registration statement on Form S-1 (including the exhibits and schedules
thereto) under the Securities Act with respect to the shares to be sold in this
offering. This prospectus does not contain all the information set forth in the
registration statement. For further information with respect to iVillage and the
shares to be sold in this offering, reference is made to the registration
statement. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to, are not necessarily complete,
and in each instance reference is made to the copy of each contract, agreement
or other document filed as an exhibit to the registration statement, each
statement being qualified in all respects a more complete description of the
matter involved, and each statement shall be deemed by the reference to the
registration statement.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information iVillage files at the Commission's
public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.C.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of
these documents upon payment of a duplicating fee, by writing to the Commission.
Please call the Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. iVillage's Commission filings,
including the registration statement will also be available to you on the
Commission's Internet site (http://www.sec.gov).
iVillage intends to send to its stockholders annual reports containing
audited consolidated financial statements and quarterly reports containing
unaudited consolidated financial statements for the first three quarters of each
fiscal year.
62
<PAGE>
INDEX TO FINANCIAL STATEMENTS
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE(S)
-------------------
<S> <C>
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets at December 31, 1997 and
1998.................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998........................ F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998............ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998........................ F-6
Notes to Consolidated Financial Statements................ F-7 - F-24
Schedule of Valuation and Qualifying Accounts............. F-25
iVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Financial
Information............................................. F-26 - F-27
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of December 31, 1998................................. F-28
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 1998......... F-29
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements as of and for the year ended
December 31, 1998....................................... F-30
HEALTH RESPONSEABILITY SYSTEMS, INC.
FINANCIAL STATEMENTS
Report of Independent Accountants......................... F-31
Balance Sheets at December 31, 1995 and 1996 and May 29,
1997 (unaudited)........................................ F-32
Statements of Operations for the years ended December 31,
1995 and 1996 and the periods ended May 29, 1996 and
1997 (unaudited)........................................ F-33
Statements of Stockholder's (Deficit) Equity for the years
ended December 31, 1995 and 1996 and the period ended
May 29, 1997 (unaudited)................................ F-34
Statements of Cash Flows for the years ended December 31,
1995 and 1996 and the periods ended May 29, 1996 and
1997 (unaudited)........................................ F-35
Notes to Financial Statements............................. F-36 - F-39
iVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Condensed Consolidated Financial Information
(unaudited)............................................. F-40
Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1997 (unaudited)........ F-41
Notes to Pro Forma Condensed Consolidated Financial
Statements for the year ended December 31, 1997
(unaudited)............................................. F-42
</TABLE>
F-1
<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-2
<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)
ASSETS
<S> <C> <C> <C>
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
------------ ------------ -------------
------------ ------------ -------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accounts payable and accrued expenses............. $ 3,989,945 $ 11,559,711 $ 11,559,711
Capital leases payable............................ 247,943 136,573 136,573
Deferred revenue.................................. 1,004,199 2,909,740 2,909,740
Other current liabilities......................... 332,531 162,859 162,859
------------ ------------ -------------
Total current liabilities..................... 5,574,618 14,768,883 14,768,883
Capital leases payable, net of current portion.... 139,346 -- --
------------ ------------ -------------
Total liabilities............................. 5,713,964 14,768,883 14,768,883
------------ ------------ -------------
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock--par value
$.0005, 1,000,000 shares authorized, issued and
outstanding..................................... 500 500 --
Series B and B-1 convertible preferred stock--par
value $.0005, 5,929,846 shares authorized,
4,777,746 issued and outstanding................ 2,389 2,389 --
Series C convertible preferred stock--par value
$.0005, 13,528,765 shares authorized, 13,193,445
issued and outstanding.......................... 6,597 6,597 --
Series D convertible preferred stock--par value
$.0005, 13,000,000 shares authorized, issued and
outstanding..................................... -- 6,500 --
Series E convertible preferred stock--par value
$.0005, 18,953,616 shares authorized, 11,730,948
issued and outstanding.......................... -- 5,865 --
Common stock, par value $.01, 35,000,000 and
65,000,000 shares authorized, 1,819,735 and
2,113,385 issued and outstanding at
December 31, 1997 and 1998, respectively;
16,898,590 issued and oustanding, pro forma
(unaudited)..................................... 18,197 21,133 168,986
Additional paid-in capital........................ 43,180,649 112,848,505 112,722,503
Accumulated deficit............................... (32,621,213) (76,274,895) (76,274,895)
Stockholders notes receivable..................... (65,000) (565,000) (565,000)
Unearned compensation and deferred advertising.... -- (4,029,512) (4,029,512)
------------ ------------ -------------
Total stockholders' equity.................... 10,522,119 32,022,082 32,022,082
------------ ------------ -------------
Total liabilities and stockholders' equity.... $ 16,236,083 $ 46,790,965 $ 46,790,965
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Sponsorship, advertising and usage......... $ 732,045 $ 6,018,696 $ 12,450,620
Commerce................................... -- -- 2,561,203
----------- ------------ ------------
Total revenues........................... 732,045 6,018,696 15,011,823
----------- ------------ ------------
Operating expenses:
Production, product and technology......... 4,521,410 7,606,355 14,521,015
Sales and marketing........................ 2,708,779 8,770,581 28,522,874
General and administrative................. 3,103,864 7,840,588 10,612,434
Depreciation and amortization.............. 108,956 2,886,256 5,683,006
----------- ------------ ------------
Total operating expenses................. 10,443,009 27,103,780 59,339,329
----------- ------------ ------------
Loss from operations......................... (9,710,964) (21,085,084) (44,327,506)
Interest income (expense), net............... 28,282 (215,876) 591,186
Loss on sale of Web site..................... -- -- (503,961)
Minority interest............................ -- -- 586,599
----------- ------------ ------------
Net loss..................................... $(9,682,682) $(21,300,960) $(43,653,682)
----------- ------------ ------------
----------- ------------ ------------
Basic and diluted net loss per share......... $ (8.90) $ (13.65) $ (21.10)
----------- ------------ ------------
----------- ------------ ------------
Weighted average shares of common stock
outstanding used in computing basic and
diluted net loss per share................. 1,087,353 1,560,957 2,068,473
----------- ------------ ------------
----------- ------------ ------------
Pro forma basic and diluted net loss per
share (Note 2) $ (2.59)
------------
------------
Shares of common stock used in computing pro
forma basic and diluted net loss per share
(Note 2)................................... 16,853,678
------------
------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
SERIES A SERIES B SERIES C SERIES D SERIES E
----------------- ----------------- ------------------ ------------------ ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ --------- ------ ---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.... 1,000,000 $500
Issuance of warrants in
connection with interest on
convertible notes............
Issuance of common stock in
connection with
acquisition..................
Issuance of Series B and
Series B-1 convertible
preferred stock.............. 4,777,746 $2,389
Issuance of stock options to
consultants and directors....
Issuance of warrants to AOL
for channel services.........
Net loss......................
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
Balance at December 31,
1996......................... 1,000,000 500 4,777,746 2,389
Issuance of common stock in
connection with exercise of
stock options................
Notes receivable due from
stockholders in connection
with exercise of options.....
Issuance of Series C
convertible preferred
stock........................ 13,193,445 $6,597
Issuance of warrants in
connection with interest on
convertible notes............
Issuance of common stock and
options in connection with
business acquisitions........
Issuance of stock options to
consultants and directors....
Net loss......................
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
Balance at December 31,
1997......................... 1,000,000 500 4,777,746 2,389 13,193,445 6,597
Issuance of common stock for
cash.........................
Issuance of Series D
convertible preferred
stock........................ 13,000,000 $6,500
Issuance of Series E
convertible preferred
stock........................ 11,730,948 $5,865
Issuance of stock options to
consultants and directors....
Issuance of common stock in
connection with exercise of
stock options................
Issuance of stock options in
connection with business
transactions.................
Officer loan receivable.......
Issuance of options to NBC....
Net loss......................
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
Balance at December 31,
1998......................... 1,000,000 $500 4,777,746 $2,389 13,193,445 $6,597 13,000,000 $6,500 11,730,948 $5,865
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
--------- ---- --------- ------ ---------- ------ ---------- ------ ---------- ------
<CAPTION>
UNEARNED
COMMON STOCK ADDITIONAL STOCKHOLDERS COMPENSATION
------------------ PAID IN NOTES AND DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE ADVERTISING COST DEFICIT TOTAL
--------- ------- ----------- ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.... 1,083,335 $10,833 $ 997,037 $ (1,637,571) $ (629,201)
Issuance of warrants in
connection with interest on
convertible notes............ 30,101 30,101
Issuance of common stock in
connection with
acquisition.................. 66,667 667 499,333 500,000
Issuance of Series B and
Series B-1 convertible
preferred stock.............. 11,941,976 11,944,365
Issuance of stock options to
consultants and directors.... 62,007 62,007
Issuance of warrants to AOL
for channel services......... 1,034,838 1,034,838
Net loss...................... (9,682,682) (9,682,682)
--------- ------- ----------- --------- ------------ ------------ ------------
Balance at December 31,
1996......................... 1,150,002 11,500 14,565,292 (11,320,253) 3,259,428
Issuance of common stock in
connection with exercise of
stock options................ 33,333 333 99,667 100,000
Notes receivable due from
stockholders in connection
with exercise of options..... $ (65,000) (65,000)
Issuance of Series C
convertible preferred
stock........................ 24,823,398 24,829,995
Issuance of warrants in
connection with interest on
convertible notes............ 334,339 334,339
Issuance of common stock and
options in connection with
business acquisitions........ 636,400 6,364 3,292,558 3,298,922
Issuance of stock options to
consultants and directors.... 65,395 65,395
Net loss...................... (21,300,960) (21,300,960)
--------- ------- ----------- --------- ------------ ------------ ------------
Balance at December 31,
1997......................... 1,819,735 18,197 43,180,649 (65,000) (32,621,213) 10,522,119
Issuance of common stock for
cash......................... 284,317 2,843 1,663,823 1,666,666
Issuance of Series D
convertible preferred
stock........................ 31,481,978 31,488,478
Issuance of Series E
convertible preferred
stock........................ 32,089,088 32,094,953
Issuance of stock options to
consultants and directors.... 146,994 $ (68,845) 78,149
Issuance of common stock in
connection with exercise of
stock options................ 9,333 93 47,507 47,600
Issuance of stock options in
connection with business
transactions................. 277,799 277,799
Officer loan receivable....... (500,000) (500,000)
Issuance of options to NBC.... 3,960,667 (3,960,667)
Net loss...................... (43,653,682) (43,653,682)
--------- ------- ------------ --------- ------------ ------------ ------------
Balance at December 31,
1998......................... 2,113,385 $21,133 $112,848,505 $(565,000) $ (4,029,512) $(76,274,895) $(32,022,082)
--------- ------- ------------ --------- ------------ ------------ ------------
--------- ------- ------------ --------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $(9,682,682) $(21,300,960) $(43,653,682)
Adjustments to reconcile net loss to net cash used in operating
activities:
Expense recognized in connection with issuance of warrants and
stock options.................................................... 92,108 1,434,572 255,954
Depreciation and amortization...................................... 108,956 2,886,256 5,683,006
Bad debt expense................................................... -- 746,589 855,000
Loss on sale of Web site........................................... -- -- 503,961
Minority interest.................................................. -- -- (586,599)
Changes in operating assets and liabilities:
Accounts receivable.............................................. (528,968) (2,410,489) (1,878,637)
Other current assets............................................. (71,787) (194,781) (360,580)
Accounts payable and accrued expenses............................ 1,034,070 2,609,437 5,144,391
Deferred revenue................................................. 294,998 709,201 1,905,541
Other liabilities................................................ 64,236 268,295 (169,672)
----------- ------------ ------------
Net cash used in operating activities.......................... (8,689,069) (15,251,880) (32,301,317)
----------- ------------ ------------
Cash flows from investing activities:
Purchase of fixed assets............................................. (665,148) (4,001,052) (5,315,516)
Acquisitions of Web sites............................................ -- (2,865,000) (1,040,000)
Proceeds from sale of Web sites...................................... -- -- 600,000
----------- ------------ ------------
Net cash used in investing activities.......................... (665,148) (6,866,052) (5,755,516)
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from convertible notes payable.............................. 1,800,000 3,775,000 --
Proceeds from issuance of common stock............................... -- 37,500 1,714,266
Proceeds from issuance of convertible preferred stock, net........... 9,494,365 21,054,995 63,583,431
Principal payments on capital leases................................. -- (516,621) (250,716)
Stockholder note receivable.......................................... -- -- (500,000)
----------- ------------ ------------
Net cash provided by financing activities...................... 11,294,365 24,350,874 64,546,981
----------- ------------ ------------
Net increase in cash for the period.................................... 1,940,148 2,232,942 26,490,148
Cash and cash equivalents, beginning of period......................... 161,631 2,101,779 4,334,721
----------- ------------ ------------
Cash and cash equivalents, end of period............................... $ 2,101,779 $ 4,334,721 $ 30,824,869
----------- ------------ ------------
----------- ------------ ------------
Cash paid during the period for interest............................... $ -- $ 66,223 $ 37,392
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
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-6
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
iVillage Inc. was incorporated in the State of Delaware on June 8, 1995 and
commenced operations on July 1, 1995. iVillage Inc. and its subsidiaries
("iVillage" or the "Company") is engaged in the development of programming
material for distribution through online service providers and the Internet and
is involved in the sale of products through its Web sites. The Company has
sustained net losses and negative cash flows from operations since its
inception. The Company's ability to meet its obligations in the ordinary course
of business is dependent upon its ability to establish profitable operations and
raise additional financing through public or private equity financings,
collaborative or other arrangements with corporate sources, or other sources of
financing to fund operations. During 1998, the Company has received additional
financing of approximately $65.3 million through the issuance of common stock
and Series D and Series E convertible preferred stock. Management believes that
its current funds will be sufficient to enable the Company to meet its planned
expenditures through at least December 31, 1999. If anticipated operating
results are not achieved, management has the intent and believes it has the
ability to delay or reduce expenditures so as not to require additional
financial resources, if such resources were not available on terms acceptable to
the Company.
The Company has a limited operating history and its prospects are subject
to the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services. These
risks include the failure to develop and extend the Company's online service
brands, the rejection of the Company's services by Web consumers, vendors and/or
advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online services, as well as other risks and uncertainties. In the
event that the Company does not successfully implement its business plan,
certain assets may not be recoverable.
2. SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany balances and transactions have been
eliminated.
REVENUE RECOGNITION
To date, the Company's revenues have been derived primarily from the sale
of sponsorship and advertising contracts and commerce revenues.
Sponsorship and Advertising
Sponsorship revenues are derived principally from contracts ranging from
one to three years in which the Company commits to provide sponsors promotional
opportunities in addition to traditional banner advertising. Typically,
sponsorship agreements provide for the delivery of impressions (on-line
advertisements displayed to a user) on the Company's Web sites, exclusive
relationships and the design and development of customized sites designed to
enhance the promotional objective of the sponsor. The portion of sponsorship
revenues related to the delivery of impressions are recognized ratably in the
period in which the advertisement is displayed, provided that none of the
Company's significant obligations remain, at the lesser of the ratio of
impressions delivered over total guaranteed impressions or the straight line
basis over the term of the contract. The portion of sponsorship revenues related
to the up-front customized design work, as specified in the contract, is
recognized in the period in which the design work is performed, typically within
the first three months of the contract term.
Advertising revenues are derived principally from short-term advertising
contracts in which the Company typically guarantees a minimum number of
impressions or pages to be delivered to users over a specified period of time
for a fixed fee. Advertising revenues are recognized ratably in the period in
F-7
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-8
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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
F-9
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 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
F-10
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The Company does not expect the adoption
of this standard to have a material effect on the Company's capitalization
policy.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5, which is effective for
fiscal years beginning after December 15, 1998, provides guidance on the
financial reporting of start-up costs and organization costs. It requires costs
of start up activities and organization costs to be expensed as incurred. As the
Company has expensed these costs historically, the adoption of this standard is
not expected to have a significant impact on the Company's results of
operations, financial position or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities" ("SFAS No. 133"), which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) and for
hedging activities. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Company does not expect the adoption of
this statement to have a significant impact on the Company's results of
operations, financial position or cash flows.
3. FIXED ASSETS:
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Computer equipment..................................................... $ 2,579,083 $ 6,949,815
Capitalized software................................................... 2,295,138 2,655,838
Furniture and fixtures................................................. 283,024 1,165,283
Leasehold improvements................................................. 462,262 1,113,386
-------------- --------------
5,619,507 11,884,322
Less, accumulated depreciation and amortization...................... (1,816,684) (4,503,956)
-------------- --------------
$ 3,802,823 $ 7,380,366
-------------- --------------
-------------- --------------
</TABLE>
Depreciation and amortization of fixed assets was approximately $109,000,
$1,780,000 and $2,687,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
4. RELATED-PARTY TRANSACTIONS:
AOL
In September 1995, the Company entered into an information provider
agreement with AOL, a holder of different classes of iVillage stock, whereby AOL
had agreed to carry the Company's programming material on the AOL service for a
period of one year. As a result of this agreement, AOL received a percentage, as
defined, of the Company's revenues and paid the Company a usage fee based upon
hours of viewership of the iVillage site on the AOL network.
In May 1996, the Company entered into an information provider agreement
with AOL whereby AOL agreed to carry up to four Company channels for a period of
two years. In return, the Company issued to AOL 266,666 warrants (on a
post-split basis) convertible into Series B Convertible Preferred Stock at an
exercise price of $7.50 per warrant. In accordance with Statement of Financial
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"),
the Company valued the warrants issued to AOL, using the Black-Scholes option
pricing model, at $3.87 per share. The following assumptions were used in the
option pricing model: stock price of $7.50, exercise price of $7.50, option term
of 5 years, risk free rate of interest of 6.5%, 50% volatility and a dividend
yield of 0%. The cost of the warrants were to be expensed over the life of each
channel, however, the agreement was canceled
F-11
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-12
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In November 1998, iVillage entered into a one-year content distribution
agreement with Cox Interactive Media ("Cox"), a stockholder, whereby iVillage
agreed to provide content for Cox's Web sites in return for displaying the
iVillage logo on the Cox Web sites and establishing links on the Cox Web sites
to iVillage's network.
OFFICER LOAN RECEIVABLE
In June 1998, the Company accepted a non-recourse promissory note in the
principal amount of $500,000 (the "Note") from its chief executive officer
("CEO"). The Note is collateralized by 166,666 shares of the Company's common
stock which is held by the Company. Interest is payable annually on December 31
of each year, commencing December 31, 1998, at the rate of 5.58%. The
outstanding principal balance on the Note is payable on June 5, 2001. As of
December 31, 1998, the CEO has borrowed $500,000 under the note, which is
recorded as a stockholder note receivable and classified as a reduction of
equity.
5. BUSINESS ACQUISITIONS AND DISPOSITIONS:
PARENTSPLACE.COM
On December 9, 1996, the Company acquired all of the outstanding stock of
ParentsPlace.com, an Internet content provider, in exchange for 66,666 shares of
the Company's common stock. The cost of the acquisition was allocated to the
assets and liabilities assumed based upon their estimated fair values as
follows:
<TABLE>
<S> <C>
Working capital.................................................................. $ (77,323)
Equipment........................................................................ 19,726
Goodwill......................................................................... 557,597
-----------
$ 500,000
-----------
-----------
</TABLE>
HRS
In May 1997, the Company completed the acquisition of Health
ResponseAbility Systems, Inc. ("HRS"), an Internet content provider, in exchange
for $2,600,000 in cash, 433,400 shares of the Company's common stock valued at
$2,210,340 or $5.10 per share, and additional cash amounts contingent on future
performance levels of HRS and the Company. In addition, the Company issued to
AOL 203,000 shares of common stock in exchange for the release of all equity
rights in HRS held by AOL valued at $1,035,300.
The cost of the acquisition was allocated to the assets acquired and
liabilities assumed based upon their estimated fair values as follows:
<TABLE>
<S> <C>
Working capital................................................................ $ (159,991)
Equipment...................................................................... 50,300
Goodwill....................................................................... 5,955,331
-------------
$ 5,845,640
-------------
-------------
</TABLE>
In January 1998, the Company agreed to pay $1,560,000 to the prior owners
of HRS in a final settlement of the cash amounts contingent upon future
performance levels, as stipulated in the agreement for the acquisition of HRS.
This amount was recorded as additional goodwill and is being amortized over the
remaining period of expected benefit.
The following unaudited pro forma summary presents consolidated results of
operations for the Company as if the acquisition of HRS had been consummated on
January 1, 1996. The acquisitions of ParentsPlace.com and StudentCenter would
not have had a significant impact on the pro forma
F-13
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
information. The pro forma information does not necessarily reflect the actual
results that would have been achieved, nor is it necessarily indicative of
future consolidated results of the Company.
<TABLE>
<CAPTION>
1996 1997
--------------- ---------------
<S> <C> <C>
Revenues............................................................. $ 1,674,226 $ 6,381,437
Net loss............................................................. $ (12,092,617) $ (22,910,945)
</TABLE>
STUDENTCENTER
In September 1997, the Company acquired substantially all of the assets of
StudentCenter LLC ("StudentCenter"), an Internet content provider, for $125,000
and the issuance of options to purchase 41,666 shares of common stock of the
Company at $5.10 per share. These options were valued at approximately $53,000
using the Black-Scholes option pricing model. The following assumptions were
used in the option pricing model: stock price of $5.10, exercise price of $7.50,
term of 3 years, risk free rate of interest of 6%, 50% volatility and a dividend
yield of 0%. In addition, the Company was required to make revenue-based and
other bonus payments, of which $30,000 was recorded as of December 31, 1997,
based on the amount of StudentCenter revenues, page views and other criteria.
The $208,000 purchase price was allocated to goodwill and intangible assets and
is being amortized over three years.
In May 1998, the Company sold the assets of StudentCenter as part of the
sale of About Work.
ABOUT WORK
In May 1998, the Company sold About Work, one of the Company's channels, as
well as the assets of StudentCenter, to TMP Worldwide Inc. ("TMP") in exchange
for net proceeds of $600,000. In connection with the sale of About Work, the
Company paid the former owners of StudentCenter $520,000 and issued options to
purchase 33,333 shares at $5.10 per share as settlement of all revenue-based and
other bonus payments. The options were valued at approximately $100,000 using
the Black-Scholes option pricing model using the following assumptions: stock
price of $6.00, exercise price of $6.00, term of 5 years, risk free rate of
interest of 5.44%, 50% volatility and a dividend yield of 0%. In addition, the
Company accrued a cost of $340,000 in connection with AOL carriage fees to be
paid on behalf of TMP for About Work. The Company recorded a loss of
approximately $504,000 on this sale due to the bonus payment, the options issued
to StudentCenter, the write off of approximately $195,000 of remaining goodwill
and the accrual for AOL carriage fees.
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
F-14
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
initial public offering of the Company's stock or a merger, consolidation or
sale transaction ("call event" or "put event").
Since the formation of iBaby in April 1998, the accounts of iBaby have been
consolidated into the Company's financial statements, as the Company holds a
majority interest and has control of iBaby.
In connection with the formation of iBaby, iBaby entered into an inventory
and services agreement with Kids Warehouse, the minority interest holder of
iBaby. The agreement, dated April 8, 1998, has a one-year term and provides for
Kids Warehouse to make available to iBaby at least $2,000,000 of inventory at
wholesale value, as defined, for iBaby to sell to customers. In addition, Kids
Warehouse is to stock and provide storage of iBaby inventory. In consideration
for such services, iBaby is to pay Kids Warehouse an inventory fee, as defined,
based on the cost of items sold by iBaby. This agreement is terminable at the
sole option of iBaby.
In connection with the joint venture agreement, the Company also entered
into a rights agreement with the minority stockholders which provides for
various rights including:
o The right and option by the Company, exercisable upon the occurrence of a
call or put event, to purchase all of the shares held by the minority
stockholders ("call option"); and
o The right and option by the minority stockholders, exercisable upon the
occurrence of a put event, to require iVillage to purchase the shares
held by the minority stockholders ("put option").
In December 1998, the board of directors of iVillage opted to exercise the
call option to acquire the minority interest in iBaby.
6. STOCK OPTION PLANS:
1995 Amended and Restated Employee Stock Option Plan
In 1995, iVillage's Board of Directors and stockholders adopted the
Company's 1995 Amended and Restated Employee Stock Option Plan (the "ESOP"),
which was amended in May 1997. The ESOP provides for the granting, at the
discretion of the Stock Option Committee of the board of directors (the "SOC"),
of: (i) options that are intended to qualify as incentive stock options, within
the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), as
amended, to employees and (ii) options not intended to so qualify to employees,
officers, consultants and directors. The total number of shares of common stock
for which options may be granted under the ESOP is 1,798,548.
The exercise price of all stock options granted under the ESOP is
determined by the SOC at the time of grant. The maximum term of each option
granted under the ESOP is 10 years from the date of grant. Options shall become
exercisable at such times and in such installments as the SOC shall provide in
the terms of each individual option.
The exercise price of all of the options under the ESOP which range from
$3.00-$9.45, were determined based upon the fair market value of iVillage's
common stock on the date of grant. 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.
F-15
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1998, there were no shares available for future grants
under the ESOP.
Changes in options outstanding under the ESOP, the fair value per option
and weighted average exercise price of stock option activity for the years ended
December 31, 1996, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
FAIR VALUE EXERCISE PRICE
OPTIONS PER OPTION PER SHARE
--------- ---------- --------------
<S> <C> <C> <C>
Outstanding, January 1, 1996.................................. 108,666 $ .78 $ 3.15
Granted....................................................... 254,048 2.10 4.56
--------- ------ ------
Outstanding, December 31, 1996................................ 362,714 1.71 3.96
Granted....................................................... 687,833 1.41 5.10
Exercised..................................................... (33,333) 1.05 3.00
Canceled...................................................... (215,750) 1.62 3.84
--------- ------ ------
Outstanding, December 31, 1997................................ 801,464 1.50 5.04
Granted....................................................... 1,256,750 1.92 6.90
Exercised..................................................... (9,333) 2.49 5.10
Canceled...................................................... (250,333) 1.38 5.25
--------- ------ ------
Outstanding, December 31, 1998................................ 1,798,548 $ 1.80 $ 6.30
--------- ------ ------
--------- ------ ------
Options exercisable at December 31, 1996...................... 35,500 $ 1.08 $ 3.63
Options exercisable at December 31, 1997...................... 103,333 $ 1.71 $ 4.92
Options exercisable at December 31, 1998...................... 287,057 $ 1.77 $ 5.28
</TABLE>
At December 31, 1998, the weighted average remaining contractual life of
the options outstanding, under the ESOP, was approximately 6.3 years.
1997 AMENDED AND RESTATED ACQUISITION STOCK OPTION PLAN
In May 1997, the Company's Board of Directors and stockholders adopted the
Company's 1997 Amended and Restated Acquisition Stock Option Plan (the "ASOP").
The ASOP provides for the granting, at the discretion of the SOC of:
(i) options that are intended to qualify as incentive stock options, within the
meaning of Section 422 of the Code, as amended, to directors who are employees
of the Company or any of its subsidiaries, or as part of one or more of such
acquisitions and (ii) options not intended to so qualify to employees, officers,
consultants and directors of the Company, or as part of one or more of such
acquisitions. The total number of shares of common stock for which options may
be granted under the ASOP is 360,726.
The exercise price of all stock options granted under the ASOP is
determined by the SOC at the time of grant. The maximum term of each option
granted under the ASOP is 10 years from the date of grant. Options shall become
exercisable at such times and in such installments as the SOC shall provide in
the terms of each individual option.
Generally, the options vest equally over a period of four years and expire
7-10 years from the date of grant. The exercise price of all of the options
under the ASOP is $5.10, which was determined based upon the fair market value
of the Company's common stock on the date of grant.
In September 1997, the SOC adjusted the exercise price of all outstanding
options of the ASOP from the original exercise price of $7.50 a share to $5.10 a
share, based on the then determined current fair market value of the Company's
common stock.
As of December 31, 1998, no shares were available for future grants under
the ASOP.
F-16
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Changes in options outstanding under the ASOP, the fair value per option
and weighted average exercise price of stock option activity for the years ended
December 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
FAIR VALUE EXERCISE PRICE
OPTIONS PER OPTION PER SHARE
-------- ---------- --------------
<S> <C> <C> <C>
Outstanding, January 1, 1997................................... -- $ -- $ --
Granted........................................................ 393,393 1.44 5.10
-------- ------ ------
Outstanding, December 31, 1997................................. 393,393 1.44 5.10
Granted........................................................ 258,393 3.00 5.10
Canceled....................................................... (291,060) 1.35 5.10
-------- ------ ------
Outstanding, December 31, 1998................................. 360,726 $ 2.64 $ 5.10
-------- ------ ------
-------- ------ ------
Options exercisable at December 31, 1997....................... 10,833 $ 1.98 $ 5.10
Options exercisable at December 31, 1998....................... 305,226 $ 2.79 $ 5.10
</TABLE>
At December 31, 1998, the weighted average remaining contractual life of
the options outstanding, under the ASOP, was approximately 6.4 years.
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock option issuances. The Company has adopted the disclosure-only provisions
of SFAS No. 123. Had compensation cost for the Company's stock options issued at
the fair value of the Company's stock been determined based on the fair value of
the stock options at the grant date for awards in 1996, 1997 and 1998 consistent
with the provisions of SFAS No. 123, the Company's net loss would have been
adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1997 1998
-------------- --------------- ---------------
<S> <C> <C> <C>
Net loss as reported................................. $ (9,682,682) $ (21,300,960) $ (43,653,682)
Net loss pro forma................................... $ (9,767,127) $ (21,693,415) $ (44,213,487)
</TABLE>
The fair value of each option grant is estimated using the minimum value
method of the Black-Scholes option pricing model which assumes no volatility.
The weighted average assumptions used for grants made in 1996, 1997 and 1998 are
as follows:
<TABLE>
<CAPTION>
OPTIONS GRANTED DURING THE
YEAR ENDED DECEMBER 31,
------------------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rate................................ 6.10% 6.22% 5.44%
Expected option life................................... 5 years 5 years 5 years
Dividend yield......................................... 0.0% 0.0% 0.0%
</TABLE>
In 1997, in connection with the exercise of options by former employees, the
Company accepted two promissory notes, with recourse, from the former employees
to cover the costs to exercise the options.
F-17
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
iBABY, INC. 1998 STOCK OPTION PLAN
In 1998, the Board of Directors and stockholders of iBaby adopted the
iBaby, Inc. 1998 Stock Option Plan ("iBaby SOP"). The iBaby SOP provides for the
granting, at the discretion of the iBaby Stock Option Committee ("iBaby SOC")
of: (i) options that are intended to qualify as incentive stock options, within
the meaning of the Code, to employees and (ii) options not intended to so
qualify to employees, officers, consultants and directors. The total number of
shares of iBaby common stock for which options may be granted under the iBaby
SOP is 294,118.
The exercise price of all stock options granted under the iBaby SOP is
determined by the iBaby SOC at the time of grant. The maximum term of each
option granted under the iBaby SOP is seven years from the date of grant.
Options shall become exercisable at such time and in such installments as the
iBaby SOC shall provide in the terms of each individual option.
Under the iBaby SOP, options to purchase 110,059 shares of iBaby common
stock were granted during the year ended December 31, 1998, with a weighted
average exercise price per share of $2.68 and a weighted average remaining
contractual life of 6.4 years. As of December 31, 1998, 184,059 shares remain
available for future grants.
7. COMMITMENTS AND CONTINGENCIES:
LEASES:
The Company leases office space, under non-cancelable operating leases
expiring at various dates through April 2001. The following is a schedule of
future minimum lease payments under non-cancelable operating leases as of
December 31, 1998:
<TABLE>
<CAPTION>
Year ending December 31: 1998
- --------------------------------------------------------------------------------- -----------
<S> <C>
1999............................................................................. $ 669,684
2000............................................................................. 279,540
2001............................................................................. 12,280
-----------
$ 961,504
-----------
-----------
</TABLE>
Rent expense was approximately $149,000, $486,000 and $714,000 for the
years ended December 31, 1996, 1997 and 1998, respectively.
At December 31, 1998, minimum future lease payments due under capital
leases for computer equipment are as follows:
<TABLE>
<CAPTION>
Year ending December 31: 1998
- --------------------------------------------------------------------------------- -----------
<S> <C>
1999............................................................................. $ 144,203
Less: amount representing interest............................................... 7,630
-----------
Net minimum lease payments....................................................... $ 136,573
-----------
-----------
</TABLE>
Accumulated amortization on assets accounted for as capital leases amounted
to approximately $301,000 and $553,000 as of December 31, 1997 and 1998,
respectively.
LITIGATION
The Company has been involved in litigation relating to claims arising out
of its operations in the normal course of business, including a claim by a
former employee. The Company does not believe that an adverse outcome of any of
these legal proceedings will have a material adverse effect on the Company's
results of operations.
F-18
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. CONVERTIBLE NOTES
In August 1995, the Company entered into a promissory note agreement with
AOL whereby the Company received $500,000. This note was converted into shares
of Series A Convertible Preferred Stock ("Series A") in September 1995.
In September 1995, the Company entered into a promissory note agreement
with AOL whereby the Company received $650,000 in 1995 and an additional
$1,100,000 in 1996. In connection with this note, the Company issued warrants to
purchase 17,366 shares (on a post-split basis) of Series B Convertible Preferred
Stock ("Series B") at $7.50 a share which resulted in interest expense of $6,745
in 1995 and $30,101 in 1996.
In 1996, the Company entered into promissory note agreements with AOL and
certain other investors whereby the Company received $1,800,000 inclusive of the
$1,000,000 received from AOL as described above. These notes, as well as the
$650,000 discussed above that was received in 1995, were converted into 980,000
shares of Series B.
In 1997, the Company entered into promissory note agreements with AOL and
certain other investors whereby the Company received $3,775,000. In connection
with these notes, the Company issued warrants to purchase 111,771 shares of
common stock for $5.86 per share, which resulted in an interest charge of
$334,339 in 1997. The Company valued these options using the Black-Scholes
option pricing model at $3.00 per share. The following assumptions were used in
determing the value of the option: stock price of $5.86, exercise price of
$5.86, term of 5 years, risk free rate of interest 6%, 50% volatility and a
dividend yield of 0%. In 1997, these notes were converted into approximately
1.93 million shares of Series C Convertible Preferred Stock ("Series C").
9. CAPITAL STOCK
COMMON STOCK
At December 31, 1998, the authorized capital stock of the Company consists
of 65,000,000 shares of common stock, $0.01 par value per share and 25,000,000
shares of preferred stock, $0.0005 par value per share. The Board of Directors
(the "Board") of the Company has the authority to issue preferred stock in
series with rights and privileges determined by the Board. Upon formation of the
Company, 1,083,335 shares of $0.01 par value common stock were issued to the
founders.
In February 1998, the Company issued 284,317 shares of common stock in
exchange for net proceeds of approximately $1,700,000.
CONVERTIBLE PREFERRED STOCK
In September 1995, the Company issued 1,000,000 shares of Series A
Convertible Preferred Stock ("Series A"), through a private placement, in
consideration for net proceeds of approximately $1,000,000, inclusive of the
conversion of a $500,000 convertible note payable.
In May 1996, the Company issued 4,777,746 shares of Series B and Series B-1
Convertible Preferred Stock ("Series B-1") through a private placement in
exchange for net proceeds of approximately $11,944,000, inclusive of the
conversion of convertible notes payable in the amount of $2,450,000. The holder
of Series B-1 has the same rights as the Series B holders, however, the Series
B-1 holder does not have voting rights.
In May 1997, the Company issued 11,003,067 shares of Series C Convertible
Preferred Stock ("Series C") through a private placement in exchange for net
proceeds of approximately $20,550,000, inclusive of the conversion of
convertible notes payable in the amount of approximately $2,975,000. In
connection with the issuance of Series C, the Company will issue additional
shares of common stock to
F-19
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Series B holders that had anti-dilution provisions, upon the conversion to
common stock. The Company also issued 30,194 warrants to purchase shares of
common stock at $.03 a share to the Company's placement agent in consideration
for services provided in connection with the private placement.
In December 1997, the Company issued an additional 2,190,378 shares of
Series C through a private placement in exchange for net proceeds of
approximately $4,280,000, inclusive of the conversion of an $800,000 convertible
note payable.
In February 1998, the Company issued 13,000,000 shares of Series D
Convertible Preferred Stock ("Series D") in exchange for net proceeds of
approximately $31,500,000.
In December 1998, the Company issued 11,730,948 shares of Series E
Convertible Preferred Stock ("Series E") through a private placement in exchange
for net proceeds of approximately $32,100,000. Holders of Series E have
participating preferred rights.
The holders of convertible preferred stock are entitled to receive
noncumulative dividends when and if declared by the Board. These dividends are
in preference to any declaration or payment of any dividend on the common stock
of the Company.
In the event of liquidation, the holders of convertible preferred stock
have a liquidation preference over the holders of common stock with holders of
Series C, D and E having preference to Series A and B holders. Such preference
is equal to the original cost of the respective class of convertible preferred
stock, plus any declared or unpaid dividends.
All classes of convertible preferred stock are convertible into common
stock at prices and at times, subject to the provisions set forth in the
Company's restated Certificate of Incorporation, on a one for one basis. In the
event of a public offering of the Company's shares with gross proceeds and an
offering price as defined, the convertible preferred stock will be automatically
converted into common stock on a one for one basis (on a pre-split basis). The
holders of Series B and B-1 shares will receive an additional 217,825 shares of
common stock as a result of the anti-dilution provisions contained in the Series
B and Series B-1 agreements. Convertible preferred stockholders maintain voting
rights equivalent to the number of shares of common stock on an as if converted
basis.
As discussed in Notes 4, 8 and above, as of December 31, 1998, the Company
has 425,998 warrants outstanding with a weighted average exercise price of $6.54
per share.
INITIAL PUBLIC OFFERING
In December 1998, the Board of Directors and stockholders of the Company,
authorized the Company's management to file a registration statement for an
initial public offering (the "IPO") of the Company's common stock.
10. ADVERTISING AND PROMOTIONAL AGREEMENTS:
NBC
On November 11, 1998, the Company entered into an agreement with NBC
pursuant to which NBC will promote the Company's Web site, iVillage.com, on
television primarily during prime time programs, as well as through its web
sites. The terms of the NBC agreement provide for the following:
i. NBC to provide the Company with the use of advertising spots having an
aggregate value of $3.5 million per annum over a three-year period. For
each $3.5 million of advertising spots, the Company will issue
1,228,070 shares of Series E (or 409,356 shares of the Company's common
stock after the IPO).
F-20
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ii. NBC will have the option, exercisable at its sole discretion, to
provide the Company with additional spots having an aggregate value of
$5 million for each of the three years. Upon exercise of NBC's option,
iVillage will issue shares of series E (or shares of iVillage's common
stock after the IPO), subject to anti-dilution protection, equal to
the aggregate value of additional spots divided by $4.15 in the first
year, $5.15 in the second year and $6.15 in the third year ($12.45,
$15.45 and $18.45 if converted to common stock).
iii. NBC may terminate the agreement in the event that a change of control
of iVillage, as defined in the agreement, occurs involving a
television broadcast network entity or its affiliate that directly
competes with NBC.
The Company will account for the NBC agreement in accordance with Emerging
Issues Task Force Abstract No. 96-18, "Accounting for Equity Instruments That
are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services."
In addition, iVillage has valued the option provided to NBC using the
Black-Scholes option pricing model. The $3,960,667 value has been recorded in
the equity section as deferred compensation, and will be adjusted at each
balance sheet date to market value. If and when NBC exercises their option by
delivering advertising, then any amounts previously deferred in the equity
section related to those shares will be reversed into the statement of
operations along with any additional amounts necessary to bring the total charge
up to the then current market value.
On February 22, 1999, the Company and NBC reached an agreement in principle
to amend, subject to execution of final documentation, the advertising and
promotional agreement with NBC. See Note 13--Subsequent Events.
SNAP
In November 1998, iVillage entered into a two-year agreement with Snap! LLC
("Snap") which provided for Snap assisting iVillage in promoting its network of
Web sites and related services. Under the agreement, Snap is to deliver
guaranteed impressions as well as certain exclusivity rights in connection with
limitations on the percentage of content that can be provided by iVillage's
competitors. In exchange for the impressions and exclusivity provided by Snap,
iVillage is required to make payments of: (i) $1 million in the first year and
$2.26 million in the second year, (ii) an amount equal to 20% of all gross
margin earned by iVillage from all sales made through the Company's iBaby Web
site arising from customers directed by Snap and (iii) a standard monthly fee
based on the daily average number of successful search results page on the Snap
Web site that is served by Snap in response to a search inquiry.
iVillage will record all of the payments required under the agreement as
sales and marketing expense and will be recognized ratably over the term of the
contract as services are provided.
AT&T
In October 1998, iVillage entered into a two-year agreement with AT&T under
which (subject to meeting certain quarterly performance measures) iVillage will
promote and market certain AT&T telecommunication services in exchange for
minimum payments, subject to adjustments based upon delivered impressions, as
defined in the agreement. In return, AT&T will display a text line for
iVillage.com on the AT&T WorldNet service and promote and market iVillage.com
through AT&T television, mass media marketing or other mass media.
F-21
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INCOME TAXES:
The components of the net deferred tax asset as of December 31, 1997 and
1998 consists of the following:
<TABLE>
<CAPTION>
1997 1998
--------------- ---------------
<S> <C> <C>
Operating loss carryforward.......................................... $ 13,940,842 31,321,682
Depreciation and amortization........................................ (50,508) (166,554)
Bad debt allowance and reserves...................................... -- 674,864
Benefits related costs............................................... -- 230,701
--------------- ---------------
Net deferred tax asset................................... 13,890,334 32,060,693
Less, Valuation allowance............................................ (13,890,334) (32,060,693)
--------------- ---------------
Deferred tax asset....................................... $ -- --
--------------- ---------------
--------------- ---------------
</TABLE>
The difference between the Company's U.S. federal statutory rate of 35%, as
well as its state and local rate, net of a federal benefit, of 10%, when
compared to the effective rate is principally comprised of the valuation
allowance.
As of December 31, 1998, the Company has a net operating loss carryforward
for federal income tax purposes of approximately $69,990,000 which begin to
expire in 2010. The net deferred tax asset has been fully reserved due to the
uncertainty of the Company's ability to realize this asset in the future.
12. SEGMENT INFORMATION:
In June 1997, FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS No. 131"), which established standards for reporting information about
operating segments in annual financial statements. The Company's business is
comprised of the development of programming material by iVillage for
distribution through online service providers and the Internet ("New Media") and
the sale of products by iBaby through its Web sites ("Commerce"). The Company's
management reviews corporate assets and overhead expenses combined with the New
Media segment. The summarized segment information, as of and for the year ended
December 31, 1998, is as follows:
<TABLE>
<CAPTION>
NEW MEDIA COMMERCE TOTAL
------------- ------------ -------------
<S> <C> <C> <C>
Revenues............................................ $ 12,450,620 $ 2,561,203 $ 15,011,823
Production, product and technology.................. 11,741,776 2,779,239 14,521,015
Sales and marketing................................. 28,176,407 346,467 28,522,874
General and administrative.......................... 9,546,082 1,066,352 10,612,434
Depreciation and amortization....................... 5,628,322 54,684 5,683,006
Loss from operations................................ (42,641,967) (1,685,539) (44,327,506)
Interest income, net................................ 570,704 20,482 591,186
Total assets........................................ 45,944,997 845,968 46,790,965
</TABLE>
Information for the years ended December 31, 1996 and 1997 has not been
provided since during those years the Company operated only in the New Media
segment.
13. SUBSEQUENT EVENTS (UNAUDITED):
Acquisition of Minority Interest of iBaby
On February 10, 1999, the Company entered into an agreement to purchase all
of the outstanding shares of iBaby held by the minority stockholders (the
"Minority Interest") for $10.8 million (the "Purchase Price") (the "iBaby
Purchase Agreement"). The Purchase Price is comprised of $8 million in
F-22
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
cash and common stock having an aggregate value of $2.8 million. The Company
paid $1.5 million on February 12, 1999, with the remaining $6.5 million being
payable within two business days of the closing of the IPO and receipt, by the
Company, of at least $6.5 million of IPO proceeds. The number of shares to be
issued will be dependent upon the IPO price per share, less the underwriters'
discount.
If an IPO does not occur, the iBaby Purchase Agreement also provides for
the right by the Company to purchase the Minority Interest for an aggregate
$9.3 million in cash until May 31, 1999 (the "Additional Purchase Period")
provided that (i) written notice is given by April 15, 1999 and a non-
refundable payment of $1 million is made to the minority stockholders (the
"Deposit") as a credit toward the remaining $9.3 million. In the event that the
Minority Interest is not purchased in accordance with the terms of the iBaby
Purchase Agreement, the Deposit will be forfeited by the Company and the terms
of the iBaby Agreement shall continue in full force except that the parties will
have 10 business days to agree to a fair value per share or select a mutually
acceptable investment bank to issue a valuation within 15 business days.
The iBaby Purchase Agreement also provides for certain other provisions,
the most significant of which include the extension of the management, and
inventory and services agreements until April 8, 2000 and certain piggyback
registration rights to the minority stockholders.
Acquisition of Astrology.Net
On February 18, 1999, the Company acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a/ Astrology.Net ("Astrology.Net"), an Internet content
provider, in exchange for 802,125 shares of iVillage's common stock and
$1 million in cash. The Astrology.Net Agreement also provides for employment,
non-compete and stock option agreements for the founding stockholders of
Astrology.Net.
The terms of the agreement are such that 326,331 of the shares of common
stock are issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be accelerated dependent on Astrology.Net
meeting revenue targets. In the event there is no acceleration of the release of
these shares by the end of the five-year term, all remaining shares in escrow
will be released to Astrology.Net's stockholders. In addition, all outstanding
options to purchase Astrology.Net common stock were converted into non-qualified
options to purchase an aggregate of 31,208 shares of iVillage common stock.
In addition to the shares issued, the Company has issued the founding
stockholders of Astrology.Net, who will continue as employees of Astrology.Net,
options to purchase 150,000 shares of iVillage common stock at an exercise price
equal to the IPO price. These options vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting certain revenue targets.
The Company also granted to the founding stockholders of Astrology.Net, subject
to its existing agreements with respect to registration rights, piggyback
registration rights in connection with the shares of the Company's common stock
to be issued pursuant to the agreement.
The acquisition will be accounted for as a purchase with an estimated
purchase price of approximately $11.8 million, based on a value of the Company's
common stock of $13.00 per share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net will be
recorded as goodwill and amortized over the period of expected benefit.
F-23
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 February 22, 1999 the Company and NBC reached an agreement in principle
to amend, subject to execution of final documentation, the November 11, 1998
advertising and promotional agreement with NBC as follows:
i. The Company has agreed to purchase, for cash, $8.5 million of
advertising and promotional spots per annum, over the next three
years.
ii. Upon signing the amended agreement, the Company will issue, subject
to certain anti-dilution protection, 4,889,030 shares of Series E
Convertible Preferred Stock and 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 $5.7 million difference between the
purchase price of the Series E Convertible Preferred Stock and the fair market
value on the date of issuance will be accounted for as a deemed dividend and
amortized using the effective interest method from the date of issuance through
the date the securities are first convertible. The Company expects this to occur
in March 1999 with the effectiveness of its anticipated initial public offering.
In addition, the fair value of the warrant of approximately $3.3 million, will
be recorded in stockholders' equity as deferred advertising costs and amortized
to advertising expense - non cash over the three year advertising agreement. The
fair value of the warrant was determined using the Black-Scholes option pricing
model in accordance with SFAS No. 123.
F-24
<PAGE>
SCHEDULE II
iVILLAGE INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------- ---------- ---------------------- ---------- ----------
ADDITIONS
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END
COLUMN A OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- --------------------------------------------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1996:
Provision for doubtful accounts............ $ -- $ -- $ -- $ -- $ --
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the year ended December 31, 1997:
Provision for doubtful accounts............ $ -- $746,589 $100,000(1) $566,760(2) $279,829
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
For the year ended December 31, 1998:
Provision for doubtful accounts............ $279,829 $855,000 $125,000(2) $513,480 $746,349
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ------------------
(1) Doubtful accounts written off against revenue
(2) Doubtful accounts written off, net of cash recovered
F-25
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ACQUISITION OF MINORITY INTEREST OF iBABY, INC.
On February 10, 1999, iVillage Inc. entered into an agreement to purchase
all of the outstanding shares of iBaby, Inc. held by the minority stockholders
in exchange for $10.8 million. The purchase price is comprised of $8 million in
cash and common stock having an aggregate value of $2.8 million. iVillage paid
$1.5 million on February 12, 1999, with the remaining $6.5 million being payable
within two business days of the closing of iVillage's IPO and receipt by
iVillage, of at least $6.5 million of IPO proceeds. The number of shares to be
issued will be dependent upon the IPO price per share, less underwriters'
discount. If the IPO does not close, the iBaby purchase agreement also provides
for the right by iVillage to acquire the minority interest for an aggregate
$9.3 million cash until May 31, 1999 provided that certain conditions are met.
The acquisition of the minority interest of iBaby is to be accounted for as
purchase. As iVillage has held a majority interest and control of iBaby since
April 1998, the results of operations have already been reflected in iVillage's
consolidated financial statements.
ACQUISITION OF ASTROLOGY.NET
On February 18, 1999, the Company acquired all of the outstanding stock of
KnowledgeWeb, Inc. d/b/a/ Astrology.Net ("Astrology.Net"), an Internet content
provider, in exchange for 802,125 shares of the iVillage's common stock and
$1 million in cash. The Astrology.Net Agreement also provides for employment,
non-compete and stock option agreements for the founding stockholders of
Astrology.Net.
The terms of the agreement are such that 326,331 of the shares of common
stock are issued up-front and the remaining 475,794 will be placed into escrow
to be released to the stockholders of Astrology.Net within a period of five
years. The release from escrow will be accelerated dependent on Astrology.Net
meeting revenue targets. In the event there is no acceleration of the release of
these shares by the end of the five-year term, all remaining shares in escrow
will be released to Astrology.Net's stockholders. In addition, all outstanding
options to purchase Astrology.Net common stock were converted into non-qualified
options to purchase an aggregate of 31,208 shares of iVillage common stock.
In addition to the shares issued, the Company has issued the founding
stockholders of Astrology.Net who will continue as employees of Astrology.Net
options to purchase 150,000 shares of iVillage common stock at an exercise price
equal to the IPO price. These options vest over a period of seven years, with
accelerated vesting dependent on Astrology.Net meeting certain revenue targets,
however, they are contingent on continued employment with iVillage.
The acquisition will be accounted for as a purchase with an estimated
purchase price of approximately $11.8 million, based on a value of the Company's
common stock of $13.00 a share and an estimate for the value of the
Astrology.Net options assumed by iVillage. The difference between the purchase
price and the fair value of the acquired net assets of Astrology.Net will be
recorded as goodwill and amortized over the period of expected benefit.
NBC AGREEMENT
On 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.
F-26
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of all of the events discussed above as if they
took place on December 31, 1998 for the unaudited pro forma condensed
consolidated balance sheet and January 1, 1998 for the unaudited pro forma
condensed consolidated statement of operations.
The unaudited pro forma condensed consolidated financial statements have
been included as required by the rules of the Securities and Exchange Commission
and are provided for informational purposes only. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
the results of operations or financial position that would have been obtained if
the transactions had been effected on the date indicated or which may be
obtained in the future.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in connection with the historical financial statements
of iVillage which are contained elsewhere in this prospectus.
F-27
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
iVILLAGE INC. PRO FORMA
AND SUBSIDIARIES ASTROLOGY.NET ADJUSTMENTS PRO FORMA
----------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 30,824,869 $ 103,852 $ (1,000,000) 1(a) $ 21,928,721
(8,000,000) 1(a)
Accounts receivable, net........... 3,147,561 113,855 -- 3,261,416
Prepaid expenses and other current
assets........................... 715,161 1,126 -- 716,287
------------- --------- ------------ -------------
Total current assets......... 34,687,591 218,833 (9,000,000) 25,906,424
Fixed assets, net.................... 7,380,366 65,057 -- 7,445,423
Other assets......................... 187,860 71,954 -- 259,814
Goodwill and intangible assets, net.. 4,535,148 5,429 11,778,676 1(b) 27,119,253
10,800,000 1(b)
------------- --------- ------------ -------------
Total assets................. $ 46,790,965 $ 361,273 $ 13,578,676 $ 60,730,914
------------- --------- ------------ -------------
------------- --------- ------------ -------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable and accrued
expenses......................... $ 11,559,711 $ 150,173 $ -- $ 11,709,884
Capital leases payable............. 136,573 17,248 -- 153,821
Deferred revenue................... 2,909,740 -- -- 2,909,740
Due to stockholder................. -- 121,971 -- 121,971
Other current liabilities.......... 162,859 -- -- 162,859
------------- --------- ------------ -------------
Total current liabilities.... 14,768,883 289,392 -- 15,058,275
Capital leases payable, net of
current portion.................... -- 22,936 -- 22,936
------------- --------- ------------ -------------
Total liabilities............ 14,768,883 312,328 -- 15,081,211
------------- --------- ------------ -------------
------------- --------- ------------ -------------
Commitments and Contingencies
Stockholders' equity:
Series A Convertible Preferred
Stock............................ 500 177,700 (500) 1(e) --
(177,700) 1(c)
Series B and B-1 Convertible
Preferred Stock.................. 2,389 -- (2,389) 1(e) --
Series C Convertible Preferred
Stock............................ 6,597 -- (6,597) 1(e) --
Series D Convertible Preferred
Stock............................ 6,500 -- (6,500) 1(e) --
Series E Convertible Preferred
Stock............................ 5,865 -- (5,865) 1(e) --
Common Stock....................... 21,133 511 (511) 1(c) 195,458
8,021 1(d)
2,154 1(d)
147,853 1(e)
16,297 1(f)
Additional paid-in capital......... 112,848,505 103,626 (103,626) 1(c) 141,823,652
10,819,600 1(d)
2,797,846 1(d)
(126,002) 1(e)
15,483,703 1(f)
Accumulated deficit................ (76,274,895) (232,892) 232,892 1(c) (76,274,895)
Stockholders notes receivable...... (565,000) -- (15,500,000) 1(f) (16,065,000)
Unearned compensation and deferred
advertising...................... (4,029,512) -- -- (4,029,512)
------------- --------- ------------ -------------
Total stockholders' equity... 32,022,082 48,945 13,578,676 45,649,703
------------- --------- ------------ -------------
Total liabilities and
stockholders' equity...... $ 46,790,965 $ 361,273 $ 13,578,676 $ 60,730,914
------------- --------- ------------ -------------
------------- --------- ------------ -------------
</TABLE>
F-28
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
iVILLAGE INC. PRO FORMA
AND SUBSIDIARIES ASTROLOGY.NET ADJUSTMENTS PRO FORMA
---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues................................ $ 15,011,823 $ 847,517 $ -- $ 15,859,340
------------ --------- ----------- ------------
Operating expenses:
Production, product and technology.... 14,521,015 77,502 -- 14,598,517
Sales and marketing................... 28,522,874 126,502 -- 28,649,376
General and administrative............ 10,612,434 663,731 -- 11,276,165
Depreciation and amortization......... 5,683,006 91,061 3,600,000 2(a) 13,300,292
3,926,225 2(a)
------------ --------- ----------- ------------
Total operating expense....... 59,339,329 958,796 7,526,225 67,824,350
------------ --------- ----------- ------------
Loss from operations.......... (44,327,506) (111,279) (7,526,225) (51,965,010)
Interest income (expense), net.......... 591,186 (100) -- 591,086
Loss on sale of Web site................ (503,961) -- -- (503,961)
Minority interest....................... 586,599 -- (586,599)2(b) --
------------ --------- ----------- ------------
Net loss...................... $(43,653,682) $(111,379) $(8,112,824) $(51,877,885)
------------ --------- ----------- ------------
------------ --------- ----------- ------------
Pro forma basic and diluted net loss per
share ................................ $ (2.59) $ (2.66)
------------ ------------
------------ ------------
Shares of common stock used in computing 1,629,676 2(c)
pro forma basic and diluted net loss 215,385 2(c)
per share ............................ 16,853,678 802,125 2(c) 19,500,864
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
F-29
<PAGE>
iVILLAGE INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1998
1. The pro forma adjustments to the unaudited pro forma condensed consolidated
balance sheet are as follows:
a) Adjustment to cash, for the cash portion of the acquisition prices,
of $1 million for Astrology.Net and $8 million for iBaby.
b) Adjustment to goodwill and intangible assets to reflect the excess
of the purchase price over the fair value of net assets acquired of
Astrology.Net and iBaby, calculated as follows:
<TABLE>
<CAPTION>
ASTROLOGY.NET* iBABY**
-------------- -----------
<S> <C> <C>
Cash portion of purchase price............................... $ 1,000,000 $ 8,000,000
Value of stock and option portion of purchase price.......... 10,827,621 2,800,000
------------ -----------
Purchase price............................................... 11,827,621 10,800,000
Less: fair value of net assets to be acquired................ 48,945 --
------------ -----------
Goodwill..................................................... $ 11,778,676 $10,800,000
------------ -----------
------------ -----------
</TABLE>
* The value of the common stock to be issued to Astrology.Net was
estimated as $13.00 a share.
** Net assets of iBaby are already included in the consolidated balance
sheet of iVillage as iVillage holds a majority interest and control.
c) Adjustment to reflect the elimination of all of the stockholder
equity balances of Astrology.Net.
d) Adjustment to reflect the issuance of 802,125 and an estimated
$400,000 value of options issued and 215,385 shares of common stock,
respectively, for the acquisitions of Astrology.Net and iBaby.
e) Adjustment to reflect the conversion of all of the outstanding
shares of convertible preferred stock into common stock, and the issuance
of 217,825 shares of common stock to holders of series B and B-1
convertible preferred stock resulting from anti-dilution protection.
f) Adjusted to reflect the issuance to NBC of 1,629,676 shares of
Series E Convertible Preferred Stock (on a post-split basis) in exchange
for a note of approximately $15.5 million. These pro forma adjustments do
not include a $5.7 million deemed non-cash dividend to NBC in connection
with the issuance of these shares.
2. The pro forma adjustments to the unaudited pro forma condensed consolidated
statement of operations are as follows:
a) Adjustment to depreciation and amortization to reflect the
amortization of goodwill of $3,926,225 and $3,600,000, resulting from the
acquisitions of Astrology.Net and iBaby, respectively, over a three year
period, the expected period of benefit.
b) Adjustment to minority interest of $586,599 to add back the net
loss previously attributed to the minority stockholders of iBaby.
c) Adjustment to weighted average shares of common stock outstanding
of 2,647,186 (as adjusted for the one-for-three reverse stock split) used
in computing basic and diluted net loss per share to reflect the issuance
of 802,125, 215,385 and 1,629,676 shares of common stock, in connection
with the acquisitions of Astrology. Net, iBaby and the issuance to NBC,
respectively, as of January 1, 1998.
F-30
<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-31
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MAY 29,
1995 1996 1997
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................................. $ 91,265 $ 188,696 $ 205,641
Certificates of deposit........................................... 100,000 108,621 --
Accounts receivable............................................... -- 119,854 9,299
Other current assets.............................................. -- 1,467 --
------------ ------------ ------------
Total current assets.......................................... 191,265 418,638 214,940
Fixed assets, net................................................. 35,092 22,806 48,044
Stockholder notes receivable...................................... 20,000 -- --
Other assets...................................................... 2,256 2,256 2,256
------------ ------------ ------------
Total assets.................................................. $ 248,613 $ 443,700 $ 265,240
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses............................. $ 50,626 $ 74,863 $ 61,269
Employee retirement plan payable.................................. -- 71,000 --
Deferred revenue.................................................. 33,333 -- --
Accrued interest.................................................. 15,146 35,396 43,662
Note payable, less unamortized discount of $67,902, $13,580 and $0
(unaudited) in 1995, 1996 and 1997, respectively................ 202,098 256,420 270,000
------------ ------------ ------------
Total current liabilities..................................... 301,203 437,679 374,931
------------ ------------ ------------
Commitments
Stockholder's (deficit) equity:
Common stock, par value $.01, 10,000 shares authorized, 1,000
shares issued and outstanding................................... 10 10 10
Additional paid-in capital........................................ 108,643 108,643 108,643
Accumulated deficit............................................... (89,243) (30,632) (146,344)
Stockholder notes receivable...................................... (72,000) (72,000) (72,000)
------------ ------------ ------------
Total stockholder's (deficit) equity.......................... (52,590) 6,021 (109,691)
------------ ------------ ------------
Total liabilities and stockholder's (deficit) equity.......... $ 248,613 $ 443,700 $ 265,240
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<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-33
<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-34
<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-35
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Health ResponseAbility Systems, Inc. (the "Company") was incorporated in
the State of Virginia on August 22, 1994 and commenced operations on January 1,
1995. The Company is engaged in the development of health-related programming
material for distribution through online service providers and the Internet.
As discussed in Note 8, all of the outstanding shares of the Company were
acquired by iVillage Inc. ("iVillage") on May 29, 1997. These financial
statements do not include any adjustments in connection with the sale.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company's revenues have been derived primarily from America Online,
Inc. ("AOL") customers visiting the Company's site on the AOL online service and
are recognized as they are earned (based upon visitations to the site) and
reported to the Company by AOL. Usage revenues received from AOL totaled
approximately $343,822 and $618,644 for the years ended December 31, 1995 and
1996, respectively. In addition, the Company has derived revenues from the
design of customer web sites. Revenues from such design work is recognized over
the term of service of each contract.
FIXED ASSETS
Depreciation of computer equipment and software and furniture and fixtures
is provided for by the straight-line method over their estimated useful lives
ranging from three to five years. The cost of additions and betterments is
capitalized, and repairs and maintenance costs are charged to operations in the
periods incurred. Depreciation expense has been included in general and
administrative expense.
INCOME TAXES
The Company has elected to be treated as an "S" corporation for both
Federal and State of Virginia tax purposes. Accordingly, corporate income or
loss is included in the stockholder's individual tax return based upon her
ownership interest.
CASH
Cash includes money market accounts and all highly liquid investments
purchased with original maturities of three months or less. Certificates of
deposit with maturities greater than three months are classified as such on the
balance sheet. The Company maintains its cash balances in a highly rated
financial institution.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash and accounts receivable. Cash is
deposited with high-credit, quality financial institutions. The Company's
accounts receivable are derived from revenue earned from customers located in
the U.S. and are denominated in U.S. dollars.
AOL accounted for approximately 78% and 66% of revenue for the years ended
December 31, 1995 and 1996, respectively, and approximately 63% of accounts
receivable at December 31, 1996.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, including
cash, certificates of deposit, accounts receivable, accounts payable and accrued
liabilities and note payable, approximate fair value because of their short
maturities.
F-36
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Significant
estimates made by the Company include the valuation of the warrant issued and
the useful lives and recoverability of fixed assets.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of May 29, 1997 and for the periods ended
May 29, 1996 and 1997 are unaudited but have been prepared in accordance with
generally accepted accounting principles ("GAAP") for interim financial
statements which do not include all disclosures required by GAAP for annual
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the full year.
COMPREHENSIVE INCOME
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Comprehensive
income, as defined, includes all changes in equity (net assets) during a period
from non-owner sources. To date, the Company has not had any transactions that
are required to be reported in comprehensive income.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current period presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
No. 131"). This statement establishes standards for the way companies report
information about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. The disclosure prescribed by SFAS No. 131
is effective for the year ending December 31, 1998. The Company has determined
that it does not have any separately reportable business segments as of May 29,
1997.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company does
not expect that the adoption of SOP No. 98-1 will have a material impact on its
financial statements.
F-37
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MAY 29,
---------------------------- -------------
1995 1996 1997
------------ -------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software.......................... $ 45,195 $ 54,775 $ 70,992
Furniture and fixtures................................... 12,682 13,406 45,454
------------ -------------- -----------
57,877 68,181 116,446
Less, accumulated depreciation........................... (22,785) (45,375) (68,402)
------------ -------------- -----------
$ 35,092 $ 22,806 $ 48,044
------------ -------------- -----------
------------ -------------- -----------
</TABLE>
Depreciation of fixed assets was approximately $22,702 and $22,590 for the years
ended December 31, 1995 and 1996, respectively.
4. RELATED-PARTY TRANSACTIONS
In January 1995, the Company loaned $29,700 to its sole stockholder who
also serves as an officer to the Company (the "Stockholder"). Interest is
payable annually at the rate of 7.92% per annum. This note was not paid until
the sale of the Company and, therefore, is recorded as a reduction of
stockholder's equity.
In February 1995, the Company loaned $20,000 to the Stockholder. Interest
is payable annually at the rate of 7.96% per annum. This note was not paid until
the sale of the Company and, therefore, is recorded as a reduction of
stockholder's equity.
In May 1995, the Company loaned $10,000 to the Stockholder. Interest is
payable annually at the rate of 7.12% per annum. The principal balance and
interest due on this note was repaid in full in July 1996.
In June 1995, the Company loaned $10,000 to the Stockholder. Interest is
payable annually at the rate of 6.83% per annum. The principal balance and
interest due on this note was repaid in full in July 1996.
In December 1995, the Company loaned $22,300 to the Stockholder. Interest
is payable annually at the rate of 5.91% per annum. This note was not paid until
the sale of the Company and, therefore, is recorded as a reduction of
stockholder's equity.
In 1995, the Company entered into a consultant agreement with the spouse of
the Stockholder, in which the Company paid the consultant $80,000 during the
year. In 1996, this consultant became an officer of the Company.
5. AOL NOTE PAYABLE
In April 1995, the Company entered into a promissory note agreement with
AOL whereby the Company received cash of $270,000 ("AOL Note"). Interest, at a
rate of 7.5% per annum, and principal, are payable on the earlier of demand or
April 2005. If payment is demanded, then such payment will be payable in 24
equal monthly installments of principal and interest beginning on the fifth day
following such demand.
In connection with the AOL Note, the Company issued a warrant (the "AOL
Warrant") to purchase a certain amount of shares of the Company's preferred
stock at a certain exercise price, both of which are based on a formula in the
warrant agreement. The Company recorded an unamortized discount of $108,643
which has been amortized as interest expense using the interest method. The AOL
Warrant was valued using the Black-Scholes option pricing model. As discussed in
Note 8, the AOL Note and the AOL Warrant were cancelled as part of the sale of
the Company in May 1997.
F-38
<PAGE>
HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Interest expense, including amortized disount related to the issuance of
the AOL Warrant, charged to operations for the year ended December 31, 1995 and
1996 was $55,887 and $74,572, respectively.
6. COMMITMENTS
LEASES
The Company leases office space in Herndon, Virginia, under a
non-cancelable operating lease expiring in June 1998. The following is a
schedule of future minimum lease payments under the lease as of December 31,
1996:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
- --------------------------------------------------------------
<S> <C>
1997................................................. $53,920
1998................................................. 27,769
-------
$81,689
-------
-------
</TABLE>
Rent expense was approximately $9,898 and $16,073 for the years ended
December 31, 1995 and 1996, respectively.
7. CAPITAL STOCK
At December 31, 1996, the authorized capital stock of the Company consists
of 10,000 shares of common stock, $0.01 par value per share. Upon formation of
the Company, 1,000 shares of common stock were issued to the founder.
8. SUBSEQUENT EVENT
On May 29, 1997, all of the outstanding shares of the Company were acquired
by iVillage in exchange for $2,600,000 in cash, 1,300,200 shares of iVillage
common stock on a pre-split basis, and cash amounts contingent on future
performance levels of the Company and iVillage, which was determined to be
$1,560,000 in January 1998. In addition, iVillage issued 609,000 shares of
common stock on a pre-split basis, to AOL in exchange for the release of the AOL
Note and the cancellation of the AOL Warrant.
F-39
<PAGE>
iVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On May 29, 1997, Health ResponseAbility Systems, Inc. ("HRS"), a developer
of health-related programming material for distribution through online service
providers and the Internet, agreed to sell substantially all of its outstanding
shares of capital stock and any securities convertible into shares of HRS
capital stock ("Fully Diluted HRS shares") to iVillage Inc. ("iVillage" or the
"Company") in exchange for $2.6 million in cash, 1,300,200 shares (on a
pre-split basis) of iVillage common stock and cash amounts contingent on future
performance levels of HRS and iVillage. In addition, iVillage issued 609,000
shares (on a pre-split basis) of common stock to America Online, Inc. ("AOL") in
exchange for the release of all equity rights in HRS held by AOL.
The acquisition has been accounted for as a purchase, with the assets
acquired and liabilities assumed recorded at fair values, and the results of
HRS's operations included in the Company's consolidated financial statements
from the date of acquisition.
The accompanying unaudited pro forma condensed consolidated financial
statements illustrate the effect of the acquisition on the Company's results of
operations assuming the acquisition took place on January 1, 1997. Since the
transaction has been reflected in the Company's consolidated balance sheet as of
December 31, 1997, contained elsewhere herein, no pro forma condensed
consolidated balance sheet has been provided.
The unaudited pro forma condensed consolidated financial statements have
been included as required by the rules of the Securities and Exchange Commission
and are provided for comparative purposes only. The unaudited pro forma
condensed consolidated financial statements do not purport to be indicative of
the results which would have been obtained if the acquisition had been effected
on the date indicated or which may be obtained in the future.
The accompanying unaudited pro forma condensed consolidated financial
statements should be read in connection with the historical financial statements
of the Company and HRS which are contained elsewhere in this Prospectus.
F-40
<PAGE>
iVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HEALTH RESPONSEABILITY
iVILLAGE INC. SYSTEMS, INC.
------------------ ----------------------
YEAR ENDED PERIOD ENDED PRO FORMA
DECEMBER 31, 1997 MAY 29, 1997 ADJUSTMENTS PRO FORMA
------------------ ---------------------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues............................. $ 6,018,696 $ 362,741 $ -- $ 6,381,437
------------ ---------- ----------- ------------
Operating expenses:
Production, content and product....
7,606,355 220,574 -- 7,826,929
Sales and marketing................ 8,770,581 7,955 -- 8,778,536
General and administrative......... 10,726,844 234,519 974,273 (a) 12,455,636
520,000 (b)
------------ ---------- ----------- ------------
Total operating expenses....... 27,103,780 463,048 1,494,273 29,061,101
------------ ---------- ----------- ------------
Loss from operations................. (21,085,084) (100,307) (1,494,273) (22,679,664)
Interest expense, net................ (215,876) (15,405) -- (231,281)
------------ ---------- ----------- ------------
------------ ---------- ----------- ------------
Net loss............................. (21,300,960) (115,712) ($1,494,273) ($22,910,945)
------------ ---------- ----------- ------------
------------ ---------- ----------- ------------
Basic and diluted net loss per share (4.55) (4.20)
(on a pre-split basis)............. $ $
------------ ------------
------------ ------------
Weighted average shares of common
stock outstanding used in computing
basic and diluted net loss per
share (on a pre-split basis)....... 4,682,872 774,141 (c) 5,457,013
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
F-41
<PAGE>
iVILLAGE INC. AND HEALTH RESPONSEABILITY SYSTEMS, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
1. The pro forma adjustments to the unaudited pro forma condensed
consolidated statement of operations are as follows:
<TABLE>
<S> <C>
(a) Adjustment to general and administrative expenses for the amortization of $5,955,331 of
goodwill, amortized over a three-year period............................................... $974,273
--------
--------
(b) Adjustment to general and administrative expenses for the amortization of $1,560,000 of
goodwill associated with contingent consideration paid on future performance levels........ $520,000
--------
--------
(c) Adjustment to weighted average shares of common stock outstanding used in computing basic
and diluted net loss per share to reflect the issuance of 1,909,200 shares (on a pre-split
basis) in connection with the acquisition of HRS as of January 1, 1997..................... 774,141
--------
--------
</TABLE>
F-42
<PAGE>
UNDERWRITING
iVillage and the underwriters named below (the "Underwriters") have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each Underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Credit
Suisse First Boston Corporation and Hambrecht & Quist LLC are the
representatives of the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
- -------------------------------------------------------------------------- ----------------
<S> <C>
Goldman, Sachs & Co.......................................................
Credit Suisse First Boston Corporation....................................
Hambrecht & Quist LLC.....................................................
----------
Total...................................................... 3,650,000
----------
----------
</TABLE>
------------------------
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional 547,500
shares from iVillage to cover such sales. They may exercise that option for
30 days. If any shares are purchased pursuant to this option, the Underwriters
will severally purchase shares in approximately the same proportion as set forth
in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the Underwriters by iVillage. Such amounts are
shown assuming both no exercise and full exercise of the Underwriters' option to
purchase additional shares.
Paid by iVillage
<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............... $ $
Total................... $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the Underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
iVillage, its directors, officers and stockholders have agreed with the
Underwriters not to dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the period
from the date of this prospectus continuing through the date 180 days after the
date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee benefit
plans. Please see "Shares Available for Future Sale" for a discussion of certain
transfer restrictions.
At the request of iVillage, the Underwriters have reserved at the initial
public offering price up to 538,461 shares of common stock for sale to NBC,
Liberty Media Corporation and America Online, Inc. These purchasers have
expressed an interest in purchasing such shares of common stock in this
offering. Each purchaser has agreed that, if it does purchase any of such
reserved shares, it will enter into a lock-up agreement with the Underwriters,
under which each agrees not to sell shares for 180 days after the date of this
prospectus. There can be no assurance that any of the reserved shares will be
purchased. The number of shares available for sale to the general public in this
offering will be reduced by the number of reserved shares sold. Any reserved
U-1
<PAGE>
shares not so purchased will be offered to the general public on the same basis
as the other shares offered hereby.
In addition, at the request of iVillage, the Underwriters have reserved for
sale, at the initial public offering price, shares of common stock for certain
directors, employees and associates of iVillage. There can be no assurance that
any of the reserved shares will be so purchased. The number of shares available
for sale to the general public in the offering will be reduced by the number of
reserved shares sold. Any reserved shares not so purchased will be offered to
the general public on the same basis as the other shares offered hereby.
Prior to this offering, there has been no public market for the shares. The
initial public offering price will be negotiated among iVillage and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be iVillage's historical performance, estimates of the business
potential and earnings prospects of iVillage, an assessment of iVillage's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
A prospectus in electronic format is being made available on an Internet
Web site maintained by Wit Capital Corporation. Other than the prospectus in
electronic format, the information on such Web site and any information
contained on any other Web site maintained by Wit Capital Corporation is not
part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by iVillage or any
Underwriter in such capacity and should not be relied on by prospective
investors.
The common stock has been approved for quotation on the Nasdaq National
Market under the symbol "IVIL".
In connection with this offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in this offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while this offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The Underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
iVillage estimates that its share of the total expenses of this offering,
excluding underwriting discounts and commissions, will be approximately
$1,500,000.
iVillage has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
Credit Suisse First Boston Corporation acted as iVillage's exclusive
placement agent in connection with the private placement of iVillage's series E
convertible preferred stock in December 1998. iVillage paid customary placement
fees to Credit Suisse First Boston Corporation for such services.
U-2
<PAGE>
------------------------------------------------------
------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 7
Use of Proceeds............................... 16
Dividend Policy............................... 16
Capitalization................................ 17
Dilution...................................... 18
Selected Consolidated Financial
Data........................................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 20
Business...................................... 31
Management.................................... 45
Certain Transactions.......................... 52
Principal Stockholders........................ 56
Description of Capital Stock.................. 58
Shares Eligible for Future Sale............... 60
Legal Matters................................. 61
Experts....................................... 61
Available Information......................... 62
Index to Financial Statements................. F-1
Underwriting.................................. U-1
</TABLE>
------------------------------
Through and including , 1999 (25 days after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as underwriter and with respect to an unsold allotment or subscription.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
3,650,000 Shares
iVILLAGE INC.
Common Stock
------------------------------
[LOGO]
------------------------------
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
HAMBRECHT & QUIST
Representatives of the Underwriters
------------------------------
WIT CAPITAL CORPORATION
Facilitator of Internet distribution
------------------------------
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the Registrant in connection with the sale of
the securities being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq/NMS listing fee.
<TABLE>
<S> <C>
SEC Registration Fee................................................................ $ 16,337
NASD Filing Fee..................................................................... 6,377
Nasdaq National Market Listing Fee.................................................. 95,000
Printing Costs...................................................................... 350,000
Legal Fees and Expenses............................................................. 500,000
Accounting Fees and Expenses........................................................ 375,000
Blue Sky Fees and Expenses.......................................................... 10,000
Transfer Agent and Registrar Fees................................................... 7,500
Miscellaneous....................................................................... 139,786
----------
Total.......................................................................... $1,500,000
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee or agent to the Registrant. The
Delaware General Corporation Law provides that Section 145 is not exclusive of
other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
Article VII of the Registrant's Bylaws provides for indemnification by the
Registrant of its directors, officers and employees to the fullest extent
permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases, redemptions or
other distributions, or (iv) for any transaction from which the director derived
an improper personal benefit. The Registrant's Amended and Restated Certificate
of Incorporation provides for such limitation of liability.
The Registrant intends to obtain directors, and officers, insurance
providing indemnification for certain of the Registrant's directors, officers
and employees for certain liabilities.
Reference is also made to the Underwriting Agreement to be filed as
Exhibit 1.1 to the Registration Statement for information concerning the
Underwriters' obligation to indemnify the Registrant and its officers and
directors in certain circumstances.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1995, the Registrant has issued and sold (without payment
of any selling commission to any person) the following unregistered securities:
(1) In September 1995, the Registrant issued and sold an aggregate of
666,668, 333,333, and 83,333 shares of Common Stock to Candice Carpenter,
Nancy Evans and Robert Levitan, respectively, at a price per share of
$.0015 (on a post-split basis).
(2) In September 1995, the Registrant issued a stock subscription
warrant to purchase 17,366 shares, on a post-split basis, of Series B
Convertible Preferred Stock at a price per share of $7.50 (the "September
1995 Warrant") and 1,000,000 shares of Series A Convertible Preferred Stock
to America Online, Inc. ("AOL") at a price per share of $1.00 in exchange
for the cancellation of a note and $496,494 in cash.
(3) In May 1996, the Registrant issued 797,130 shares of Series B
Convertible Preferred Stock to AOL at a price per share of $2.50 in
exchange for the cancellation of a note payable.
(4) In May 1996, the Registrant issued and sold an aggregate of
300,000 shares of Series B-1 Convertible Preferred Stock to AOL at a price
per share of $2.50 in exchange for the conversion of the principal amount
and accrued interest on two notes and $450,000 in cash.
(5) In May 1996, in connection with an information provider agreement,
the Registrant issued a stock subscription warrant to purchase 266,666
shares, (on a post-split basis), to AOL at a price per share of $7.50.
(6) In May 1996, the Registrant issued and sold an aggregate of
4,477,746 shares of Series B Convertible Preferred Stock at a price per
share of $2.50 to the following entities: Kleiner Perkins Caufield & Byers
VII ("Kleiner"), KPCB VII Founders Fund ("KPCB VII"), KPCB Information
Sciences Zaibatsu Fund II ("KPCB Information"), Ann R. Mathias, Edward J.
Mathias, TCI Online Village Holdings, Inc. ("TCI") and the Tribune Company
("Tribune").
(7) In December 1996, in connection with an Agreement and Plan of
Reorganization, the Registrant issued 33,333 shares of Common Stock (on a
post-split basis) each to Jacqueline B. Needelman and David L. Cohen in
consideration for 1,500 shares of jointly owned common stock of
ParentsPlace.com, Inc.
(8) In January 1997, Beth Polish exercised an option and received
8,333 shares of Common Stock at a price per share of $3.00 (on a post-split
basis).
(9) In January 1997, Elaine Rubin exercised an option and received
12,500 shares of Common Stock at a price per share of $3.00 (on a
post-split basis).
(10) In January 1997, Tina Neederlander exercised an option and
received 12,500 shares of Common Stock at a price per share of $3.00 (on a
post-split basis).
(11) In February 1997, the Registrant issued and sold stock
subscription warrants to purchase an aggregate of 111,771 shares of Common
Stock at a price per share of $5.86 (on a post-split basis) to AOL,
Tribune, Kleiner and KPCB Information in consideration for the cancellation
of a note and cash.
(12) In May 1997, the Registrant issued and sold an aggregate of
11,003,068 shares of Series C Preferred Stock at a price per share of
$1.954 to the following entities: AOL, Philip E Berney, CIBC Wood Gundy
Ventures, Inc. ("CIBC") Cox Interactive Media, Inc. ("Cox"), Convergence
Ventures I, L.P. ("Convergence"), Stephen Friedman, Charles A. Davis,
Growth Shares Ltd., Juergen Habermeier, Kleiner, KPCB Information, Ralph
Mack, Stephen M. Parish, Rho Management Trust I ("Rho"), Sonem Partners,
Tenet, Transatlantic Venture Partners C.V., Tribune, The Trustees of the
General Electric Pension Trust, Norman Tulchin, Stanley Tulchin and one
other corporate investor.
II-2
<PAGE>
(13) In May 1997, the Registrant issued warrants to Bear, Stearns &
Co. Inc. to purchase 30,194 shares of the Registrant's Common Stock at an
exercise price of $0.03 per share in consideration for services rendered
(on a post-split basis).
(14) In May 1997, in connection with a Plan of Reorganization and
Merger, among the Registrant, Health ResponseAbility Systems, Inc. and
other signatories thereto, the Registrant issued 433,400 shares of Common
Stock to Elin Silveous and 203,000 shares of Common Stock to AOL (on a
post-split basis).
(15) In December 1997, the Registrant issued and sold an aggregate of
2,190,377 shares of Series C Convertible Preferred Stock at a price per
share of $1.954 per share to the following entities: AOL, Convergence,
Convergence Entrepreneurs Fund I ("Convergence Entrepreneurs"), Rho, Sonem
Partners and O'Sullivan Graev & Karabell, L.L.P., Profit Sharing Plan F/B/O
Martin H. Levenglick.
(16) In February 1998, the Registrant issued and sold an aggregate of
284,317 shares of Common Stock to Tenet Healthcare Corporation ("Tenet") at
a price per share of $5.86 (on a post-split basis).
(17) In February 1998, the Registrant issued a certificate for an
aggregate of 76,800 shares of Series B Convertible Preferred Stock to
Kleiner in exchange for a certificate representing 76,800 shares of Series
B Convertible Preferred Stock issued to KPCB VII.
(18) In February 1998, the Registrant issued and sold an aggregate of
1,333,334 shares of Series D Convertible Preferred Stock to Tenet at a
price per share of $2.50.
(19) In March 1998, the Registrant issued and sold an aggregate of
4,480,000 shares of Series D Convertible Preferred Stock at a price per
share of $2.50 to the following entities: Convergence, Nexus Capital
Partners I, L.P., NIG-Village Ltd., Porcelain Partners L.P., Rho, TCV II
V.O.F., Technology Crossover Ventures II, L.P., TCV Strategic Partners,
L.P., Technology Crossover Partners II, C.V. and TCV II (Q), L.P.
(20) In April 1998, the Registrant issued and sold an aggregate of
6,434,000 shares of Series D Convertible Preferred Stock at a price per
share of $2.50 to the following entities: AOL, CIBC, Transatlantic Venture
Partners, C.V., Leavitt Family Trust, Boston Millennia Partners Limited,
Boston Millennia Associates I Partnership, FIMA Finance Management, Inc.,
Josef H. von Rickenbach, David Mahoney, Chestnut Investment Associates
1998, Chestnut Partners, Inc., Allyn C. Woodward, Moore Global Investments,
Ltd., Remington Investment Strategies, L.P., Ralph Mack, Cox and one other
corporate investor.
(21) In May 1998, the Registrant issued and sold an aggregate of
352,666 shares of Series D Convertible Preferred Stock at a price per share
of $2.50 to the following entities: Merrill Roth, Gannett International
Communications, Inc. and Pasquale Lavecchia.
(22) In June 1998, the Registrant issued and sold an aggregate of
400,000 shares of Series D Convertible Preferred Stock to a corporate
investor at a price per share of $2.50.
(23) In June 1998, Stephen Chao, Inc. exercised an option and received
8,333 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(24) In December 1998, the Registrant issued and sold an aggregate of
11,730,948 shares of Series E Convertible Preferred Stock at a price of
$2.85 to the following entities: AOL, Boston Millennia Associates, Boston
Millennia Partners Limited, Lawrence Berk, CIBC, Convergence, Convergence
Entrepreneurs, Cox, Gannett, Leavitt, Steven Parish, Merrill Roth, Moore,
Nexus, NIG, O'Sullivan Graev & Karabell, L.L.P., Profit Sharing Plan F/B/O
Martin H. Levenglick, Ralph Mack, Remington, Rho, Sonem, TCI, TCI Ventures
Group, LLC, TCV II (Q), L.P., TCV II V.O.F., TCV Strategic Partners, L.P.,
Technology Crossover Ventures II, C.V., Technology Crossover Ventures II,
L.P., Tenet, Transatlantic, Tribune, William James Bell 1993 Trust,
Seligman Communications & Information Fund, Vantage Point Communications
Partners, LP, Vantage Point
II-3
<PAGE>
Venture Partners 1996, LP, Applewood Associates, Fred F. Nazem, Admirals,
L.P., Fred Tanzer, Van Wagoner Capital Management.
(25) In December 1998, John Kiefer exercised an option and received
833 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(26) In December 1998, Eileen O'Reilly exercised an option and
received 83 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(27) In December 1998, Laurie Peterson Wardell exercised an option and
received 83 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(28) In January 1999, Warren Cook exercised an option and received
1,000 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(29) In January 1999, Maura Curtin exercised an option and received 83
shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(30) In January 1999, Lisa Gansky exercised an option and received
4,000 shares of Common Stock at a price per share of $7.50 (on a post-split
basis).
(31) In January 1999, Dermott McCormack exercised an option and
received 83 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(32) In January 1999, Christine Ohly exercised options and received
250 and 2,416 shares of Common Stock at a price per share of $3.00 and
$5.10, respectively (on a post-split basis).
(33) In January 1999, Sarah Cabot Rockwell exercised options and
received 833 shares of Common Stock at a price per share of $5.10 (on a
post-split basis).
(34) In January 1999, Deanna Vincent exercised options and received
6,250 shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(35) In January 1999, Philip Vo exercised options and received 83
shares of Common Stock at a price per share of $5.10 (on a post-split
basis).
(36) In February 1999, in connection with the acquisition of
KnowledgeWeb, Inc. d/b/a Astrology.Net, the Registrant issued 802,125
shares of Common Stock to Astrology.Net (on a post-split basis).
Exemption from registration for the transactions described above was
claimed pursuant to Section 4(2) of the Securities Act of 1933, as amended,
regarding transactions by the issuer not involving a public offering, in that
these transactions were made, without general solicitation or advertising, to
sophisticated investors with access to all relevant information necessary to
evaluate these investments and who represented to the Registrant that the shares
were being acquired for investment.
II-4
<PAGE>
ITEM 16. EXHIBITS.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.**
2.1 Agreement and Plan of Reorganization and Merger dated as of January 31, 1997, as amended on
March 31, 1997, as further amended as of May 15, 1997, as further amended as of May 16, 1997 and as
further amended as of May 23, 1997 among the Registrant, Health ResponseAbility Systems, Inc., and
other signatories thereto.**
2.2 Letter of Intent dated January 4, 1999 between the Registrant and KnowledgeWeb, Inc. d/b/a
Astrology.Net.**
2.3 Agreement and Plan of Reorganization dated as of December 10, 1996 among the Registrant, PP
Acquisition Corporation, ParentsPlace.com, Inc. and the stockholders of ParentsPlace.com, Inc.**
2.4 Letter Agreement dated February 10, 1999 by and among the Registrant and Kid's Warehouse, Inc.,
iBaby, Inc., Our Baby, LLC, JBM Ventures, Inc. and Gavin Mandelbaum.**
2.5 Agreement and Plan of Reorganization dated as of February 12, 1999 among the Registrant and
KnowledgeWeb Acquisition Corporation and KnowledgeWeb, Inc. and the Shareholders of KnowledgeWeb,
Inc.**
3.1 Certificate of Incorporation of the Registrant, as currently in effect.**
3.2 Amended and Restated Certificate of Incorporation of the Registrant.
3.3 Form of Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon
completion of this offering.**
3.4 Bylaws of the Registrant, as currently in effect.**
3.5 Form of Amended and Restated Bylaws of the Registrant, to be effective upon completion of this
offering.**
4.1 Form of Registrant's Common Stock Certificate.
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP.**
9.1 Voting Trust Agreement dated as of September 19, 1995 between Candice Carpenter, Nancy Evans and
certain owners of Common Stock of the Registrant.**
10.1 Form of Indemnification Agreement between the Registrant and each of its directors and officers.**
10.2 1995 Amended and Restated Employee Stock Option Plan of the Registrant.**
10.3 1997 Amended and Restated Acquisition Stock Option Plan of the Registrant.**
10.4 Form of 1999 Employee Stock Option Plan of the Registrant.**
10.5 Form of 1999 Director Stock Option Plan of the Registrant.**
10.6 Form of 1999 Employee Stock Purchase Plan of the Registrant.**
10.7 Form of 1999 Acquisition Stock Option Plan of the Registrant.**
10.8 Interactive Services Agreement dated December 31, 1998, between the Registrant and America Online,
Inc. ("AOL").+
10.9 Confidential Bankcard Marketing Agreement dated June 4, 1998, between the Registrant and First
Credit Card Services USA L.L.C.+
10.10 Promotion Distribution and License Agreement dated October 21, 1998 between AT&T Corp. and the
Registrant.+
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ----------------------------------------------------------------------------------------------------
<S> <C>
10.11 Exclusive Sponsorship Agreement dated February 28, 1998 between Amazon.com, Inc. and the
Registrant.+
10.12 Promotion Agreement dated November 6, 1998 between Snap! LLC and the Registrant.+
10.13 Online Services Agreement dated December 19, 1997 between Charles Schwab & Co., Inc. and the
Registrant.+
10.14 Letter Agreement dated November 11, 1998 between the National Broadcasting Company, Inc. and the
Registrant.**
10.15 Joint Activities Agreement dated September 1997 between Intuit Inc. and the Registrant.+
10.16 Sponsorship Agreement dated as of December 18, 1998 by and between Ford Motor Media, a division of
J. Walter Thompson and the Registrant.+
10.17 Sponsorship Agreement dated as of October 30, 1998 between Ralston Purina Company and the
Registrant.+
10.18 Form of Non-Competition, Non-Disclosure and Assignment of Inventions Agreement dated September 9,
1995, and Amendment dated May 6, 1996, between the Registrant and each of Candice Carpenter and
Nancy Evans.**
10.19 Employment Letter dated June 4, 1998 to Craig Monaghan.**
10.20 Lease dated August 21, 1995, commencing on September 1, 1995, as amended on September 20, 1995, as
amended and supplemented April 5, 1996, as further amended and supplemented on April 15, 1996, as
further amended and supplemented January 20, 1997, and as amended and supplemented on May 8, 1997,
between 170 Fifth Associates (the "Landlord") and the Registrant.**
10.21 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.**
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 Form of Promissory Note dated March 9, 1999 in the amount of $15,497,558.48 between the Registrant
and GE Investments Subsidiary, Inc.
21 List of subsidiaries.**
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1).**
23.2 Consents of PricewaterhouseCoopers LLP.
24 Power of Attorney (included on page II-8).**
27 Financial Data Schedule.**
</TABLE>
II-6
<PAGE>
- ------------------
** Previously filed
+ Confidential treatment has been requested for certain portions of these
exhibits. Omitted portions have been filed separately with the Commission.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
II-7
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 4 to this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 11th day of March, 1999.
iVILLAGE INC.
By: /s/ Caterina A. Conti
----------------------------------
Caterina A. Conti
General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to this Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ------------------------------------------------- --------------
<S> <C> <C>
/s/ Candice Carpenter* Co-Chairperson of the Board and Chief Executive March 11, 1999
- ------------------------------------------ Officer (Principal Executive Officer)
Candice Carpenter
/s/ Nancy Evans* Co-Chairperson of the Board and Editor- in-Chief March 11, 1999
- ------------------------------------------
Nancy Evans
/s/ Craig T. Monaghan* Chief Financial Officer (Principal Financial March 11, 1999
- ------------------------------------------ Officer)
Craig T. Monaghan
/s/ Sanjay Muralidhar* Vice President, Finance (Principal Accounting March 11, 1999
- ------------------------------------------ Officer)
Sanjay Muralidhar
/s/ Alan Colner* Director March 11, 1999
- ------------------------------------------
Alan Colner
/s/ Jay Hoag* Director March 11, 1999
- ------------------------------------------
Jay Hoag
/s/ Lennert J. Leader* Director March 11, 1999
- ------------------------------------------
Lennert J. Leader
/s/ Habib Kairouz* Director March 11, 1999
- ------------------------------------------
Habib Kairouz
/s/ Michael Levy* Director March 11, 1999
- ------------------------------------------
Michael Levy
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
- ------------------------------------------ ------------------------------------------------- --------------
<S> <C> <C>
/s/ Douglas McCormick* Director March 11, 1999
- ------------------------------------------
Douglas McCormick
/s/ Martin Yudkovitz* Director March 11, 1999
- ------------------------------------------
Martin Yudkovitz
/s/ Daniel Schulman* Director March 11, 1999
- ------------------------------------------
Daniel Schulman
*By: /s/ Caterina A. Conti
--------------------------------------
Caterina A. Conti
General Counsel
</TABLE>
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ---------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement.**
2.1 -- Agreement and Plan of Reorganization and Merger dated as of January 31, 1997, as
amended on March 31, 1997, as further amended as of May 15, 1997, as further amended
as of May 16, 1997 and as further amended as of May 23, 1997 among the Registrant,
Health ResponseAbility Systems, Inc., and other signatories thereto.**
2.2 -- Letter of Intent dated January 4, 1999 between the Registrant and Knowledgeweb, Inc.
d/b/a Astrology.Net.**
2.3 -- Agreement and Plan of Reorganization dated as of December 10, 1996 among the
Registrant, PP Acquisition Corporation, ParentsPlace.com, Inc. and the stockholders
of ParentsPlace.com, Inc.**
2.4 -- Letter Agreement dated February 10, 1999 by and among the Registrant and Kid's
Warehouse, Inc., iBaby, Inc., Our Baby, LLC, JBM Ventures, Inc. and Gavin
Mandelbaum.**
2.5 -- Agreement and Plan of Reorganization dated as of February 12, 1999 among the
Registrant and KnowledgeWeb Acquisition Corporation and KnowledgeWeb, Inc. and the
shareholders of KnowledgeWeb, Inc.**
3.1 -- Certificate of Incorporation of the Registrant, as currently in effect.**
3.2 -- Amended and Restated Certificate of Incorporation of the Registrant.
3.3 -- Form of Amended and Restated Certificate of Incorporation of the Registrant, to be
filed and effective upon completion of this offering.**
3.4 -- Bylaws of the Registrant, as currently in effect.**
3.5 -- Form of Amended and Restated Bylaws of the Registrant, to be effective upon
completion of this offering.**
4.1 -- Form of Registrant's Common Stock Certificate.
5.1 -- Opinion of Orrick, Herrington & Sutcliffe LLP.**
9.1 -- Voting Trust Agreement dated as of September 19, 1995 between Candice Carpenter,
Nancy Evans and certain owners of Common Stock of the Registrant.**
10.1 -- Form of Indemnification Agreement between the Registrant and each of its directors
and officers.**
10.2 -- 1995 Amended and Restated Employee Stock Option Plan of the Registrant.**
10.3 -- 1997 Amended and Restated Acquisition Stock Option Plan of the Registrant.**
10.4 -- Form of 1999 Employee Stock Option Plan of the Registrant.**
10.5 -- Form of 1999 Director Stock Option Plan of the Registrant.**
10.6 -- Form of 1999 Employee Stock Purchase Plan of the Registrant.**
10.7 -- Form of 1999 Acquisition Stock Option Plan of the Registrant.**
10.8 -- Interactive Services Agreement dated December 31, 1998, between the Registrant and
America Online, Inc. ("AOL").+
10.9 -- Confidential Bankcard Marketing Agreement dated June 4, 1998, between the Registrant
and First Credit Card Services USA L.L.C.+
10.10 -- Promotion Distribution and License Agreement dated October 21, 1998 between AT&T
Corp. and the Registrant.+
10.11 -- Exclusive Sponsorship Agreement dated February 28, 1998 between Amazon.com, Inc. and
the Registrant.+
10.12 -- Promotion Agreement dated November 6, 1998 between Snap! LLC and the Registrant.+
10.13 -- Online Services Agreement dated December 19, 1997 between Charles Schwab & Co., Inc.
and the Registrant.+
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
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<S> <C> <C> <C>
10.14 -- Letter Agreement dated November 11, 1998 between the National Broadcasting Company,
Inc. and the Registrant.**
10.15 -- Joint Activities Agreement dated September 1997 between Intuit Inc. and the
Registrant.+
10.16 -- Sponsorship Agreement dated as of December 18, 1998 by and between Ford Motor Media,
advisor of J. Walter Thompson and the Registrant.+
10.17 -- Sponsorship Agreement dated as of October 30, 1998 between Ralston Purina Company and
the Registrant.+
10.18 -- Form of Non-Competition, Non-Disclosure and Assignment of Inventions Agreement dated
September 9, 1995, and Amendment dated May 6, 1996, between the Registrant and each
of Candice Carpenter and Nancy Evans.**
10.19 -- Employment Letter dated June 4, 1998 to Craig Monaghan.**
10.20 -- Lease dated August 21, 1995, commencing on September 1, 1995, as amended on
September 20, 1995, as amended and supplemented April 5, 1996, as further amended and
supplemented on April 15, 1996, as further amended and supplemented January 20, 1997,
and as amended and supplemented on May 8, 1997, between 170 Fifth Associates (the
"Landlord") and the Registrant.**
10.21 -- 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.**
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 -- Form of Promissory Note dated March 9, 1999 in the amount of $15,497,558.48 between
the Registrant and GE Investments Subsidiary, Inc.
21 -- List of subsidiaries.**
23.1 -- Consent of Orrick, Herrington & Sutcliffe LLP (included in Exhibit 5.1).**
23.2 -- Consents of PricewaterhouseCoopers LLP.
24 -- Power of Attorney (included on page II-7).**
27 -- Financial Data Schedule.**
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** Previously filed.
+ Confidential treatment has been requested for certain portions of these
exhibits. Omitted portions have been filed separately with the Commission.
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RESTATED CERTIFICATE OF INCORPORATION OF iVILLAGE INC.
iVillage Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The name of the corporation is iVillage Inc. The corporation was
originally incorporated under the name iVillage Inc. and the
original Certificate of Incorporation of the corporation was filed
with the Secretary of State of the State of Delaware on
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
The Corporation shall be authorized to issue 120,000,000 shares of all
classes, consisting of (i) 65,000,000 shares of common stock, $.01 par value
(the "Common Stock"), and (ii) 55,000,000 shares of preferred stock, $.01 par
value. Authority is hereby expressly granted to the Board of Directors, subject
to the provisions of Section 3 hereof, from time to time to issue the preferred
stock in one or more series, and in connection with the creation of any such
series, by resolution or resolutions providing for the issuance of the shares
thereof, to determine and fix such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative participating, optional
or other special rights, and qualifications limitations or restrictions thereof,
including, without limitation thereof, dividend rights, conversion rights,
voting rights, redemption privileges and liquidation preferences, as shall be
stated and expressed in such resolution or resolutions, all to the full extent
now or hereafter permitted by the General Corporation Law. Of such preferred
stock, 1,000,000 shares shall be designated as "Series A Preferred Stock",
5,629,846 shares shall be
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designated as "Series B Preferred Stock", 300,000 shares shall be designated as
"Series B-1 Preferred Stock", 13,528,762 shares shall be designated as "Series C
Preferred Stock", 13,000,000 shares shall be designated as "Series D Preferred
Stock and 18,953,616 shares shall be designated "Series E Preferred Stock". (For
convenience of reference, the shares of Series A Preferred Stock, Series B
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are sometimes hereinafter
collectively referred to as the "Preferred Stock".) The Series A Preferred
Stock, Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock shall have the
following designations, powers, preferences and other rights, and
qualifications, limitations and restrictions:
1. Dividends. The holders of Preferred Stock shall be entitled to share in any
dividends declared and paid upon or set aside for the Common Stock of the
Corporation, pro rata in accordance with the number of shares of Common Stock
into which such shares of Preferred Stock are then convertible pursuant to
Section 4.
2. Liquidation.
(a) Upon a Liquidation (as defined below), after payment or provision
for payment of the debts and other liabilities of the Corporation and all
amounts which the holders of any class of capital stock ranking senior to the
Preferred Stock shall be entitled to receive upon such Liquidation,
(i) the holders of Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock shall be entitled to receive, on a pari-passu
basis in accordance with their respective Preference Amounts (as defined below),
out of the remaining assets of the Corporation available for distribution to its
stockholders with respect to each share of Series C Preferred Stock, an amount
(the "Series C Preference Amount") equal to the sum of (A) $1.954 and (B) all
declared but unpaid dividends payable with respect to such share under Section
1, with respect to each share of Series D Preferred Stock, an amount (the
"Series D Preference Amount") equal to the sum of (A) $2.50 and (B) all declared
but unpaid dividends payable with respect to such share under Section 1, and
with respect to each share of Series E Preferred Stock, an amount (the "Series E
Preference Amount") equal to the sum of (A) $2.85 and (B) all declared but
unpaid dividends payable with respect to such share under Section 1, before any
distribution shall be made to the holders of the Series A Preferred Stock, the
Series B Preferred Stock, the Series B-1 Preferred Stock, the Common Stock or
any other class of capital stock of the Corporation ranking junior to the Series
C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock. If upon
any Liquidation the assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock the full respective
Series C Preference Amounts, Series D Preference Amounts and Series E Preference
Amounts to which they shall be entitled, respectively, the holders of Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
share ratably in any distribution of assets based on the respective amounts
which would be payable to them on or with respect to the shares of Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred Stock held by
them upon such
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distribution pursuant to this Section 2 as if all amounts payable on or with
respect to such shares were paid in full.
(ii) After distribution to the holders of Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock of the full Series C
Preference Amount, Series D Preference Amount and Series E Preference Amount set
forth in Section 2(a)(i), the holders of Series A Preferred Stock, the holders
of Series B Preferred Stock and the holders of Series B-1 Preferred Stock shall
be entitled to receive, on a pari passu basis in accordance with their
respective Preference Amounts, out of the remaining assets of the Corporation
available for distribution to its stockholders, with respect to each share of
Series A Preferred Stock an amount (the "Series A Preference Amount") equal to
the sum of (A) $1.00 and (B) all declared but unpaid dividends payable with
respect to such share under Section 1, and with respect to each share of Series
B Preferred Stock and each share of Series B-1 Preferred Stock an amount (the
"Series B Preference Amount") equal to the sum of (A) $2.50 and (B) all declared
but unpaid dividends payable with respect to such share under Section 1, in each
case, before any distribution shall be made to the holders of the Common Stock
or any other class of capital stock of the Corporation ranking junior to the
Preferred Stock. If upon any Liquidation the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the holders of
Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred
Stock the full respective Preference Amounts to which they shall be entitled,
respectively, the holders of Series A Preferred Stock, Series B Preferred Stock
and Series B-1 Preferred Stock shall share ratably in any distribution of assets
based on the respective amounts which would be payable to them on or with
respect to the shares of Series A Preferred Stock, Series B Preferred Stock and
Series B-1 Preferred Stock held by them upon such distribution pursuant to this
Section 2 as if all amounts payable on or with respect to such shares were paid
in full. The Series A Preference Amount, Series B Preference Amount, Series C
Preference Amount, Series D Preference Amount and Series E Preference Amount
sometimes hereinafter shall be collectively referred to as the "Preference
Amount" and each such Preference Amount shall be subject to equitable adjustment
to reflect stock splits, stock dividends, stock combinations, recapitalizations
and like occurrences.
(b) Upon any Liquidation, the holders of Series A Preferred Stock,
Series B Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock shall, after any distribution to such holders of
the full amount to which they shall be entitled under paragraph (a) above, not
share in the distribution of the remaining assets of the Corporation, except to
the extent that such holders also hold Common Stock of the Corporation. After
distribution of the Preference Amount, the remaining assets of the Corporation
available for distribution, if any, to the stockholders of the Corporation shall
be distributed to the holders of shares of Common Stock and Series E Preferred
Stock, pro rata based on the respective number of shares of Common Stock then
owned or then issuable upon conversion of the Series E Preferred Stock then
owned by such stockholders, provided, however, that the aggregate distribution
per share of Series E Preferred Stock pursuant to Section 2(a)(i) and 2(b) shall
not exceed $5.70 (subject to equitable adjustment to reflect stock splits, stock
dividends, stock combinations, recapitalizations and like occurrences).
(c) For purposes of this Section 2, a Corporate Transaction (as defined
below) shall be treated as a Liquidation and shall entitle the holders of
Preferred Stock to receive, upon
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the consummation of such Corporate Transaction, consideration in the same form
as is to be provided in such Corporate Transaction (whether cash, securities,
other property or any combination thereof), having a value (as determined in
accordance with the next sentence) equivalent to the sum of (i) the amounts to
which such holders of Preferred Stock would otherwise have been entitled
pursuant to Section 2(a) and Section 2(b) assuming such Corporate Transaction
had constituted a Liquidation within the meaning of this Section 2 and (ii) that
in the case of each share of Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock, an additional amount that, when added to the
amount of declared but unpaid dividends (if any) then payable with respect to
such share of Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, as the case may be, will constitute an amount representing a
10% (calculated daily and compounded annually) internal rate of return (computed
in accordance with generally accepted financial practice) with respect to the
Series C Preference Amount, Series D Preference Amount or Series E Preference
Amount, as the case may be, of such share calculated for the period commencing
with the date of the original issuance thereof and ending on the date of such
Corporate Transaction and in connection with such calculation, the Corporation
shall provide each holder of Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock with the information set forth in Section 4(f)
within the time period specified therein. In the event that any distribution
pursuant to this Section 2(c) shall be payable in a form other than cash, the
value thereof shall be its fair market value as determined in good faith by the
Board of Directors of the Company; provided, however, that if the holders of 60%
of the then outstanding Preferred Stock shall dispute in writing such
determination within ten (10) business days of such determination, the
Corporation shall promptly engage a nationally-recognized independent investment
banking firm or independent competent appraisers, jointly selected by the
Corporation and the holders of at least 60% of the then outstanding Preferred
Stock, to determine the value of the non-cash assets and property to be
distributed to the holders of Preferred Stock pursuant to this Section 2, whose
determination shall be conclusive (the "Fair Market Value").
(d) As used herein, the following terms shall have the following
respective meanings:
(i) "Corporate Transaction" means (A) any consolidation or merger
of the Corporation, other than any merger or consolidation resulting in the
holders of the capital stock of the Corporation entitled to vote for the
election of directors holding a majority of the capital stock of the surviving
or resulting entity entitled to vote for the election of directors, (B) any
person or entity (including any affiliates thereof) becoming the holder of a
majority of the capital stock of the Corporation entitled to vote for the
election of directors, or (C) any sale or other disposition by the Corporation
of all or substantially all of its assets.
(ii) "Liquidation" means any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, other than any
dissolution, liquidation or winding up in connection with any reincorporation of
the Corporation in another jurisdiction.
3. Voting Rights.
(a) In addition to the rights provided by law and in the Corporation's
By-laws, each share of Preferred Stock (except for shares of Series B-1
Preferred Stock) shall entitle the
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holder thereof to such number of votes as shall equal the nearest whole number
of shares of Common Stock into which such share of Preferred Stock is then
convertible pursuant to Section 4. Except as provided in paragraphs (b) and (c)
below or as otherwise provided by law, the holders of Preferred Stock (except
for Series B-1 Preferred Stock) shall be entitled to vote on all matters as to
which holders of Common Stock shall be entitled to vote, in the same manner and
with the same effect as such holders of Common Stock, voting together with the
holders of Common Stock as one class. Except as otherwise required by law, all
shares of Series B-1 Preferred Stock shall be non-voting, and the holders
thereof shall not be entitled to vote on any matters.
(b) The Corporation shall not, without the affirmative consent or
approval of each of (i) the holders of a majority of the shares of Series A
Preferred Stock then outstanding (with respect to clauses (1), (2), (3) and (4)
below), voting as a separate class, (ii) the holders of at least 60% of the
shares of Series B Preferred Stock then outstanding (with respect to clauses
(1), (2), (3) and (4) below), voting as a separate class, (iii) the holders of
at least a majority of the shares of Series A Preferred Stock and Series B
Preferred Stock then outstanding, voting together as a class (with respect to
clauses (5) and (6) below), (iv) the holders of at least 66 2/3% (by voting
power) of the shares of Series D Preferred Stock then outstanding voting as a
separate class (with respect to clauses (2), (3), (4) and (7) below) and (v) the
holders of at least 66 2/3% (by voting power) of the shares of Series E
Preferred Stock then outstanding voting as a separate class (with respect to
clauses (2), (3), (4) and (8) below):
(1) authorize, create, designate or establish any class or series
of capital stock ranking senior to such series of Preferred Stock or reclassify
any shares of Common Stock into shares having any preference or priority as to
dividends or assets superior to any such preference or priority of such series
of Preferred Stock;
(2) in any other manner alter or change the powers, preferences, or
rights, or qualifications, limitations or restrictions thereof, of the shares of
such series of Preferred Stock as to affect them adversely;
(3) in any other manner amend the Certificate of Incorporation of
the Corporation so as to materially adversely affect the powers, preferences or
rights, or qualifications, limitations or restrictions thereof, of the shares of
such series of Preferred Stock, except (1) to authorize, create, designate or
establish any class or series of capital stock ranking, with respect to voting
rights or rights to dividends or assets, pari passu with or junior to such
series of Preferred Stock and (2) that the number of shares of Common Stock that
the Corporation is authorized to issue may, without separate class vote, be
increased or decreased from time to time by the affirmative vote of the holders
of a majority of the capital stock of the Corporation entitled to vote thereon;
(4) amend the By-laws of the Corporation in any manner that would
materially adversely affect the powers, preferences or rights, or
qualifications, limitations or restrictions thereof, of the shares of such
series of Preferred Stock;
(5) consummate any Corporate Transaction; or
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(6) approve or authorize any Liquidation or any recapitalization or
reorganization of the Corporation.
(7) notwithstanding clause (3) above, authorize, create, designate
or establish any class or series of capital stock ranking, with respect to
voting rights or rights to dividends or assets, senior to or pari passu with the
Series D Preferred Stock.
(8) notwithstanding clause (3) above, authorize, create, designate
or establish any class or series of capital stock ranking, with respect to
voting rights or rights to dividends or assets, senior to or pari passu with the
Series E Preferred Stock.
(c) The Corporation shall not, without the affirmative consent or
approval of each of (i) the holders of at least 66 2/3% of the shares of Series
C Preferred Stock (with respect to clauses (1), (2), (3) and (4) below), voting
separately as a class, (ii) the holders of at least 66 2/3% of the shares of
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
(with respect to clauses (5), (6), (7) below), voting together as a class and
(iii) the holders of least 60% of the shares of Series C Preferred Stock (with
respect to clause (8) below), voting separately as a class:
(1) authorize, create, designate or establish any class or series
of capital stock ranking senior to or pari passu with Series C Preferred Stock
or reclassify any shares of Common Stock into shares pari passu with or having
any preference or priority as to dividends or assets pari passu with or superior
to any such preference or priority of Series C Preferred Stock;
(2) in any other manner alter or change the powers, preferences, or
rights, or qualifications, limitations or restrictions thereof, of the shares of
Series C Preferred Stock as to affect them adversely;
(3) in any other manner amend the Certificate of Incorporation of
the Corporation so as to adversely affect the powers, preferences or rights, or
qualifications, limitations or restrictions thereof, of the shares of Series C
Preferred Stock, except to authorize, create, designate or establish any class
or series of capital stock ranking, with respect to voting rights or rights to
dividends or assets, junior to Series C Preferred Stock;
(4) amend the By-laws of the Corporation in any manner that would
adversely affect the powers, preferences or rights, or qualifications,
limitations or restrictions thereof, of the shares of Series C Preferred Stock;
(5) consummate any Corporate Transaction;
(6) approve or authorize any Liquidation or any recapitalization or
reorganization of the Corporation;
(7) incur or guaranty any indebtedness for money borrowed, having a
maturity of twelve months or greater, in the excess of $5,000,000 in the
aggregate at any time outstanding; or
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(8) increase or decrease the authorized number of shares of Series
C Preferred Stock, except as contemplated by Section 7.13 of the Series C
Preferred Stock Purchase Agreement dated as of May 28, 1997 among the
Corporation and the other parties identified therein.
(b) The Corporation shall not, without the affirmative consent or
approval of the holders of 66 2/3% of the shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock then outstanding, voting together as a class:
(1) directly or indirectly pay or declare any dividend or make any
distribution upon, or redeem, retire, repurchase or otherwise acquire, any
shares of capital stock of the Corporation, other than (i) pursuant to any stock
vesting or similar agreement with an officer, director or employee of the
Company or (ii) in accordance with Sections 3.2 and 3.4 of the Fourth Amended
and Restated Stockholders' Agreement dated as of the Original Issuance Date (as
defined in Section 4(a)), among the Corporation and its stockholders named
therein;
(2) increase or decrease the authorized number of shares of
Preferred Stock or Common Stock; or
(3) sell, transfer, or grant any lien or encumbrance on any
material intellectual property right of the Corporation, other than licenses
granted in the ordinary course of business of the Corporation.
4. Optional Conversion.
(a) Upon the terms set forth in this Section 4, each holder of shares
of Preferred Stock shall have the right, (x) in the case of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock at such holder's option, at any time and from
time to time, and (y) in the case of Series B-1 Preferred Stock, if and only to
the extent permitted under the provisions of this Section 4(a), to convert any
of such shares into the number of fully paid and nonassessable shares of Common
Stock equal to the quotient obtained by dividing (i) (A) in the case of the
Series A Preferred Stock, the product of $1.00 and the number of shares of
Series A Preferred Stock being converted, (B) in the case of the Series B
Preferred Stock and Series B-1 Preferred Stock, the product of $2.50 and the
number of shares of Series B Preferred Stock or Series B-1 Preferred Stock (as
the case may be) being converted, (C) in the case of the Series C Preferred
Stock, the product of $1.954 and the number of shares of Series C Preferred
Stock being converted, (D) in the case of the Series D Preferred Stock, the
product of $2.50 and the number of shares of Series D Preferred Stock being
converted and (E) in the case of Series E Preferred Stock, the product of $2.85
and the number of shares of Series E Preferred Stock being converted, by (ii)
the applicable Conversion Price (as defined below) therefor, as last adjusted
and then in effect, and in addition, in the case of the Series B-1 Preferred
Stock (in lieu of converting into Common Stock), into an equal number of shares
of Series B Preferred Stock, by surrender of the certificates representing the
shares of Preferred Stock to be converted. The conversion price per share at
which shares of Common Stock shall be issuable upon conversion of shares of
Preferred Stock shall initially be $1.00 for the Series A Preferred Stock, $2.24
for the Series B Preferred
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Stock and the Series B-1 Preferred Stock, $1.954 for the Series C Preferred
Stock, $2.50 for the Series D Preferred Stock and $2.85 for the Series E
Preferred Stock (as to each such series of Preferred Stock, the "Conversion
Price"), subject to adjustment as set forth in paragraph (d) below. Each holder
of shares of Series B-1 Preferred Stock shall have the right, at such time as
such holder and its affiliates would hold, in the aggregate, voting capital
stock of the Corporation representing less than nineteen and nine-tenths (19.9%)
percent of the then outstanding voting capital stock of the Corporation
(assuming solely for the purpose of such calculation that shares of Series B-1
Preferred Stock then held by such holder or any affiliate thereof constituting
in the aggregate at least twenty-five (25%) percent of the number of shares of
Series B-1 Preferred Stock held by such holder on May 6, 1996 (the "Minimum
Number of Shares") would entitle such holder to such number of votes as shall
equal the nearest whole number of shares of Common Stock into which said shares
of Series B-1 Preferred Stock would then be convertible but for the provisions
of this Section 4(a)), to convert up to that number of such holder's shares of
Series B-1 Preferred Stock (but in no event representing less than the Minimum
Number of Shares), that, after giving effect to such conversion, would result in
such holder and its affiliates holding, in the aggregate, voting capital stock
of the Corporation representing less than nineteen and nine-tenths (19.9%)
percent of the then outstanding voting capital stock of the Corporation into, at
the option of the holder thereof, either (a) an equal number of fully paid and
nonassessable shares of Series B Preferred Stock or (ii) that number of shares
of Common Stock as is determined in accordance with the foregoing provisions of
this Section 4(a). Shares of Series B-1 Preferred Stock shall be converted into
shares of Series B Preferred Stock or Common Stock (as requested by the holder
thereof), as aforesaid, within five business days of written notice from such
holder(s) of Series B-1 Preferred Stock to the Corporation requesting that the
specified number of such holder's shares of Series B-1 Preferred Stock be
converted into shares of Series B Preferred Stock or Common Stock (as requested
by the holder thereof), and otherwise in accordance with Section 4(b). As used
herein, the term "Original Issuance Date" shall mean the date of original
issuance of the first share of Series E Preferred Stock.
(b) The holder of any shares of Preferred Stock may exercise the
conversion right pursuant to paragraph (a) above by delivering to the
Corporation the certificate or certificates for the shares to be converted, duly
endorsed or assigned in blank or to the Corporation (if required by it),
accompanied by written notice stating that the holder elects to convert such
shares and stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Conversion shall
be deemed to have been effected on the date when such delivery is made (the
"Conversion Date"). As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, to the place
designated by such holder, a certificate or certificates for the number of full
shares of Common Stock (in the case of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock) or Series B Preferred Stock (in the case of Series B-1
Preferred Stock) to which such holder is entitled, and a cash amount in respect
of any fractional interest in a share of Common Stock (in the case of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock) or Series B Preferred Stock (in
the case of Series B-1 Preferred Stock) as provided in paragraph (c) below. The
person in whose name the certificate or certificates for Common Stock (in the
case of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock) or Series B
Preferred Stock (in the case of Series B-1 Preferred Stock) are to be
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issued shall be deemed to have become a stockholder of record on the applicable
Conversion Date unless the transfer books of the Corporation are closed on that
date, in which event such person shall be deemed to have become a stockholder of
record on the next succeeding date on which the transfer books are open, but the
Conversion Price shall be that in effect on the Conversion Date. Upon conversion
of only a portion of the number of shares covered by a certificate representing
shares of Preferred Stock surrendered for conversion, the Corporation shall
issue and deliver to or upon the written order of the holder of the certificate
so surrendered for conversion, at the expense of the Corporation, a new
certificate covering the number of shares of Preferred Stock representing the
unconverted portion of the certificate so surrendered.
(c) No fractional shares of Common Stock (in the case of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, Series D
Preferred Stock or Series E Preferred Stock), Series B Preferred Stock (in the
case of Series B-1 Preferred Stock) or scrip shall be issued upon conversion of
shares of Preferred Stock. The number of full shares of Common Stock issuable
upon conversion of Preferred Stock shall be computed on the basis of the
aggregate number of shares of Preferred Stock to be converted. Instead of any
fractional shares of Common Stock (in the case of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock), Series B Preferred Stock (in the case of Series B-1
Preferred Stock) which would otherwise be issuable upon conversion of any shares
of Preferred Stock, the Corporation shall pay a cash adjustment in respect of
such fractional interest in an amount equal to the product of (i) the price of
one share of Common Stock (in the case of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock), Series B Preferred Stock (in the case of Series B-1 Preferred
Stock) as determined in good faith by the Board of Directors and (ii) such
fractional interest. The holders of fractional interests shall not be entitled
to any rights as stockholders of the Corporation in respect of such fractional
interests.
(d) The Conversion Price applicable to the Series A Preferred Stock,
the Series B Preferred Stock, the Series B-1 Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and/or the Series E Preferred
Stock (as the case may be) shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall at any time or from time to time after the
Original Issuance Date issue any shares of Common Stock (including shares of
Common Stock deemed to be issued pursuant to subdivision (3) of clause (ii)
below) other than Excluded Stock (as defined in clause (iii) below) without
consideration or for a consideration per share less than the Conversion Price
applicable to such series of Preferred Stock in effect immediately prior to the
issuance of such Common Stock, then the applicable Conversion Price in effect
immediately prior to each such issuance shall forthwith be lowered to a price
equal to the quotient obtained by dividing:
(1) an amount equal to the sum of (x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock deemed to have
been issued pursuant to subdivision (3) of clause (ii) below) immediately prior
to such issuance, multiplied by the applicable Conversion Price in effect
immediately prior to such issuance, and (y) the consideration received by the
Corporation upon such issuance; by
9
<PAGE>
(2) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of clause (ii) below) immediately after the issuance of such
Common Stock.
(ii) For the purposes of any adjustment of the Conversion Price
pursuant to clause (i) above, the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be deemed to be
the amount of cash paid therefor after deducting therefrom any discounts,
commissions or placement fees payable by the Corporation to any underwriter or
placement agent in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the Fair Market Value thereof (such Fair Market Value
being determined as provided in the definition thereof but with reference to
such consideration), irrespective of any accounting treatment.
(3) The issuance after the Original Issuance Date of options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to purchase or
rights to subscribe for such convertible or exchangeable securities shall be
deemed to be an issuance of Common Stock for purposes of clause (i) above. In
the case of any such issuance of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities:
a. the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
b. the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities, options, or rights were issued and for a consideration equal to
the consideration received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of such securities
or the exercise of any related options or rights (the consideration in each case
to be determined in the manner provided in subdivisions (1) and (2) above);
10
<PAGE>
c. on any change in the number of shares or exercise price
of Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchange for such securities, other than a change resulting
from the antidilution provisions thereof, the applicable Conversion Price shall
forthwith be readjusted to such Conversion Price as would have been obtained had
the adjustment made upon the issuance of such options, rights or securities not
converted prior to such change or options or rights related to such securities
not converted prior to such change been made upon the basis of such change; and
d. on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
applicable Conversion Price shall forthwith be readjusted to such Conversion
Price as would have been obtained had the adjustment made upon the issuance of
such options, rights, securities or options or rights related to such securities
been made upon the basis of the issuance of only the number of shares of Common
Stock actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities, or upon the exercise of the options
or rights related to such securities and subsequent conversion or exchange
thereof.
(iii) "Excluded Stock" means (A) shares of Common Stock, and options
therefor, issued or granted from time to time to employees, directors and
officers of and consultants to the Corporation pursuant to agreements, plans or
arrangements approved by the Board of Directors; (B) shares of Series B
Preferred Stock issued upon exercise or exchange of stock subscription warrants
dated September 19, 1995 and May 6, 1996 to purchase shares of Series B
Preferred Stock; (C) shares of Common Stock issued upon conversion of shares of
Preferred Stock; (D) shares of Common Stock issued by the Corporation as a stock
dividend or upon any subdivision, split-up or combination of shares of Common
Stock; (E) shares of Series B Preferred Stock issued upon conversion of shares
of Series B-1 Preferred Stock; (F) shares of Common Stock issued upon exercise
or exchange of stock subscription warrants dated May 28, 1997, issued to Bear,
Stearns & Co. Inc. to purchase shares of Common Stock; (G) shares of Series C
Preferred Stock issued upon exercise or exchange of stock subscription warrants
dated February 27, 1997 and April 2, 1997 to purchase shares of Series C
Preferred Stock; (H) shares of Common Stock issued to Tenet Healthcare
Corporation ("Tenet") pursuant to the Common Stock Purchase Agreement dated as
of February 24, 1998 (the "Tenet Agreement"), between the Corporation and Tenet;
(I) Additional Shares (as such term is defined in the Tenet Agreement), (J)
shares of Common Stock issued in connection with the acquisition of Health
ResponseAbility Systems, Inc. on May 29, 1997; (K) shares of capital stock of
the Company issued to one or more broadcast networks or their affiliates in
exchange for in-kind consideration (which may include, by way of example, but
not in limitation thereof, promotion, marketing and advertising time); (L)
shares of capital stock of the Corporation issued as consideration in connection
with the acquisition by the Corporation of all or substantially all of the
assets or all capital stock of any person or entity and (M) securities that were
declared to be "Excluded Stock" for purposes of this Section by the holders of
at least 60% of (1) the shares of Series A Preferred Stock and Series B
Preferred Stock if an adjustment to the Conversion Price of the Series A
Preferred Stock and/or Series B Preferred Stock would otherwise result pursuant
to Section 4(d)(i) with respect to Series A Preferred Stock and/or Series B
Preferred Stock, (2) the shares of Series C Preferred Stock if an adjustment to
the Conversion Price of the Series C Preferred Stock would otherwise result
pursuant to Section 4(d)(i) with respect to Series C Preferred Stock, (3) the
shares of Series
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<PAGE>
D Preferred Stock if an adjustment to the Conversion Price of the Series D
Preferred Stock would otherwise result pursuant to Section 4(d)(i) with respect
to Series D Preferred Stock and (4) the shares of Series E Preferred Stock if an
adjustment to the Conversion Price of the Series E Preferred Stock would
otherwise result pursuant to Section 4(d)(i) with respect to Series E Preferred
Stock.
(iv) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of Preferred Stock
shall be increased in proportion to such increase in outstanding shares.
(v) If, at any time after the Original Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares.
(vi) In the event of any capital reorganization of the Corporation, any
reclassification of the stock of the Corporation (other than a change in par
value or from par value to no par value or from no par value to par value or as
a result of a stock dividend or subdivision, split-up or combination of shares),
or any consolidation or merger of the Corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any change in the Common Stock), each share of Preferred Stock shall
after such reorganization, reclassification, consolidation or merger (unless, in
the case of a consolidation or merger, payment shall have been made to the
holders of Preferred Stock of the full amount to which they shall have been
entitled pursuant to Section 2(c) of this Article Fourth) be convertible into
the kind and number of shares of stock or other securities or property of the
Corporation or of the corporation resulting from such consolidation or surviving
such merger to which the holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon conversion of such share of
Preferred Stock would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications, consolidations
or mergers.
(vii) All calculations under this paragraph shall be made to the
nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10) of a
share, as the case may be.
(viii) In any case in which the provisions of this paragraph (d) shall
require that an adjustment shall become effective immediately after a record
date of an event, the Corporation may defer until the occurrence of such event
(i) issuing to the holder of any share of Preferred Stock converted after such
record date and before the occurrence of such event the shares of capital stock
issuable upon such conversion by reason of the adjustment required by such event
in addition to the shares of capital stock issuable upon such conversion before
giving
12
<PAGE>
effect to such adjustments, and (ii) paying to such holder any amount in
cash in lieu of a fractional share of capital stock pursuant to paragraph (c)
above; provided, however, that the Corporation shall deliver to such holder an
appropriate instrument evidencing such holder's right to receive such additional
shares and such cash.
(e) Whenever the Conversion Price shall be adjusted as provided in
paragraph (d), the Corporation shall make available for inspection during
regular business hours, at its principal executive offices or at such other
place as may be designated by the Corporation, a statement, signed by its chief
executive officer, showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by first class certified
mail, return receipt requested and postage prepaid, to each holder of Preferred
Stock as to which the Conversion Price shall be so adjusted at such holder's
address appearing on the Corporation's records. Where appropriate, such copy may
be given in advance and may be included as part of any notice required to be
mailed under the provisions of paragraph (f) below.
(f) If the Corporation shall propose to take any action of the types
described in clauses (iv), (v) or (vi) of paragraph (d) above, the Corporation
shall give notice to each holder of shares of Preferred Stock, in the manner set
forth in paragraph (e) above, which notice shall specify the record date, if
any, with respect to any such action and the date on which such action is to
take place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Conversion
Price and the number, kind or class of shares or other securities or property
which shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice shall be
given at least 20 days prior to the date so fixed, and in case of all other
action, such notice shall be given at least 30 days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(g) The Corporation shall reserve, and at all times from and after the
date of Original Issuance Date keep reserved, free from preemptive rights, out
of its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of Preferred Stock, sufficient shares of
Common Stock to provide for the conversion of all outstanding shares of
Preferred Stock.
(h) At any time the Corporation makes or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Corporation other than shares of
Common Stock, provision shall be made so that each holder of shares of Preferred
Stock shall receive upon conversion thereof, in addition to the shares of Common
Stock receivable thereupon, the number of securities of the Corporation which it
would have received had its shares of Preferred Stock been converted into shares
of Common Stock on the date of such event and had such holder thereafter, during
the period from the date of such event to and including the date of conversion,
retained such securities receivable by it pursuant to this paragraph during such
period, subject to the sum of all other adjustments called for during such
period under this Section 4 with respect to the rights of such holder of shares
of Preferred Stock.
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<PAGE>
5. Mandatory Conversion.
(a) Upon the consummation of the first underwritten public offering for
the account of the Corporation of Common Stock pursuant to a registration
statement filed under the Securities Act of 1933, as amended, at an offering
price per share of Common Stock to the public (subject to equitable adjustment
for stock splits, stock dividends, stock combinations, recapitalizations and
like occurrences) of not less than $3.93 and with aggregate proceeds (net of
underwriting discounts and commissions) to the Corporation of not less than
$20,000,000 (a "Qualified Public Offering"), each share of Preferred Stock then
outstanding shall, by virtue of and simultaneously with such Qualified Public
Offering, be deemed automatically converted into the number of fully paid and
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(i) (A) in the case of the Series A Preferred Stock $1.00, (B) in the case of
the Series B Preferred Stock and the Series B-1 Preferred Stock $2.50, (C) in
the case of the Series C Preferred Stock $1.954, (D) in the case of the Series D
Preferred Stock $2.50 and (E) in the case of the Series E Preferred Stock $2.85
by (ii) the applicable Conversion Price, as last adjusted and then in effect.
(b) As promptly as practicable after the date of consummation of any
Qualified Public Offering and the delivery to the Corporation of the certificate
or certificates for the shares of Preferred Stock which have been converted,
duly endorsed or assigned in blank to the Corporation (if required by it), the
Corporation shall issue and deliver to or upon the written order of each holder
of Preferred Stock, to the place designated by such holder, a certificate or
certificates for the number of full shares of Common Stock to which such holder
is entitled, and a cash amount in respect of any fractional interest in a share
of Common Stock as provided in paragraph (c) below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a stockholder of record on the date of such Qualified Public
Offering and on such date the shares of Preferred Stock shall cease to be
outstanding, whether or not the certificates representing such shares have been
received by the Corporation.
(c) The provisions set forth in Sections 4(b) and (c) shall apply to
the conversion of Preferred Stock pursuant to this Section in the same manner as
they apply to the conversion of Preferred Stock pursuant to Section 4.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.
ARTICLE VI
The number of directors which constitute the whole Board of Directors of
the corporation shall be as specified in the Bylaws of the corporation.
ARTICLE VII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provisions
14
<PAGE>
contained in the statutes) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
Bylaws of the corporation.
ARTICLE VIII
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders.
ARTICLE IX
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Bylaws and no action shall be taken by the stockholders by written consent. The
affirmative vote of sixty-six and two thirds percent (66 2/3%) of the then
outstanding voting securities of the corporation, voting together as a single
class, shall be required for the amendment, repeal or modification of the
provisions of Article VIII or IX of this Amended and Restated Certificate of
Incorporation or Sections 2.3, 2.5 and 3.2(b) of the Corporation's Bylaws.
ARTICLE X
To the fullest extent permitted by the Delaware General Corporation Law, a
director of the Corporation shall not be personally liable to the corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. Neither any amendment nor repeal of this Article X nor the adoption of
any provision of this Certificate of Incorporation inconsistent with this
Article X, shall eliminate or reduce the effect of this Article X in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article X, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
ARTICLE XI
1. The Corporation shall indemnify each of the Corporation's directors and
officers in each and every situation where, under Section 145 of the General
Corporation Law of the State of Delaware, as amended from time to time ("Section
145"), the Corporation is permitted or empowered to make such indemnification.
The Corporation may, in the sole discretion of the Board of Directors of the
Corporation, indemnify any other person who may be indemnified pursuant to
Section 145 to the extent the Board of Directors deems advisable, as permitted
by Section 145. The Corporation shall promptly make or cause to be made any
determination required to be made pursuant to Section 145.
2. No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is subsequently amended to
further eliminate or limit the liability of a director, then a
15
<PAGE>
director of the Corporation, in addition to the circumstances in which a
director is not personally liable as set forth in the preceding sentence, shall
not be liable to the fullest extent permitted by the amended General Corporation
Law of the State of Delaware. For purposes of this Article XI, "fiduciary duty
as a director" shall include any fiduciary duty arising out of serving at the
Corporation's request as a director of another corporation, partnership, joint
venture or other enterprise, and "personal liability to the corporation or its
stockholders" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
corporation in its capacity as a security holder, joint venture, partner,
beneficiary, creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise.
ARTICLE XII
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provisions contained in this Certificate, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
16
<PAGE>
IN WITNESS WHEREOF, the corporation has caused this
Certificate to be signed by Caterina A. Conti, its General Counsel, and
attested by Steven Elkes, its Assistant Secretary, this 11th day of March, 1999.
iVillage Inc.
By: /s/ Caterina A. Conti
---------------------------------------
Caterina A. Conti
General Counsel
ATTEST:
By: /s/ Steve Elkes
-----------------------
17
<PAGE>
NUMBER [LOGO OF iVILLAGE INC.] SHARES
COMMON STOCK INCORPORATED UNDER THE SEE REVERSE FOR
LAWS OF THE STATE OF CERTAIN DEFINITIONS
DELAWARE CUSIP 46588H 10 5
This Certifies that
-------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
is the record holder of
--------------------------------------------------------
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.01 PAR VALUE,
OF iVILLAGE INC.
Transferable on the books of the Corporation in person or by duly authorized
attorney on surrender of this Certificate properly endorsed. This Certificate
shall not be valid until countersigned and registered by the Transfer Agent
and Registrar.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers
Dated:
/s/ /s/
CHAIRMAN OF THE BOARD AND GENERAL COUNSEL AND
CHIEF EXECUTIVE OFFICER [SEAL OF iVILLAGE ] SECRETARY
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY TRANSFER AGENT AND REGISTRAR
BY___________________________________
AUTHORIZED SIGNATURE
<PAGE>
[LOGO OF iVILLAGE INC.]
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation or to the
Transfer Agent and Registrar named on the face of this Certificate.
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- .............Custodian .............
TEN BNT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors
in common Act.............................
COM PROP -- as community property (State)
UNIF TRF MIN ACT -- .......... Custodian (until age....)
(Cust)
..............under Uniform Transfers to Minors Act ...................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, _____________________________ hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________attorney-in-fact
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER.
<PAGE>
* Confidential treatment has been requested for certain portions of this
exhibit.
CONFIDENTIAL
INTERACTIVE SERVICES AGREEMENT
------------------------------
This Interactive Services Agreement (this "Agreement"), effective as
of December 31, 1998 (the "Effective Date"), is made and entered into by and
between America Online, Inc. ("AOL"), a Delaware corporation, with its
principal offices at 22000 AOL Way, Dulles, Virginia 20166, and iVillage, Inc.
("Interactive Content Provider" or "ICP"), a Delaware corporation, with its
principal offices at 170 Fifth Avenue, 4th Floor, New York, NY 10010 (each a
"Party" and collectively the "Parties").
INTRODUCTION
------------
AOL and ICP each desires that ICP provide the ICP Sites through the
AOL Network, subject to the terms and conditions set forth in this Agreement.
Defined terms used but not defined in the body of the Agreement or in Exhibit C
shall be as defined on Exhibit B attached hereto.
TERMS
-----
1. DISTRIBUTION; PROGRAMMING
-------------------------
1.1 Anchor Tenancy. Beginning on the Launch Date (or upon the
launch of the new version of the applicable screen or
channel, as the case may be), ICP shall receive anchor tenant
distribution within the AOL Service as follows:
(a) Within the Families channel (or any specific successor
thereof), AOL shall continuously and prominently place an
agreed-upon ICP logo or banner (an "Anchor Tenant Button") on
each of (i) the Families channel main screen, (ii) the
Parenting subscreen and (iii) the Babies subscreen, or any
specific successor(s) of such screens, which Anchor Tenant
Buttons shall each link to the "Parent Soup" Online Area.
(b) Within the Health channel (or any specific successor
thereof), AOL shall continuously and prominently place an
Anchor Tenant Button on each of (i) the Health channel main
screen and (ii) the Illnesses and Treatments subscreen, or
any specific successor(s) of such screens, which Anchor
Tenant Buttons shall link to the "Better Health" Online Area.
(c) AOL shall continuously and prominently place an Anchor
Tenant Button on the Women's subchannel main screen (or any
specific successor thereof), which Anchor Tenant Button shall
link to the "iVillage Women's Network" Online Area.
(d) Until [*], AOL shall continuously and prominently place an
Anchor Tenant Button on the Lifestyles channel main screen (or
any specific successor thereof), which Anchor Tenant Button
shall link to the "iVillage Women's Network" Online Area.
Beginning on [*], AOL shall have the option to remove the
Anchor Tenant Button set forth in this Section 1.1(d), [*]
from the Lifestyles channel main screen, in which case the
carriage payments and Impressions Guarantees shall be
adjusted as set forth in Section 1.5.1.1 and
1
<PAGE>
Section 1.6.1. ICP may request that [*] the Anchor Tenant
Button set forth in this Section [*] on [*] by providing
AOL with written notice thereof no later than [*], in which
case the [*] and [*] shall be [*] as set forth in [*] and [*].
(e) AOL shall provide ICP with the keywords specified on
Exhibit A.2 hereto provided, however, that (i) AOL shall have
the right to discontinue provision to ICP of any keywords
that are not registered trademarks of ICP upon thirty (30)
days notice and (ii) ICP may submit for AOL's approval (not
to be unreasonably withheld) any other trademarks or trade
names of ICP as potential additional keywords.
(f) list the ICP Sites in AOL's "Find" feature.
Except to the extent expressly described herein, the exact
form, placement and nature of the Anchor Tenant Buttons shall
be determined by AOL in its reasonable editorial discretion.
1.1.1 Discontinuation of ICP properties. If ICP
discontinues provision of any property specified in
Section 1.1, ICP shall continue to be obligated to
pay AOL the full carriage fee specified in Section
1.5, provided that ICP and AOL shall negotiate in
good faith for a "make-good" provision to ICP for
the discontinued property, which may include
carriage for another ICP property or provision to
ICP of remnant AOL advertising inventory. Any such
"make-good" provision shall occur during the Term of
this Agreement.
1.2 ICP Sites. ICP shall work diligently to develop and implement
the ICP Sites, consisting of, at a minimum, the specific
Content described on Exhibit A attached hereto. ICP shall
develop the design of the Online Areas in consultation with
AOL and in accordance with any standard design and content
publishing guidelines provided to ICP by AOL (including,
without limitation, any HTML publishing guidelines). ICP
shall not authorize or permit any third party to distribute
the Licensed Content or any other Content of ICP through the
AOL Network absent AOL's prior written approval which shall
not be unreasonably withheld. The inclusion of any additional
Content in the ICP Sites (including, without limitation, any
features, functionality or technology) not expressly
described on Exhibit A shall be subject to AOL's prior
written approval, which shall not be unreasonably withheld or
delayed.
1.3 License. ICP hereby grants AOL a worldwide license to use,
market, license, store, distribute, display, communicate,
perform, transmit and promote the ICP Sites and the Licensed
Content (or any portion thereof) through such areas or
features of the AOL Network as AOL deems appropriate,
including without limitation the right to integrate Content
from the ICP Sites or another Linked Interactive Site by
linking to specific areas on the ICP Sites, provided that the
link to any such Content on the AOL Network shall conform
with the specifications set forth on Exhibit D. Without
limiting the generality of the foregoing, to the extent AOL
wishes to distribute the Licensed Content through an online
or Internet product or service separate and distinct from the
U.S. version of the America
2
<PAGE>
Online branded service (each an '"Additional AOL Product"):
(i) AOL shall provide ICP with prior written notice of the
Additional AOL Product through which the Licensed Content
will be made available; and (ii) any changes in the form or
presentation of the Licensed Content within the Additional
AOL Product shall be subject to ICP's approval, which shall
not be unreasonably withheld or delayed. AOL shall not be
required to pay any additional fees or other form of
compensation in connection with distribution of the Licensed
Content through any such Additional AOL Product.
1.4 Links on Sites. The Parties will work together on mutually
acceptable links (including links back to AOL) within the ICP
Sites in order to create a robust and engaging AOL member
experience. ICP shall take reasonable efforts to insure that
AOL traffic is generally either kept within the ICP Sites or
channeled back into the AOL Network. [*], ICP shall not be
permitted to establish any "pointers" or links between the ICP
Sites and any other area on or outside of the AOL Network,
including, without limitation, other ICP Sites or sites on the
World Wide Web portion of the Internet ("Linked Sites"),
without the prior written approval of AOL, which approval
shall not be unreasonably withheld and may be conditioned
upon, among other things, payment of certain linking fees and
commitments providing for promotion of the ICP Sites and AOL
through the Linked Site in question. In addition, AOL may
restrict its approval (at any time) to specific portions of
Content or functionality within a Linked Site (based on AOL's
programming objectives related to the ICP Sites). In such
case, establishment of the link from the ICP Site to the
Linked Site will be subject to mutual agreement of the Parties
regarding the means by which access will be restricted to the
approved portions of the Linked Site. Notwithstanding the
foregoing, ICP may establish links from an ICP Site to another
ICP Site provided that such links are editorial,
content-specific links, to relevant areas of the ICP Sites. In
general, such links shall be temporary (i.e., generally no
more than 7 days continuous duration, and in any event, for
no more than 30 days continuous duration and no more than [*]
days cumulatively (including partial duration days) in any [*]
period).
1.4.1 Management. AOL shall have no obligations of any
kind with respect to the ICP Sites or any Linked
Interactive Site. ICP shall be responsible for any
hosting or communication costs associated with the
ICP Sites and any Linked Interactive Sites
(including, without limitation, the costs associated
with (i) any agreed-upon direct connections between
the AOL Network and an ICP Internet Site or a Linked
Interactive Site or (ii) a mirrored version of an
ICP Internet Site or a Linked Interactive Site). Any
Linked Interactive Sites shall be subject to the
license set forth in Section 1.3 above. ICP will
permit AOL Members to access and use any ICP
Interactive Site free of charge during the Term. AOL
Members shall not be
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required to go through a registration process (or
any similar process) in order to access and use the
ICP Sites, provided that if ICP elects to have all
users of ICP Internet Sites go through a
registration and subscription process (or other
similar process) in order to access and use the
sites, then ICP shall be permitted to require AOL
Members to go through the identical process,
provided, further, that (a) AOL Members shall not be
required to go through any such registration process
from a Welcome Mat, and (b) in any event the ICP
Internet Sites shall contain a material amount of
Content that is available without AOL Members having
to go through any such registration process.
1.5 Carriage Fee. ICP shall pay AOL during the Term as follows:
1.5.1 Cash Payments. ICP shall pay AOL Three Million Six
Hundred Eighty Four Thousand Six Hundred Fifteen
Dollars ($3,684,615) in equal quarterly installments
beginning on the date this Agreement is executed and
Four Million Eight Hundred Sixty Three Thousand Six
Hundred Ninety Two Dollars ($4,863,692) in equal
quarterly installments beginning on or before the
date which is one (1) year from the Effective Date.
1.5.1.1 [*] Anchor Tenancy. In the event that
AOL or ICP elects to [*] the [*] channel
Anchor Tenant Button, as set forth in
Section [*], AOL will [*] (or [*] from
future [*]) a [*] of the [*] associated
with such [*], based on a monthly
carriage payment of $[*] for the first
year of the Term and a monthly [*] of
$[*] for the second year of the Term.
1.5.2 In-Kind Programming and Promotion. ICP shall provide
AOL with the equivalent of $2,746,666 during the
Term, made up of the in-kind commitments specified on
Exhibit E attached hereto in the amounts and with
the bona-fide values listed in such exhibit (the
"ICP In-kind Commitments"). Without limiting any
other rights or remedies available to AOL, AOL's
anchor tenant and impressions commitments specified
in Sections 1.1 and 1.6 herein are and will be
contingent upon provision by ICP of the ICP In-Kind
Commitments in accordance with Exhibit E.
1.5.3 [*] Television Advertisements. ICP will make best
efforts to obtain [*] consent to provide AOL with the
following advertising on [*] ("[*]") during the Term:
(a) ICP will provide AOL with $[*], (based on
the best available preferred rate card as
provided in any ICP agreement with [*] or
its affiliates), in prime time advertising
spots on [*] for the broadcast of co-branded
ICP/AOL advertisements (each an "[*]" and
collectively, the "[*]"). In the event that
ICP is unable to secure every [*] during
prime time, the mix of prime time/non-prime
time [*] shall be at least equivalent to the
mix of prime time/non-prime time advertising
spots provided to ICP by [*]. No less than
[*] of the creative for each [*] shall
promote AOL.
(b) AOL, or its agents, shall produce at least
one [*], subject to the following: AOL shall
submit the [*] for ICP's approval, which
shall not be unreasonably withheld. If ICP
does not approve
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the [*], AOL will make one round of
revisions and resubmit the [*] for ICP's
approval, which shall not be unreasonably
withheld. If ICP approves the [*], either on
the first or second submission, AOL shall be
responsible for any costs [*] Incurred In
the production thereof. In the event that
ICP does not approve the second submission
of the [*], or in the event that the Parties
otherwise agree, ICP or its agents shall
produce the [*] and ICP shall obtain AOL's
approval of the [*]; provided that ICP shall
be responsible for any and all costs
incurred in the production thereof.
(c) In any instance when ICP promotes an ICP
Interactive Site on [*], ICP shall include
an equally prominent reference to ICP's AOL
Keyword.
1.5.4 Substitute [*]-Advertising. To the extent ICP is
unable to obtain [*] consent to the [*] set forth in
Section 1.5.3 above, then, at AOL's option:
(a) ICP will provide AOL with $[*] in
AOL-approved banner advertisements on ICP
Interactive Sites, valued at ICP's
preferred rate card price, which AOL may
use to promote any AOL product; or
(b) ICP will purchase $[*] of run of service
advertisements on the AOL Network (which
shall be in addition to the advertising
package set forth in Section 1.7). The
Parties shall work together to select the
screens on which such run of service
advertisements shall appear, subject to
AOL's discretion and final approval.
1.6 Impressions Guarantee. AOL shall provide ICP with at least
81,785,000 Impressions for the first year of the Term and
89,963,500 Impressions for the second year of the Term from
ICP's presence on the AOL Network (collectively, the
"Impressions Guarantee"). AOL shall use reasonable efforts to
ensure that the Impressions Guarantee is delivered in
relatively consistent amounts over the Term, measured on a
quarterly basis, subject to seasonal, customary and other
appropriate fluctuations. A minimum of 85% of the Impressions
Guarantee shall be generated from the presence of ICP on the
screens set forth in Section 1.1, and the remaining
Impressions, if any, may be generated from ICP's presence on
other appropriate screens on the AOL Network as AOL may
determine in its discretion. For the purposes of this
Agreement, ICP's presence on an AOL screen shall conform to
the specifications set forth on Exhibit D (each, an "ICP
Presence"), provided that only screens that contain a link to
an ICP Site will count against the Impressions Guarantee. AOL
will not be obligated to provide in excess of any of such
Impression amounts in any year. In the event AOL provides an
excess of any annual Impressions amounts in any year, the
Impressions amount for the subsequent year will be reduced by
the amount of such excess. Any shortfall in Impressions at the
end of a year will not be deemed
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a breach of this Agreement by AOL; instead such shortfall
will be added to the Impressions target for the subsequent
year. In the event that the Impressions Guarantee is not met
(or will not, in AOL's reasonable judgment, be met) during
the Term, at AOL's option either (a) the Term shall be
extended for up to six (6) months without additional carriage
fees payable by ICP until the Impressions Guarantee is met,
(b) AOL shall, from time to time, provide ICP with the
remaining Impressions in the form of advertising space within
the AOL Network of comparable value to the undelivered
Impressions (as reasonably determined by AOL), or (c) some
combination thereof.
1.6.1 [*] Anchor Tenancy. In the event that AOL or ICP
elects to remove the [*] channel Anchor Tenant
Button, as set forth in Section [*], the Impressions
Guarantee will be reduced by a pro rata portion,
based on a monthly Impressions Guarantee of [*] for
the first year of the Term and a monthly Impressions
Guarantee of [*] for the second year of the Term.
1.7 Other Advertising. The Parties shall work together in good
faith to develop a mutually agreed upon advertising package
(the "Advertising Package"). The Advertising Package shall be
comprised of advertising placements within the AOL Network
valued at (i) no less than $[*] during the first year of the
Term and (ii) no less than $[*] during the second year of the
Term. The Parties shall work together to make the Women's
subchannel the primary component of the Advertising Package.
The remaining advertising placements in the Advertising
Package shall be mutually agreed upon by the Parties. All
advertising placements in the Advertising Package shall be
subject to AOL's then-standard advertising policies and
exclusivity commitments to third parties and the terms and
conditions of AOL's standard advertising insertion order.
2. ADVERTISING AND TRANSACTIONS
----------------------------
2.1 Advertising Sales. AOL owns all right, title and Interest in
and to the advertising and promotional spaces within the AOL
Network (including, without limitation, advertising and
promotional spaces on any AOL forms or pages which are
included within, preceding, framing or otherwise associated
with the ICP Sites). The specific advertising inventory
within any AOL forms or pages shall be as reasonably
determined by AOL. With respect to the Online Areas
(including the Welcome Mats), AOL hereby grants ICP the sole
right, subject to the terms of his Agreement, to license or
sell promotions, advertisements, links, pointers or similar
services or rights in or through the Online Areas ("Online
Advertisements"), subject to (i) AOL's approval for each
Online Advertisement (such approval not to be unreasonably
delayed) and (ii) the Advertising Minimum. In addition, with
respect to promotions, advertisements, links, pointers or
similar services or rights in or through the Welcome Mats
(not including screens linked from the Welcome Mats) "Welcome
Mat Advertisements" and, collectively with Online
Advertisements, "AOL Advertisements"), which pursuant to the
preceding sentence ICP has the sole right to license or sell,
ICP shall pay AOL fifteen percent (15%) of the Advertising
Revenue generated from such Welcome Mat Advertisements. If
and when AOL makes its ad server technology generally
available to third parties, AOL shall make such technology
available for use by
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ICP with respect to the AOL Advertisements on AOL's
then-standards terms and conditions.
2.2 Advertising Policies.
2.2.1 AOL Advertisements. Any AOL Advertisements sold by
ICP or its agents shall be subject to AOL's
then-standard advertising policies, including,
without limitation, restrictions on the promotion of
any entity reasonably construed to be in competition
with AOL..
2.2.2 Linked Interactive Site Advertisements. ICP shall
ensure that AOL Members linking to any Linked ICP
Interactive Site from the AOL Network do not
encounter advertisements, promotions or links on or
through the Online Sites, the Welcome Mats or via
any Linked ICP Interactive Sites, (a) for any
entity, [*], reasonably construed to be
in competition with AOL or any AOL "component"
products and services, (e.g. AOL NetFind or other
search/directory services, AOL NetMail or
free/discount E-mail, yellow pages, white pages, "My
AOL" type personalized information, classifieds, and
other products and services as AOL may designate
from time to time during the Term) (collectively,
the "Component Products and Services"), (b) for [*]
(including any affiliates thereof), or any [*] or
[*], (c) [*], or (d) in violation of any other of
AOL's then-standard advertising policies. In the
event that AOL notifies ICP in writing that any
advertising or promotional Content associated with
any Linked ICP Interactive Site (a "Linked ICP
Interactive Site Advertisement") is in violation of
AOL's then-standard advertising policies, then ICP
shall take commercially reasonable steps to block
access by AOL Members to such advertising using ICP's
then-available ad server or other technology. In the
event that ICP cannot, through Its commercially
reasonable efforts, block access by AOL Members to
the advertising in question, then ICP shall provide
AOL prompt written notice of such fact. AOL may then,
at its option, either (i) restrict access from the
AOL Network to the advertising in question using
technology available to AOL or (ii) terminate the
link from the AOL Network to the Linked ICP
Interactive Site until such time as the advertising
in question is no longer displayed. ICP will
cooperate with AOL's reasonable requests to the
extent AOL elects to implement any such access
restrictions.
2.3 Advertising Compliance. ICP shall take all reasonable steps
necessary to ensure that any AOL Advertisement sold by ICP
complies with all applicable federal, state and local laws
and regulations.
2.4 Advertising Registration Form. In connection with the sale by
ICP of any AOL Advertisement, ICP shall, in each instance,
provide AOL with a completed standard AOL Advertising
Registration Form relating to such AOL Advertisement.
2.5 Advertising Packages. To the extent ICP sells a Welcome Mat
Advertisement as part of an advertising package including
multiple placement locations (e.g., both Welcome Mat and
another area or site), ICP shall allocate the payment for
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such advertising package between or among such locations in
an equitable fashion, subject to the Advertising Minimum.
When selling advertising associated with the ICP Sites, ICP
shall use commercially reasonable efforts to sell related
advertising within the Welcome Mats. To the extent an
advertisement is delivered through a dynamic mechanism
primarily linked to particular AOL Members viewing such
advertisement (rather than a defined space within the Welcome
Mats), the amount of revenue from the advertisement allocable
to Advertising Revenue shall be determined based on the
number of impressions to the advertisement generated by AOL
Members while viewing Content within the Welcome Mat relative
to the total impressions to the advertisement during the
given period (or such other formula as AOL may reasonably
implement given the then-existing advertising models).
2.6 Interactive Commerce. All merchandising on the ICP Sites
shall be subject to (i) the terms of the Shopping Channel
Promotional Agreement between AOL and ICP dated as of January
1, 1998 (the "Commerce Agreement"), (ii) the requirements
posted at keyword "Marketplace Policy" on the America
Online(R) brand service (or such other keyword as AOL may
designate during the Term), (iii) approval by AOL of all
Products to be offered, which approval shall not be
unreasonably withheld, and (iv) the then-current requirements
of AOL's merchant certification program. Upon the expiration
of the Commerce Agreement, all merchandising on the ICP Sites
shall be subject to AOL's prior written approval. Prior to
entering into negotiations with any third party regarding
merchandising or commerce arrangements through the ICP Sites,
ICP shall give AOL written notice of such desire and, upon
request by AOL made within [*] business days after receipt of
such notice from ICP, negotiate in good faith with AOL or its
commerce or marketing partner in the applicable product/
service category regarding a merchandising or commerce
arrangement.
3. PROMOTION
---------
3.1 Cooperation. Each Party shall cooperate with and reasonably
assist the other Party in supplying Content for marketing and
promotional activities which relate to the ICP Sites.
3.2 Interactive Site. ICP shall include the following promotions
within each ICP Interactive Site, including, without
limitation, ICP's Interactive Site on [ * ],
during the Term: a continuous promotional banner for
AOL appearing "above the fold" on the first screen of the ICP
Interactive Site which shall be as prominent as the banner
(or any other form of promotion) for [ * ] and more
prominent than the banner (or any other form of promotion)
for any other Interactive Service, through which AOL may
promote any AOL product. AOL shall have a "right of first
refusal" with respect to ICP's promotion of any products or
services reasonably deemed to be competitive with AOL's
Component Products and Services (as set forth in Section
2.2.2). The "right of first refusal" means that AOL shall
have the right to purchase promotional space on an ICP
Interactive Site to promote AOL's Component Products and
Services, upon ICP's decision to offer such promotional
space, at the same terms offered by ICP to a third party.
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3.3 Other Media. In addition to the specific terms set forth in
Section 1.5.3 herein, ICP shall prominently and regularly
promote AOL and the ICP Sites availability through the AOL
Service in publications, television and radio programs,
features or other forms of media over which ICP exercises
substantial editorial control. Except as required by the
terms of ICP's agreement with [*] as set forth in the letter
[*] from [*] to ICP, ICP shall not promote any other
Interactive Service, including without limitation [ * ] in any
forms of "offline" media through which ICP purchases
promotional space (either through cash, stock, barter or by
providing any other "in-kind" value) or in publications,
television and radio programs, features or other forms of
media over which ICP exercises complete or substantial
editorial control. ICP shall not enter into any agreement,
written or oral, that will in any way serve to intentionally
undermine the provisions of this, or any other, paragraph of
the Agreement.
3.4 Keyword Mentions. In any instances when ICP makes promotional
reference to an ICP Interactive Site in publications,
television, radio, the Internet, and any other forms of
media, and exercises at least partial editorial control,
including any listings of the applicable "URL(s)" for such
web site(s) (each a "Web Reference"), ICP shall include a
listing of the applicable AOL "keyword" of comparable
prominence to the Web Reference.
3.5 Preferred Access Provider. In any "offline" Web Reference,
ICP shall promote AOL as the preferred access provider
through which a user can access ICP's Content (and ICP shall
not implement or authorize any other promotions on behalf of
any third parties which are inconsistent with the foregoing).
Notwithstanding the foregoing, AOL acknowledges that, due to
contractual commitments set forth in [ * ], ICP may be
required to promote [*] on an ICP Interactive Site. In such
cases, AOL shall be promoted as prominently as [ * ].
3.5.1. Upon the expiration or termination of the [ * ],
AOL shall have the non-exclusive right of
first negotiation to enter into a similar
promotion/distribution agreement with ICP.
3.6 Direct Marketing. The Parties shall execute any commercially
reasonable New Member acquisition programs, and ICP shall
earn a bounty of Ten Dollars ($10) for each New Member.
3.7 Member Benefits. ICP will generally promote through the ICP
Sites any special or promotional offers made available by or
on behalf of ICP through any ICP Interactive Site or any
other distribution channel. In addition, ICP shall promote
through the ICP Sites on a regular and consistent basis
special offers exclusively available to AOL Members ("AOL
Exclusive Offers"). ICP shall, at all times, feature at least
one AOL Exclusive Offer for AOL Members (except as otherwise
mutually agreed upon by the Parties). The AOL Exclusive Offer
made available by ICP shall provide a substantial member
benefit to AOL Members, either by virtue of a meaningful
price discount, product enhancement, unique service benefit
or other special feature. The Parties shall meet from time to
time during the Term, (e.g. quarterly) to agree upon any such
AOL Exclusive Offers. In any
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event, ICP will provide AOL with reasonable prior notice of
AOL Exclusive Offers and other special offers so that AOL
can, in its editorial discretion, market the availability of
such offers.
4. PAYMENTS AND REPORTING
----------------------
4.1 Payment Schedule. Except as otherwise specified in Section
1.5 and 6.4, each Party agrees to pay the other Party all
amounts received and owed to such other Party as described
herein on a quarterly basis within thirty (30) days of the
end of the quarter in which such amounts were collected by
such Party. The first quarter for which payment is to be made
shall (i) begin on the first day of the month following the
month of execution of this Agreement and (ii) include the
portion of the month of execution following the Effective
Date (unless the Agreement was executed on the first day of a
month, in which case the quarter shall be deemed to begin on
the first day of such month). All payments by ICP hereunder
shall be paid in immediately available, non-refundable U.S.
funds wired to the "America Online" account, [*], or such
other account of which AOL shall give ICP written notice.
4.2 Reporting. On no less than a monthly basis, each Party shall
supply or make available to the other Party reports
containing the following information:
4.2.1 Advertising and Transactions. ICP shall provide
detailed information to AOL regarding AOL
Advertisements. In reporting any advertisement or
promotion, ICP shall indicate the name of the
advertiser, the term of the advertising arrangement
and the amounts paid (or to be paid) to ICP or its
agent(s).
4.2.2 Usage Data. AOL shall make available to ICP a
monthly report specifying usage information for each
of the Online Areas for the prior month in the
format which is generally made available to
similarly situated interactive content providers. In
addition, to the extent AOL is caching the ICP
Sites, AOL shall supply ICP with monthly reports for
each ICP Site reflecting aggregate impressions by
AOL Members to the cached version of the ICP Sites
during the prior month. ICP will supply AOL with
monthly reports, for each ICP Site, which reflect
total impressions by AOL Members to Welcome Mats
during the prior month and any transactions
involving AOL Members at the ICP Sites during the
period in question. ICP shall also provide AOL with
"click-through" data with respect to the promotions
specified in Section 3.
4.2.3 Promotional Commitments. ICP shall provide to AOL a
monthly report documenting its compliance with any
promotional commitments it has undertaken pursuant
to Section 3 in the form attached as Exhibit E
hereto.
5. CUSTOMIZED LINKED INTERACTIVE SITE
----------------------------------
5.1 Performance. ICP shall optimize the ICP Sites for
distribution hereunder according to AOL specifications and
guidelines, including, if applicable, the Operating Standards
set forth on Exhibit G attached hereto. ICP shall allow
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appropriate AOL personnel to have access to the ICP Sites for
the purpose of reviewing such site to determine compliance
with the provisions of this Section 5 and Exhibit G.
5.2 Customization. ICP shall customize the ICP Sites for AOL
Members as follows:
(a) upon AOL's request, create a customized, co-branded home
page "welcome mat" for the AOL audience for each area on the
ICP Sites linked to from the AOL Network on a continuous
basis (each a "Welcome Mat"), which Welcome Mat(s) shall be
subject to AOL approval;
(b) ensure that AOL Members linking to the ICP Sites do not
receive advertisements, promotions or links for any entity,
product, or service reasonably construed to be in competition
with AOL's products or services, or otherwise in violation of
AOL's then-standard advertising policies or exclusivity or
premiere commitments to third parties; and
(c) provide continuous navigational ability for AOL Members
to return to an agreed-upon point on the AOL service (for
which AOL shall supply the proper address) from the ICP Sites
(e.g., the point on the AOL service from which the ICP Sites
are linked), which, at AOL's option, may be satisfied through
the use of a hybrid browser format.
6. TERM AND TERMINATION.
---------------------
6.1. Term. Unless earlier terminated as set forth herein, the
initial Term of this Agreement shall commence on the
Effective Date and expire two (2) years from the Effective
Date ("Initial Term").
6.1.1 One Year Extension by AOL. AOL may extend the
Agreement for an additional year from December 31,
2000, upon AOL's then-standard terms and conditions
generally applicable to anchor tenants (but in no
event less favorable to ICP than the terms and
conditions provided for herein) and with payments by
ICP to AOL of $6,237,025 (or $[*] if the [*] channel
Anchor Tenant Button is [*] pursuant to 1.1(d)) (the
"Renewal Carriage Fee") by providing ICP with written
notice thereof no later than sixty (60) days prior to
the expiration of the Initial Term (the "Put
Notice"), provided, however, that if the most recent
price offered to and accepted by AOL as valid for the
placements specified herein (e.g., for continuous and
prominent logos or banners as specified in Section
1.1) is seventy-five percent (75%) of the Renewal
Carriage Fee or less (a "Renewal Offer"), then AOL
may only extend this Agreement for an additional year
by a Put Notice specifying to ICP the Renewal Offer
as the applicable carriage fee. The Renewal Carriage
Fee (or Renewal Offer as the applicable carriage fee,
as the case may be) shall be made up of a combination
of cash and in-kind commitments, subject to the
following: (i) the proportion of cash to in-kind
commitments shall be determined by ICP, provided that
no less than (a) $4,863,692 of the Renewal Carriage
Fee or 78% of the Renewal Offer (as the case
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may be) or (b) if the [*] channel Anchor Tenant
Button is [*] pursuant to [*], $[*] of the Renewal
Carriage Fee or [*]% of the Renewal Offer (as the
case may be) shall be in cash and payable in equal
monthly installments in advance of each month
beginning on December 31, 2000; and (ii) the value
placed by ICP on and schedule of the in-kind
commitments shall be subject to AOL's prior written
approval (not to be unreasonably withheld).
6.1.2 One Year Extension by ICP. If AOL does not deliver
the Put Notice, ICP may, no later than forty five
(45) days prior to the expiration of the Initial
Term, notify AOL in writing (the "Call Notice") that
ICP desires to renew this Agreement for an
additional year from December 31, 2000, on AOL's
then-standard terms and conditions generally
applicable to anchor tenants (but in no event less
favorable to ICP than the terms and conditions
provided for herein) and with payments by ICP to AOL
of the "Market Rate" (as defined below). AOL shall
then provide ICP written notice of the "Market Rate"
for the additional year within thirty (30) days of
AOL's receipt of the Call Notice (the "Market Rate
Notice"). ICP shall have ten (10) days from receipt
of the Market Rate Notice to either accept or
decline the terms contained therein for the
additional year, provided that ICP's failure to
respond to the Market Rate Notice within such [*]
period shall be deemed to be an acceptance of the
terms contained therein. If ICP accepts the terms
contained in the Market Rate Notice for the
additional year, then the Market Rate shall be
payable by ICP to AOL in a combination of cash and
in-kind commitments, subject to the following: (i)
the proportion of cash to in-kind commitments shall
be determined by ICP, provided that no less than
78% of the Market Rate (or [*]% of such Market Rate
if the Lifestyles channel Anchor Tenant Button is
removed) shall be in cash and payable in equal
monthly installments in advance of each month
beginning on December 31, 2000; and (ii) the value
placed by ICP on and schedule of the in-kind
commitments shall be subject to AOL's prior written
approval (not to be unreasonably withheld). If ICP
declines the terms contained in the Market Rate
Notice for the additional year, AOL shall not, for a
period of one hundred twenty days (120) days
thereafter, agree with any non-affiliated third
party for continuous placement on the Screens (as
specified in this Agreement) for a carriage fee that
is materially less than the Market Rate. For the
purposes hereof, "Market Rate" shall mean the rate,
specified by AOL in its notice to ICP, reasonably
determined by AOL for anchor tenant placement as
specified herein for the screens specified in this
Agreement, taking into account such reasonable
considerations as AOL may determine in its
discretion.
6.2 Termination for Breach. Either Party may terminate this
Agreement at any time in the event of a material breach by
the other Party which remains uncured after thirty (30) days
written notice thereof.
6.3 Termination for Bankruptcy/Insolvency. Either Party may
terminate this Agreement immediately following written notice
to the other Party if the other Party (i) ceases to do
business in the normal course, (ii) becomes or is declared
insolvent or bankrupt, (iii) is the subject of any proceeding
related to its liquidation or insolvency (whether voluntary
or involuntary) which is not dismissed within ninety (90)
calendar days or (iv) makes an assignment for the benefit of
creditors.
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6.4 Effect of Agreement. The Parties agree that upon the
execution of this Agreement by both Parties, that Interactive
Services Agreement by and between AOL and ICP, effective as
July 1, 1997 ("ICP Agreement") is terminated. The termination
of the ICP Agreement is subject to the survival of those
terms expressly identified for survival in the ICP Agreement
and ICP's payment to AOL of all amounts owed by ICP to AOL as
of the Effective Date of this Agreement pursuant to Section
1.5.1 thereof. ICP shall pay the foregoing outstanding
amounts to AOL no later than sixty (60) days following the
execution of this Agreement by both Parties. Except as
otherwise provided herein, any and all obligations arising
from, related to or in connection with that ICP Agreement are
hereby extinguished.
6.5 Entire Agreement. This Agreement sets forth the entire
agreement and supersedes any and all prior agreements of the
Parties with respect to the transactions set forth herein.
Neither Party shall be bound by, and each Party specifically
objects to, any term, condition or other provision which is
different from or in addition to the provisions of this
Agreement (whether or not it would materially alter this
Agreement) and which is proffered by the other Party in any
correspondence or other document, unless the Party to be
bound thereby specifically agrees to such provision in
writing.
7. TERMS AND CONDITIONS. The legal terms and conditions set forth on
Exhibit C attached hereto are hereby made a part of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the Effective Date.
AMERICA ONLINE, INC. iVILLAGE, INC.
By: /s/ Lynne Crawford By: /s/ Steve Elkes
Print Name: Lynne Crawford Print Name: Steve Elkes
Title: VP/CFO AOL Interactive Services Title: VP Business/Legal Affairs
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EXHIBIT A
---------
A.1 Description of Content
----------------------
Description of the ICP Sites
- ----------------------------
Exclusive Content. ICP make available and promote through the ICP Sites on a
regular and consistent basis special content exclusively available to AOL
Members ("AOL Exclusive Content"), to be mutually agreed upon by the Parties.
ICP shall, at all times, feature at least one AOL Exclusive Content area for AOL
Members (except as otherwise mutually agreed upon by the Parties). The Parties
shall meet from time to time during the Term, (e.g. quarterly) to develop any
such AOL Exclusive Content. ICP shall provide AOL with any and all content
developed for AT&T.
Description of the ICP Sites
iVillage:
iVillage is a "one-stop" destination for real women who want practical answers
to life's questions - in a quick, safe, easy-to-use interface. iVillage is about
utility, problem-solving and solutions. We provide the tools, expert advice,
peer support and information for busy women faced with trade-offs every day, as
they try and balance all the aspects of their lives.
iVillage has created a forum for women to talk with experts and with each other
on subjects they are most passionate about, including careers, finance, fitness
& beauty, food, health, parenting, and relationships. These conversations not
only provide the tools to help them come up with solutions to real issues, but
they actually help women create their own communities with each other. Each
community addresses an aspect of women's lives today in an easy-to-use, friendly
way. We provide access to experts - and peers - who can help women understand,
solve, resolve or accept issues and challenges in their lives.
Parent Soup:
Parent Soup, the No. 1 destination for parents online, is the place to get
answers and advice 24 hours a day, seven days a week. Features include a panel
of parenting experts available to answer questions; a vibrant community of
parents offering advice and support; interactive tools, such as the Parent Soup
Baby Name Finder; month-by-month Pregnancy Circles and New Mother's Clubs; and
games such as the Baby Name Scrambler.
Better Health:
The Better Health channel helps users make better health-care decisions by
providing the best information, advice and support anywhere. The Health Library,
a collection of over 1,000 articles, provides practical tips on how to deal with
a variety of medical conditions and concerns. The channel also offers the latest
medical news from Reuters Health; free access to Medline, a comprehensive
database of all of the world's major medical journals; and the most informed and
supportive health communities online.
A.2 iVillage Keywords
-----------------
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EXHIBIT B
---------
DEFINITIONS. The following definitions shall apply to this Agreement:
Advertising Minimum. (i) Thirty dollars ($30) per thousand entries per month or
(ii) such different rate or fates as AOL may establish based upon market
conditions and publish during the Term.
Advertising Revenues. Aggregate amounts collected plus the fair market value of
any other compensation received (such as barter advertising) by ICP or its
agents arising from the license or sale of Welcome Mat Advertisements. less
applicable Advertising Sales Commissions; provided that in order to ensure that
AOL receives fair value in connection with Welcome, Mat Advertisements, ICP
shall be deemed to have received no less than the Advertising Minimum in
instances when ICP makes an AOL Advertisement available to a third patty at a
cost below the Advertising Minimum.
Advertising Sales Commission. Actual amounts paid as commission to third party
agencies in connection with sale of the Welcome Mat Advertisement or (ii) 15%.
in the event ICP has sold the Welcome Mat Advertisement directly and will riot
be deducting any third party agency commissions.
Affiliate. Any agent, distributor or franchises of AOL, or an entity in which
AOL holds at least a nineteen percent (19%) equity interest.
AOL Look and Feel. The distinctive and particular elements of graphics, design,
organization, presentation, layout, user Interface, navigation, trade dress and
stylistic convention (including the digital implementations thereof) which are
associated with Online Areas within the AOL Network and the total appearance
and impression substantially formed by the combination. coordination and
interaction of these elements.
AOL Member(s). Authorized users of the AOL Network, including any sub-accounts
using the AOL Network under an authorized master account.
AOL Service. The narrow-band U.S. version of the America Online(R) brand
service, specifically excluding (a) AOL.com or any other AOL Interactive Site,
(b) the international versions of an America Online service (e.g., AOL Japan),
(c) "ICQ," "AOL NetFind", "AOL Instant Messenger(Trade Mark)" 'Digital
Cities(Trade Mark)". 'NetMail(Trade Mark)" or any similar independent product
or service which may be offered by, through or with to U.S. version of the
America Online(Registered) brand service, (d) any programming or content area
offered by or through the U.S. version of the America Online brand service over
which AOL does not exercise complete operational control (including, without
limitation, Content areas controlled by other parties and member-created Content
areas), (e) any yellow pages. white pages, classifieds or other search,
directory or review services of Content offered by or through the U.S. version
of the America Online(R) brand service, (f) any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the Effective Date
and (g) any other version of an America Online service which is materially
different from the narrow-band U.S. version of the America Online brand service,
by virtue of its branding, distribution, functionality, Content and services,
including, without imitation, any co-branded version of the service and any
version distributed through any broadband distribution platform or through any
platform or device other than a desktop personal computer.
AOL Network. (i) The AOL Service and (ii) any other product or service owned,
operated, distributed or authorized to be distributed by or through AOL or its
Affiliates worldwide through which such party elects to offer the Licensed
Content (which may include, without limitation, AOL-related Internet sites,
"offline" information browsing products, international versions of the AOL
brand service, and CompuServe). For the avoidance of doubt, without imitation,
the AOL Network includes the AOL Australia Service, the AOL Canada Service, the
AOL France Service, the AOL Germany Service, the AOL Japan Service and the AOL
UK Service.
Confidential Information. Any information relating to or disclosed In the
course of negotiating and Implementing the Agreement which is, or should be
reasonably understood to be, confidential or proprietary to the disclosing
Party, including, but not limited to, the content of negotiations between the
Parties. the material terms of this Agreement. Information about AOL Members,
technical processes and formulas, source codes, product designs, sales, cost
and other unpublished financial information, product and business plans.
projections and marketing data "Confidential Information" shall not Include
information (a) already lawfully known to or independently developed by the
receiving Party, (b) disclosed in published materials, (c) generally known to
the public, (d) lawfully obtained from any third party or (e) required or
reasonably advised to be disclosed by law.
Content. Text, images, video, audio (including, without Imitation, music used
In time relation with text. Images, or video), and other data, products,
services, advertisements, promotions. links, pointers, technology and software.
ICP Interactive Site. Any interactive site or area (other than the ICP Sites)
which is managed, maintained or owned by ICP or its agents or to which ICP
provides and/or licenses Content, Including, by way of example and without
Imitation, (i) an ICP site on the World Wide Web portion of the Internet
(including the ICP Internet Sites) or (ii) a channel or area delivered through
a "push" product such as the Pointcast Network or interactive environment such
as Microsoft's proposed "Active Desktop."
ICP Internet Sites. Collectively, (i) the Internet site and Content, currently
located at URL:http://www.ivillage.com, which are managed, maintained or owned
by ICP or its agents or to which ICP licenses Information, content or other
materials and (H) the portions of the ICP Sites which are located on the world
wide web portion of the Internet.
ICP Sites. The sites and Content specified on Exhibit A which are managed,
maintained or owned by ICP or its agents. The ICP Sites shall consist of the
Online Areas (including the Welcome Mats) and the ICP Internet Sites.
Impression. User exposure to (i) the page containing an ICP Presence or (i) a
page of the ICP Internet Sites, as the context may require, as such exposure
may be reasonably determined and measured by the reporting Party In accordance
with its standard methodologies and protocols.
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Interactive Service. An entity, offering one or more of the following: (i)
online or Internet connectivity services (e.g., an Internet service provider);
(ii) a broad selection of aggregated third party Interactive content (or
navigation thereto) (e.g., an online service or search and directory service),
(iii) communications software capable of serving as the principal means through
which a user creates, sends and receives electronic mail or real time online
messages.
Keyword(TM) Search Terms. The Keyword(TM) online search terms made available on
the AOL Service for use by AOL Members, combining AOL's Keyword(TM) online
search modifier with a term or phrase specifically related to ICP (and
determined in accordance with the terms of this Agreement).
Launch Date. The earliest date upon which ICP's Anchor Tenant Button is
displayed on any screen on which it is required under Section 1.1 to be
displayed.
Licensed Content. All Content provided by ICP or its agents to AOL or its
Affiliates for distribution through the, AOL Network In connection with the
subject matter of this Agreement
Linked Interactive Site. Any site or area outside of the AOL Service which is
linked to the Online Areas (through a "pointer" or similar link) In accordance
with the terms and conditions of this Agreement. For the avoidance of doubt,
the ICP Internet Site shall be deemed a Linked Interactive Site if the ICP
Internet Site is linked to the Online Areas.
Linked ICP Interactive. Site. Any ICP Interactive Site which is also a Linked
Interactive Site.
New Member. Any person or entity (a) who registers for the AOL Network using
ICP's special promotion identifier and (b) who remains an AOL Member for two
paid billing cycles.
Online Areas. The specific areas of (the ICP Sites that reside within the AOL
Network (including the Welcome Mats), as described In Exhibit A, which shall be
developed, managed or marketed by ICP pursuant to this Agreement including but
not limited to the Licensed Content, message boards, chat and other AOL
Member-supplied content areas contained therein (but excluding any Linked
Interactive Sites other than sites which are exclusively available to AOL
Members).
Products. Any product, good or service which ICP offers, sells or licenses to
AOL Members through (i) the ICP Sites, (ii) any Linked ICP Interactive Site or
(iii) an "offline" means (e.g., toll-free number) for receiving orders related
to specific offers within the ICP Sites requiring purchasers to reference a
specific promotional identifier or tracking code, including, without
limitation, products odd trough surcharged downloads (to the extent permitted
hereunder).
Term. The period beginning on the Effective Date and ending upon the expiration
or earlier termination of the Agreement.
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EXHIBIT C
---------
II. ICP SITES
AOL Terms of Service; Unspecified Content. AOL shall have the right to remove,
or direct ICP to remove any Content from the ICP Sites or the Welcome Mat (or
remove the link from, or otherwise block Content contained on. a Linked
Interactive Site), which, as reasonably determined by AOL: (I) violates AOL's
then-standard Terms of Service (as set forth on the America Online(TM) brand
service), the Terms of this Agreement or any other standard, written AOL
policy, (ii) violates the warranties made by ICP under the section below
entitled 'Management", or (iii) is not specifically described on Exhibit A. To
the extent ICP wishes to implement any rules of conduct or terms of service
related to the ICP Sites which are separate from or supplementary to AOL's
Terms of Service, ICP must obtain the prior written approval of the AOL Legal
Department.
Management. ICP shall review, delete, edit, create, update and otherwise manage
all Content available on or through the ICP Sites, any Linked ICP Interactive
Site and the Welcome Mat, including but riot limited to the Licensed Content
and message boards, in a timely and professional manner and in accordance with
the terms of this Agreement, AOL's then-standard Terms of Service and any
generally applicable guidelines and service standards for interactive content
providers published by AOL. In managing the ICP Sites, ICP agrees to refrain
from editing or altering any opinion expressed by an AOL Member within the ICP
Sites, except in cases when ICP (i) has a good faith belief that the Content in
question violates an applicable law, regulation, third party right or portion
of AOL's Terms of Service or (ii) obtains AOL's prior approval. ICP shall
ensure that the ICP Sites is reasonably current and well-organized, and shall
employ all necessary procedures to insure the accuracy of the, Licensed
Content. ICP warrants that the ICP Sites, the Licensed Content. the Welcome Mat
and any Linked Interactive Sites (i) will conform to AOL's applicable Terms of
Service; (ii) will not infringe on or violate any copyright, trademark, patent
or any other third party right, including without limitation, any music
performance or other music related rights; and (iii) will not contain any
Content which violates any applicable law or regulation. AOL shall have no
obligations with respect to the Content available on or through the ICP Sites,
the Welcome Mat or any Linked Interactive Site, including, but not limited to,
any duty to review or monitor any such Content
Changes to AOL Service. AOL reserves the right to redesign or modify the
organization, structure, "look and feel," navigation and other elements of the
AOL Service and/or other portions of the AOL Network. If AOL eliminates or
modifies the screen(s) specified in Section 1.1 in a manner that substantially
modifies the nature of the placements for ICP described in Section 1.1 in a
material adverse fashion, AOL will work with ICP in good faith to provide ICP
with a comparable package of placements which are reasonably satisfactory to
ICP.
Contests. ICP shall take all steps necessary to ensure that any contest,
sweepstakes or similar promotion conducted Or promoted through the ICP Sites, a
Linked Interactive Site or the Welcome Mat (a 'Contest") complies with all
applicable federal, state and local laws and regulations. ICP shall provide AOL
with (I) at least thirty (30) days prior written notice of any Contest and (ii)
upon AOL's request an opinion from ICP's counsel confirming that the Contest
complies with all applicable federal, state and local laws and regulations.
AOL Look and Feel. ICP acknowledges and agrees that AOL shall own all right,
title and Interest In and to the AOL Look and Feel. In addition. AOL shall
retain editorial control over the portions of the AOL pages and forms which
frame the Licensed Content or any Linked Interactive Site (the -AOL Frames-).
AOL may, at its discretion, incorporate navigational icons, links and pointers
or other Content into such AOL Frames.
Operations. AOL shall be entitled to require reasonable changes to Licensed
Content or any Linked Interactive Site to the extent such Licensed Content
will, in AOL's good faith judgment adversely affect technical operations of the
AOL Network.
Duty to Inform. ICP shall promptly inform AOL of any Information related to the
Licensed Content which could reasonably lead to a claim, demand or liability of
or against AOL and/or its Affiliates by any third party.
Response to Questions/Comments; Customer Service. ICP shall respond promptly
and professionally to questions, comments, complaints and other reasonable
requests regarding the Licensed Content by AOL Members or on request by AOL,
and shall cooperate and assist AOL In promptly answering the same.
Classifieds. To the extent ICP desires to implement any classifieds listing
features through the ICP Sites, ICP shall obtain AOL's prior written approval.
Such approval may be conditioned upon, among other things, ICP's conformance
with any then-applicable service-wide technical or other standards related to
online classifieds.
Message Boards. Any Content submitted by ICP or its agents within message
boards or any comparable vehicles will be subject to the license grant relating
to submissions to "public areas" set forth in the Proprietary Rights section of
the Terms of Service. ICP acknowledges that it has no rights or Interest in AOL
Member submissions to message boards within the ICP Sites.
Statements Through AOL Network. ICP shall not make, publish, or otherwise
communicate through the AOL Network any deleterious remarks concerning AOL or
its Affiliates, directors. officers. employees, or agents (including, without
limitation, AOL's business projects, business capabilities, performance of
duties and services, or financial position) which remarks are based on the
relationship established by this Agreement or information exchanged hereunder.
This section is not intended to limit good faith editorial statements made by
ICP based upon publicly available Information, or information developed by ICP
independent of its relationship with AOL and its employees and agents.
Accounts. ICP shall be granted a number of accounts for the America Online(R)
brand service deemed reasonable by AOL for the exclusive purpose of enabling it
and its agents to perform ICP's duties under this Agreement. The accounts shall
be of the type determined by AOL to be necessary for ICP to perform its duties
hereunder, and shall be subject to such monthly
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subscription charges as AOL shall determine (not to exceed monthly subscription
charges generally available to the public for a similar type of account),
provided, however, that in any event ICP shall be responsible for any
surcharges, including, without limitation, all premium charges, transaction
charges and any applicable communication surcharges incurred by any such
account ICP shall be responsible for to actions taken with or through its
accounts (which actions are subject to AOL's then-standard Terms of Service)
Upon the termination of this Agreement, all accounts, related screen names and
any associated usage credits or similar rights shall automatically terminate.
AOL shall have no liability for loss of any data or content related to the
proper termination of any account.
Keywords. Any Keyword Search Terms to be directed to the ICP Sites shall be (i)
subject to availability for use by ICP and (ii) limited to the combination of
the Keyword(Trade Mark) search modifier combined with a registered trademark of
ICP. AOL reserves the right to revoke at any time ICP's use of any Keyword
Search Terms which do not incorporate registered trademarks of ICP. ICP
acknowledges that its utilization of a Keyword Search Term will not create in it
nor will it represent it has, any right, title or interest in or to such Keyword
Search Term, other than the right, title and interest Partner holds in ICP's
registered trademark independent of the Keyword Search Term. Without limiting
the generality of the foregoing, ICP will not (a) attempt to register or
otherwise obtain trademark or copyright protection in the Keyword Search Term,
or (b) use the Keyword Search Term except for the purposes expressly required or
permitted under this Agreement. This Section shall survive the completion,
expiration, termination or cancellation of this Agreement.
Launch Date. In the event that any terms contained herein relate to or depend
on the launch date of the ICP Sites or other property contemplated by this
Agreement then it is the intention of the Parties to record such Launch Date in
a written instrument signed by both Parties promptly following such Launch
Date; provided that, in the absence of such a written instrument, the Launch
Date shall be as reasonably determined by AOL based on the information
available to AOL.
Production Work. In the event that ICP requests AOL's production assistance in
connection with (i) the initial development, design and construction of the ICP
Sites, (ii) ongoing programming and maintenance related to the ICP Sites, (iii)
a redesign of or addition to the ICP Sites (e.g., a change to an existing
screen format or construction of a new custom form), (iv) construction and
maintenance of an approved advertising. sponsorship or promotional area or
online 'store,' (v) production to modify work performed by a third party
provider or (vi) any other type of production work ICP shall work with AOL to
develop detailed production plans for the requested production assistance (the
"Production Plan"). Following receipt of the final Production Plan, AOL shall
notify ICP of (i) AOL's availability to perform the requested production work,
(ii) the proposed fee or fee structure for the requested production and
maintenance work and (iii) the estimated development schedule for such work. To
the extent the Parties reach agreement regarding Implementation of agreed-upon
Production Plan, such agreement shall be reflected in a separate work order
signed by the Parties. To the extent ICP elects to retain a third party
provider to perform any such production work, work produced by such third party
provider must generally conform to AOL's production Standards & Practices (a
copy of which will be supplied by AOL to ICP upon request). The specific
production resources which AOL allocates to any production work to be performed
on behalf of ICP shah be as determined by AOL in its sale discretion.
Publishing Tools. AOL shall make available to ICP AOL's proprietary publishing
tools (each a "Tool") which are made available to AOL's similarly situated
content partners in order to develop and implement the Licensed Content during
the Term. ICP shall be granted a nonexclusive license to use any such Tool,
which license shall be subject to: (i) ICP's compliance with all rules and
regulations totaling to use of the Tools, as published from time to time by
AOL, (ii) AOL's right to withdraw or modify such license at any time, and (iii)
ICP's express recognition that AOL provides all Tools on an "as is" basis,
without warranties of any kind.
Training and Support. AOL shall make available to ICP standard AOL training and
support programs related to ICP'S management and maintenance of the Licensed
Content ICP can select its training and support program from the options then
offered by AOL. ICP shall be responsible to pay the fees associated with its
chosen training and support package; provided, however, that AOL will provide
such training to two (2) of ICP's employees without charging a fee. In
addition, ICP will pay travel and lodging costs associated with its
participation in any AOL training programs (including AO(:s travel and lodging
costs when training is conducted at ICP's offices), including such costs for
the two (2) employees that AOL trains without charging a fee.
II. TRADEMARKS
Trademark License. In designing and implementing the Promotional Materials and
subject to the other provisions contained herein, ICP shall be entitled to use
the following trade names, trademarks and service marks of AOL: the "America
Online(R)" brand service, AOL(Trade Mark) service/software and AOL's
triangle logo; arid AOL and its Affiliates shall be entitled to use the trade
names, trademarks and service marks of ICP associated with the ICP Sites
(collectively, together with the AOL marks listed above, the "Marks"); provided
that each Party: (i) does not create a unitary composite mark involving a Mark
of the other Patty without the prior written approval of such other Party and
(R) displays symbols and notices clearly and sufficiently indicating the
trademark status and ownership of the other Party's Marks in accordance with
applicable trademark law and practice.
Rights. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees riot to do anything contesting or impairing the trademark
rights of the other Party.
Quality Standards. Each Party agrees that the nature and quality of its
products and services supplied in connection with the other Party's Marks shall
conform to quality standards communicated in writing by the other Party for use
of its trademarks. Each Party agrees to supply the other Party, upon request
with a reasonable number of samples of any Materials publicly disseminated by
such Party which utilize the other Party's Marks, Each Party shall comply with
all applicable laws, regulations and customs and obtain any required government
approvals pertaining to use of the other Party's Marks.
Promotional Materials/Press Releases. Each Party will submit to the other
Party, for its prior written approval, which shall not be unreasonably withheld
or delayed, any marketing,
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advertising, press releases or other promotional materials related to the ICP
Sites and/or referencing the other Party and/or its trade names, trademarks and
service marks (the 'Promotional Materials"); provided, however, that, following
the initial public announcement of the business relationship between the
Parties in accordance with the approval and other requirements contained
herein, either Party's subsequent factual reference to the existence of a
business relationship between AOL and ICP, including, without limitation, the
availability of the ICP Sites on the AOL Network, or use of screen shots of the
ICP Sites (so long as the AOL Network is clearly identified as the source of
such screw shots) for promotional purposes shall not require the approval of
the other Party. Once approved, the Promotional Materials may be used by a
Party and its affiliates for the purpose of promoting the ICP Sites and the
content contained therein and reused for such purpose until such approval is
withdrawn with reasonable prior notice. In the event such approval is
withdrawn, existing inventories of Promotional Materials my be depleted.
Infringement Proceedings. Each Party agrees to promptly notify the other Party
of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party shall have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party,
at such other Party's expense, with its reasonable cooperation and assistance
with respect to any such infringement proceedings.
III. REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party that (i) such Party has
the full corporate right, power and authority to enter into this Agreement, to
grant the licenses granted hereunder and to perform the acts required of it
hereunder (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this
Agreement will constitute the legal, valid and binding obligation of such
Party, enforceable against such Party in accordance with its terms; (iv) such
Party's Promotional Materials will neither infringe on any copyright U.S.
patent or any other third party right nor violate any applicable law or
regulation and (v) such Party acknowledges that the other Party makes no
representations, warranties or agreements related to the subject matter hereof
which are not expressly provided for in this Agreement
IV. CONFIDENTIALITY
Each Party acknowledges that Confidential Information may be disclosed to the
other Party during the course of this Agreement Each Party agrees that it will
take reasonable steps, at least substantially equivalent to the steps it takes
to protect its own proprietary information, during the Term of this Agreement
and for a period of three years following expiration or termination of this
Agreement to prevent the duplication or disclosure of Confidential Information
of the other Party, other than by or to its employees or agents who must have
access to such Confidential Information to perform such Party's obligations
hereunder, who will each agree to comply with this section. Notwithstanding the
foregoing, either Party may issue a press release or other disclosure
containing Confidential Information without the consent of the other Party. to
the extent such disclosure is required by law, rule, regulation or government or
court order. In such event the disclosing Party will provide at least five (5)
business days prior written notice of such proposed disclosure to the other
Party. Further, in the event such disclosure is required of either Party under
the laws, rules or regulations of the Securities and Exchange Commission or any
other applicable governing body, such Party will (i) redact mutually agreed-upon
portions of this Agreement to the fullest extent permitted under applicable
laws, rules and regulations and (ii) submit a request to such governing body
that such portions and other provisions of this Agreement receive confidential
treatment under the laws, rules and regulations of the Securities and Exchange
Commission air otherwise be held in the strictest confidence to the fullest
extent permitted under the laws, rules or regulations of any other applicable
governing body.
V. RELATIONSHIP WITH AOL MEMBERS
Solicitation of Subscribers. During the Term and for the [*] period following
the expiration or termination of this Agreement, neither ICP nor its agents will
use the AOL Network to (i) solicit or participate in the solicitation of AOL
Members when that solicitation is for the benefit of any entity (including ICP)
which could reasonably [*] or become [*] or (ii) promote any services which
could reasonably be construed to be in competition with services available
through AOL including, but not limited to, services available through the
Internet (e.g., an ICP Interactive Site). ICP may not send any AOL Member
unsolicited email communications on or through the AOL Network without a "Prior
Business Relationship." For purposes of this Agreement a "Prior Business
Relationship" shall mean that the AOL Member has either (i) purchased Products
from ICP through the AOL Network or (ii) voluntarily provided information to ICP
through a contest, registration, or other communication, which included dear and
conspicuous notice to the AOL Member that the information provided by the AOL
Member could result in an e-mall being sent to that AOL Member by ICP or its
agents. A Prior Business Relationship does not exist solely by virtue of an AOL
Member's visit to the ICP Sites (absent the additional elements described
above). In any commercial e-mail communications to AOL Members which are
otherwise permitted hereunder, ICP will provide the recipient with a prominent
and easy means to 'opt-out" of receiving any future commercial e-mail
communications from ICP.
Collection of Member Information. ICP is prohibited from collecting AOL Member
screen names from public or private areas of the AOL Network, except as
specifically provided below. ICP shall ensure that any survey, questionnaire or
other means of collecting Member Information including, without limitation,
requests directed to specific AOL Member screen names and automated methods of
collecting screen names (an "Information Request") complies with (i) all
applicable laws and regulations, (ii) AOL's applicable Terms of Service, and
(iii) any privacy policies which have been Issued by AOL in writing during the
Term (or, in the case of a Linked ICP Interactive Site, ICP's standard privacy
policies, to the extent such policies are prominently published on the site and
provide adequate notice and disclosure to users regarding ICP's collection, use
and disclosure of any user information) (collectively, the "Applicable Privacy
Policies"). Each Information Request shall clearly and conspicuously specify to
the AOL Members at Issue the purpose for which Member Information collected
through the information request shall be used (the "Specified Purpose").
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Use of Member Information. ICP shall restrict use of the Member Information
collected through an Information Request to the Specified Purpose. In no event
shall ICP (i) provide AOL Member names, screen names, addresses or other
identifying information Member Information-) to any third party (except to the
extent specifically (a) permitted under the Applicable Privacy Policies or (b)
authorized by the AOL Members in question) or (ii) otherwise use any Member
Information in contravention of the above section regarding "Solicitation of
Members".
E-mail Newsletters. Any e-mail newsletters sent to AOL Members by ICP or its
agents shall (i) be subject to AOL's policies an use of the e-mail
functionality, including but not limited to AOL's policy on unsolicited bulk
e-mail, (ii) be sent only to AOL Members requesting to receive such
newsletters, (iii) not contain Content which violates AOL's Terms of Service,
and (iv) not contain any advertisements, marketing or promotion for any other
interactive Service.
VI. TREATMENT OF CLAIMS
Liability. EXCEPT AS PROVIDED BELOW IN THE INDEMNITY SECTION, UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM THE USE OF OR
INABILITY TO USE THE AOL NETWORK OR ICP SITES OR ANY OTHER PROVISION OF THIS
AGREEMENT, SUCH AS, BUT NOT LIMITED TO. LOSS OF REVENUE OR ANTICIPATED PROFITS
OR LOST BUSINESS. EXCEPT AS PROVIDED BELOW IN THE "INDEMNITY" SECTION, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR MORE THAN THE AGGREGATE AMOUNTS
PAYABLE HEREUNDER AS OF THE DATE UABIL17Y ACCRUED.
No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS, ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK
THE ICP SITES OR ANY AOL PUBLISHING TOOLS. INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING
THE PROFITABILITY OF THE ICP SITES.
Indemnity. Either Party will defend, indemnify, save and hold harmless the
other Party and the officers, directors, agents, affiliates, distributors,
franchisees and employees of the other Party from any and all third party
claims. demands, liabilities, costs or expenses, Including reasonable
attorneys' fees ("Liability"), resulting from the Indemnifying Party's material
breach of any duty, representation, or warranty of this Agreement.
If a Party entitled to indemnification hereunder (the "Indemnified Party")
becomes aware of any matter it believes is indemnifiable hereunder involving
any claim action, suit, investigation, arbitration or other proceeding against
the Indemnified Party by any third party (each an 'Action'), the Indemnified
Party shall give the other Party (the "Indemnifying Party") prompt written
notice of such Action. Such notice shall (i) provide the basis on which
Indemnification is being asserted and (ii) be accompanied by copies of all
relevant pleadings, demands. and other papers related to the Action and In the
possession of the Indemnified Party. The Indemnifying Party shall have a period
of ten (10) days after delivery of such notice to respond. If the Indemnifying
Party elects to defend the Action or does not respond within the requisite ten
(10) day period, the Indemnifying Party shall be obligated to defend the
Action, at Its own expense, and by counsel reasonably satisfactory to the
Indemnified Party. The Indemnified Party shall cooperate, at the expense of the
Indemnifying Party, with the Indemnifying Party and its counsel in the defense
and the Indemnified Party shall have the right to participate fully, at its own
expense. In the defense of such Action. If the Indemnifying Party responds
within the required ten (10) day period and elects not to defend such Action.
The Indemnified Party shall be free, without prejudice to any of the
Indemnified Party's rights hereunder, to compromise or defend (and control the
defense of) such Action. In such case, the Indemnifying Party shall cooperate,
at its own expense, with the Indemnified Party and its counsel in the defense
against such Action and the Indemnifying Party shall have the right to
participate fully, at its own expense, In the defense of such Action. Any
compromise or settlement of an Action shall require the prior written consent
of both Parties hereunder, such consent not to be unreasonably withheld or
delayed.
Acknowledgment. AOL AND ICP EACH ACKNOWLEDGES THAT THE PROVISIONS OF THIS
AGREEMENT WERE NEGOTIATED TO REFLECT AN INFORMED, VOLUNTARY ALLOCATION BETWEEN
THEM OF ALL RISKS (BOTH KNOWN AND UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS
CONTEMPLATED HEREUNDER. THE LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES
AND LIABILITY CONTAINED IN THIS AGREEMENT ARE INTENDED TO LIMIT THE
CIRCUMSTANCES AND EXTENT OF LIABILITY. THE PROVISIONS OF THIS SECTION VI SHALL
BE ENFORCEABLE INDEPENDENT OF AND SEVERABLE FROM ANY OTHER ENFORCEABLE OR
UNENFORCEABLE PROVISION OF THIS AGREEMENT.
VII. ARBITRATION
(a) The Parties shall act in good faith and use commercially reasonable efforts
to promptly resolve any claim, dispute, claim controversy or disagreement (each
a "Dispute") between the Parties or any of their respective subsidiaries,
affiliates, successors and assigns under or related to this Agreement or any
document executed pursuant to this Agreement or any of the transactions
contemplated hereby. If the Parties cannot resolve the Dispute within such
timeframe, the Dispute shall be submitted to the Management Committee for
resolution. For ten (10) days after the Dispute was submitted to the Management
Committee, the Management Committee shall have the exclusive right to resolve
such Dispute; provided further that the Management Committee shall have the
final and exclusive right to resolve Disputes arising from any provision of
this Agreement which expressly or implicitly provides for the Parties to reach
mutual agreement as to certain terms. If the Management Committee is unable to
amicably resolve the Dispute during the ten (10) day period, then the
Management Committee will consider in good faith (the possibility of retaining a
third party mediator to facilitate resolution of the Dispute. In the event the
Management Committee elects not to retain a mediator, the Dispute will be
subject to the resolution mechanism described below. "Management Committee"
shall mean a committee made up of a senior executive from each of the Parties
for the purpose of
21
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resolving Disputes under this Section and generally overseeing the relationship
between the Parties contemplated by this Agreement Neither Party shall seek,
nor shall be entitled to seek, binding outside resolution of the Dispute unless
and until the Parties have been unable to amicably resolve the dispute as set
forth In this paragraph (a) and then, only in compliance with the procedures
set forth in this Section.
(b) Except for Disputes relating to issues of (i) proprietary rights, including
but not limited to intellectual property and confidentiality, and (g) any
provision of this Agreement which expressly or implicitly provides for the
Parties to reach mutual agreement as to certain terms (which shall be resolved
by the Parties solely and exclusively through amicable resolution as set forth
In paragraph (a), any Dispute not resolved by amicable resolution as set forth
In paragraph (a) shall be governed exclusively and finally by arbitration. Such
arbitration shall be conducted by the American Arbitration Association ("AAA")
in Washington. D.C. and shall be initiated and conducted in accordance with the
Commercial Arbitration Rules ("Commercial Rules") of the AAA, including the AAA
Supplementary Procedures for Large Complex Commercial Disputes "Complex
Procedures"), as such rules shall be in effect on the date of delivery of a
demand for arbitration ("Demand" except to the extent that such rules are
inconsistent with the provisions set forth herein. Notwithstanding the
foregoing, the Parties may agree in good faith that the Complex Procedures
shall not apply in order to promote the efficient arbitration of Disputes where
the nature of the Dispute, including without limitation the amount in
controversy, does not justify the application of such procedures.
(c) The arbitration panel shall consist of three arbitrators. Each Party shall
name an arbitrator within ten (10) days after the delivery of the Demand. The
two arbitrators named by the Parties may have prior relationships with the
naming Party, which In a judicial setting would be considered a conflict of
interest. The third arbitrator, selected by the first two, shag be a neutral
participant, with no new working relationship with either Party. If the two
arbitrators are unable to select a third arbitrator within ten (10) days, a
third neutral arbitrator will be appointed by the AAA from the panel of
commercial arbitrators of any of the AAA Large and Complex Resolution Programs.
If a vacancy in the arbitration panel occurs after the hearings have commenced,
the remaining arbitrator or arbitrators may hot continue with the hearing and
determination of the controversy, unless the Parties agree otherwise.
(d) The Federal Arbitration Act 9 U.S.C. Sec. 1-16, and not state law, shall
govern the arbitrability of all Disputes. The arbitrators shall allow such
discovery as Is appropriate to the purposes of arbitration in accomplishing a
fair, speedy and cost-effective resolution of the Disputes. The arbitrators
shall reference the Federal Rules of Civil Procedure then in effect in setting
the scope and timing of discovery. The Federal Rules of Evidence shall apply in
toto. The arbitrators may enter a default decision against any Party who fails
to participate in the arbitration proceedings.
(e) The arbitrators shag have the authority to award compensatory damages only.
Any award by the arbitrators shall be accompanied by a written opinion setting
forth the findings of fact and conclusions of law reflect upon in reaching the
decision. The award rendered by the arbitrators shall be final, binding and
non-appealable, and judgment upon such award may be entered by any court of
competent jurisdiction. The Parties agree that the existence, conduct and
content of any arbitration shag be kept confidential and no Party shall
disclose to any person any information about such arbitration, except as may be
required by law or by any governmental authority or for financial reporting
purposes in each Party's financial statements.
(f) Each Party shall pay its fees of its own attorneys', expenses of witnesses
and all other expenses and costs In connection with the presentation of such
Party's case (collectively, "Attorneys' Fees"). The remaining costs of the
arbitration, including without limitation, fees of that arbitrators, costs of
records or transcripts and administrative fees (collectively, "Arbitration
Costs") shall be born equally by the parties. Notwithstanding tie foregoing.
the arbitrators may modify the allocation of Arbitration Costs and award
Attorneys' Fees in those cases where fairness dictates a different allocation
of Arbitration Costs between the Parties and an award of Attorneys' Fees to the
prevailing Party as determined by the arbitrators.
(g) Any Dispute that is not subject to final resolution by the Management
Committee or to arbitration under this Section or law (collectively,
"Non-Arbitration Claims") shall be brought in a court of competent jurisdiction
in the Commonwealth of Virginia. Each Party Irrevocably consents to the
exclusive jurisdiction of the courts of the Commonwealth of Virginia and the
federal courts situated in the Commonwealth of Virginia, over any and all
Non-Arbitration Claims and any and all actions to enforce such claims or to
recover damages or other relief in connection with such claims or to enforce a
judgment rendered in an arbitration proceeding.
VIII. MISCELLANEOUS
Auditing Rights. Each Party shall maintain complete. dear and accurate records
of all expenses, revenues, fees, transactions and related documentation
(including agreements) in connection with the performance of this Agreement
("Records"). All such Records shall be maintained for a minimum of five (5)
years following termination of this Agreement. For the sole purpose of ensuring
compliance with this Agreement, each Party shall have the right at its expense,
to direct an independent certified public accounting firm subject to strict
confidentiality restrictions to conduct a reasonable and necessary copying and
inspection of portions of the Records of the other Party which are directly
related to amounts payable to the Party requesting the audit pursuant to this
Agreement. Any such audit may be conducted after twenty (20) business days prior
written notice, subject to the following. Such audits shall not be made more
frequently than once every twelve months. No such audit of AOL shall occur
during the period beginning on June 1 and ending October 1. In lieu of
providing access to its Records as described above, a Party shall be entitled
to provide the other Party with a report from an independent certified public
accounting firm confirming the information to be derived from such Records.
Excuse. Neither Party shall be liable for, or be considered in breach of or
default under this Agreement on account of, any delay or failure to perform as
required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.
Independent Contractors. The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or partner of1he other
Party. Neither Party shall have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
22
<PAGE>
otherwise bind, the other Party. This Agreement shall not be interpreted or
construed to create an association, agency, joint venture or partnership
between the Parties or to impose any liability attributable to such a
relationship upon either Party.
Notice. Any notice, approval, request authorization, direction or other
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail an the AOL Network (to screen name
"[email protected]" in the case of AOL) or by confirmed facsimile; (ii) on the
delivery date if delivered personally to the Party to whom the same is
directed; (iii) one business day after deposit with a commercial overnight
carrier, with written verification of receipt or (iv) five business days after
the mailing date, whether or not actually received, if sent by U.S. mall.
return receipt requested, postage and charges prepaid, or any other means of
rapid mail delivery for which a receipt is available. In the case of AOL, such
notice will be provided to both the Senior Vice President for Business Affairs
(fax no. 703-2651206) and the Deputy General Counsel (fax no. 703-285-1105),
each at the address of AOL set forth in the first paragraph of this Agreement.
In the case of ICP, except as otherwise specified herein, the notice address
shall be the address for ICP set forth in the first paragraph of this Agreement
with the other relevant notice Information, including the recipient for notice
arid, as applicable, such recipient's fax number or AOL e-mail address, to be as
reasonably identified by AOL.
No Waiver. The failure of either Party to insist upon or enforce strict
performance by the other Party of any provision of this Agreement or to
exercise any right under this Agreement shall not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same shall
be and remain in full force and effect.
Return of Information. Upon the expiration or termination of this Agreement,
each Party shall, upon the written request of the other Party, return or
destroy (at that option of the Party receiving the request) all confidential
information, documents, manuals and other materials specified the other Party.
Survival. Sections IV, V, V1, and VII of this Exhibit C, all payment provisions
and any provisions that by its nature, must survive the completion, expiration,
termination or cancellation of this Agreement shall survive the completion.
expiration, termination or cancellation of this Agreement.
Amendment. No change. amendment or modification of any provision of this
Agreement shall be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment.
Further Assurances. Each Party shall take such action (including, but not
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by any other Party for the implementation or continuing
performance of this Agreement.
Assignment. ICP shall not assign this Agreement or any right interest or
benefit under this Agreement without the prior written consent of AOL.
Assumption of this Agreement by any Successor to ICP (including, without
limitation, by way of merger or consolidation) shall be subject to AOL's prior
written approval. Subject to the foregoing, this Agreement shall be fully
binding upon, inure to the benefit of and be enforceable by the Parties hereto
and their respective successors and assigns.
Construction; Severability. In the event that any provision of this Agreement
conflicts with the law under which this Agreement is to be construed or if any
such provision is held invalid by a court with jurisdiction over the Parties to
this Agreement, (i) such provision shall be deemed to be restated to reflect as
nearly as possible the original intentions of the Parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this Agreement shall remain In full force and effect.
Remedies. Except where otherwise specified, the rights and remedies granted to
a Party under this Agreement are cumulative and in addition to, and not in lieu
of, any other rights or remedies which the Party my possess at law or in
equity.
Applicable Law; Jurisdiction. This Agreement shall be interpreted, construed
and enforced in all respects in accordance with the laws of the Commonwealth of
Virginia except for its conflicts of laws principles. Each Party irrevocably
consents to the exclusive jurisdiction of the courts o( the Commonwealth of
Virginia and the federal courts situated in the Commonwealth of Virginia, in
connection with any action to enforce the provisions of this Agreement to
recover damages or other relief for breach or default under this Agreement, or
otherwise arising under or by reason of this Agreement.
Export Controls. Both parties shall adhere to all applicable laws, regulations
and rules relating to the export of technical data and shall not export or
re-export any technical data, any products received from the other Party or the
direct product of such technical data to any proscribed country fisted in such
applicable law, regulations and rules unless properly authorized.
Headings. The captions and headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same document.
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EXHIBIT D
---------
FORMAT FOR ICP'S PRESENCE ON THE AOL NETWORK
o Any ICP trademark or logo
o Any headline or picture from ICP content
o Any teaser, icon, link to the Online Areas, ICP Internet Sites or
Welcome Mat
o Any other Content which originates from, describes or promotes ICP
or ICP's Content
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EXHIBIT E
---------
Detailed Schedule and Bona-Fide Value of ICP In-Kind Commitments
In-Kind Commitment Bona Fide Value
Daily mentions in the "Ask the Family Doctor" $1,980,000.00
syndicated column in various newspapers;
approximately 2 billion total Impressions for
the mentions.
Mentions on the "American Baby" show on the $33,333.00
Lifetime Network; approximately 36 million
total Impressions for the mentions.
Mentions on CNNfn, 30 weekly segments, 3-4 $733,333.00
minutes each segment.
For the purposes hereof, with respect to each promotion specified above, a
"mention" shall mean a coherent spoken or graphic reference to the relevant ICP
keyword and/or area on AOL, which shall also include at a minimum a reference
to "America Online" and/or "AOL." Additionally, the mentions shall be exclusive
to AOL (i.e., they shall not mention or refer to any ICP Interactive Site).
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EXHIBIT F
---------
CERTIFICATION OF COMPLIANCE WITH COMMITMENTS
REGARDING PROMOTIONS
Pursuant to Sections 1.5.2 and 1.5.3 and Section 3 of the Interactive Services
Agreement between iVillage, Inc. ("ICP") and America Online, Inc. ("AOL"),
dated as of December 31, 1998 (the "Agreement"), the following report is
delivered to AOL for the month ending ____________ (the "Month"):
1. Promotional Commitments
ICP hereby certifies to AOL that ICP completed the following promotional
commitments during the Month:
<TABLE>
<CAPTION>
Type of Promotion Date(s) of Promotion Duration/Circulation of Relevant Contract Section
Promotion
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
1.
- ----------------------------------------------------------------------------------------------------------------------
2.
- ----------------------------------------------------------------------------------------------------------------------
3.
</TABLE>
IN WITNESS WHEREOF, this Certificate has been executed this ________ day of
_________, 199_.
- ------------------------------------------
By:
---------------------------------------
Print Name:
-------------------------------
Title:
------------------------------------
Date:
-------------------------------------
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<PAGE>
EXHIBIT G
---------
OPERATING STANDARDS
-------------------
[*]
<PAGE>
* Confidential treatment has been requested for certain portions of this
exhibit.
CONFIDENTIAL
BANKCARD MARKETING AGREEMENT
THIS AGREEMENT, made this 4th day of June, 1998, by and between
iVILLAGE, INC., a Delaware corporation having its principal office at 170 Fifth
Avenue, New York, New York 10010 (the "Company") and FIRST CREDIT CARD SERVICES
USA L.L.C., a Delaware limited liability company ("FCCSU-LLC") sometimes
referred to as the "Parties" and individually as a "Party". This Agreement is
made together with the BankCard Issuance and Servicing Agreement by and
between FIRST USA BANK ("FUSA") and the Company of even date herewith (the
"Issuance and Servicing Agreement").
RECITALS:
WHEREAS, FCCSU-LLC assists FUSA in connection with the ongoing
efforts of FUSA to market its various MasterCard and/or Visa consumer credit
products and related services (hereinafter referred to as "Credit Card(s)") to
the general public;
WHEREAS, this Agreement has been negotiated and executed by FCCSU-LLC
and the Company in connection with those efforts of FUSA in order to document
the terms of their agreement concerning the marketing of Credit Cards to the
officers, directors, employees, subscribers, customers and users of Company's
on-line services (the "Company Users" or "Users"), including a Credit Card
which bears the name and logo of the Company on the face thereof (the
"iVillage-branded Credit Card"), and the subsequent and immediate acquisition
of the underlying account relationships by FUSA;
WHEREAS, FCCSU-LLC has agreed, subject to the terms and conditions
hereinafter contained, to market Credit Cards, including the iVillage-branded
Credit Card, to Company Users on behalf of FUSA in the manner and to the
extent set forth in this Agreement;
WHEREAS, immediately upon the successful completion of the marketing
acquisition efforts of FCCSU-LLC as determined by FUSA and FCCSU-LLC in their
sole and absolute discretion, the underlying accounts will be immediately sold
by FCCSU-LLC to FUSA so that the account in question can then be serviced by
FUSA in accordance with its then current business practices and serviced by
FUSA in the manner contemplated by the Issuance and Servicing Agreement and in
a manner consistent with the then current business practices of FUSA;
WHEREAS, the Company is willing to endorse the offering of FUSA's
Credit Card(s) to and among the Company Users subject to the terms and
conditions contained in this Agreement and in the Issuance and Servicing
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties herein contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:
1. License to Use Marks.
(a) During the term of this Agreement, FCCSU-LLC shall have
the limited right and license, for the purpose of fulfilling all of the
obligations contained within this Agreement, to use the current and future
respective name, trademarks, servicemarks, copyrights and logo of the Company
(collectively, the "Marks") solely in connection with
1
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FCCSU-LLC's marketing of FUSA's Credit Card(s) to Company Users under this
Agreement (the "Program"). Examples of Company's current Marks are set forth
in Exhibit B attached hereto. Such right and license is restricted to the
products and services described herein and shall not apply or extend to any
other product or service. Subject to and consistent with the rules and
regulations of Visa and MasterCard, FCCSU-LLC shall comply with the standards
established by the Company with respect to the form of the Marks and their
usage.
(b) Subject to the foregoing, each of the parties hereto is
and shall remain the owner of all rights in and to its name and logo, as the
same now exist or as they may hereafter be modified, including all rights in
and to any copyright, trademark, servicemark and/or like rights pertaining
thereto. Any and all rights to Company's Marks not herein specifically granted
and licensed to FCCSU-LLC are reserved to Company. Upon the termination of
this Agreement, all rights conveyed by Company to FCCSU-LLC with respect to
the use of Company's Marks shall cease, and all such rights shall revert to
Company. Upon termination of this Agreement, FCCSU-LLC shall have no further
right to market FUSA's cardmember products using the Company Marks or to
further utilize any promotional materials containing the Company Marks.
2. Customer Lists.
(a) In the event that direct mail becomes a marketing method
used, the Parties agree to work together in conformity with any applicable
rules, regulations and/or privacy policies established to determine the method
by which FCCSU-LLC can be provided with mailing lists of the Company Users,
including names, addresses (residential and e-mail), residential telephone
numbers (where available), and all other data pertaining to Company Users, via
magnetic tape, cartridge, or any other media which is mutually agreed upon
(the "Lists"). All Lists shall be provided to FCCSU-LLC by Company at no cost
to FCCSU-LLC.
(b) FCCSU-LLC shall use the Lists provided by Company on a
basis consistent with the intent and terms of this Agreement, i.e. to market
Credit Cards on behalf of FUSA, and shall not rent, use or permit any third
party handling such Lists to use them for any other purpose. FCCSU-LLC shall
not rent or otherwise make available such Lists to any third party (except for
the purposes of fulfilling obligations under this Agreement) without the
express written consent of Company. The Lists provided by Company are and
shall remain the sole property of Company provided they have been provided to
FCCSU-LLC by Company at no expense to FCCSU-LLC, except to the extent that
such Company names are available to FCCSU-LLC from another source. FCCSU-LLC
will, subject to applicable law requiring their retention, return such Lists
to Company or destroy them upon the termination of this Agreement.
(c) FCCSU-LLC and/or its affiliates may maintain separately
all information which is submitted and/or obtained as a result of an
application for an Account relationship with a Company Users. This information
becomes a part of FCCSU-LLC's own files and shall not be subject to this
Agreement provided that, any use of such information, except for fulfilling
obligations under the Program, will not imply or suggest an endorsement by
Company.
(d) FCCSU-LLC and Company mutually agree that given the
nature of the industry, additional and/or various marketing vehicles not
specifically addressed in this Agreement may require additional User
information. As a result, subject to the established rules, regulations and
privacy policies, the Company acknowledges and agrees to use commercially
reasonable efforts to work with FCCSU-LLC for the purpose of providing
2
<PAGE>
any necessary User information as requested from time to time, including but
not limited to Lists of Users, as referenced in subsection (a) above.
3. Offering of Credit Cards by FCCSU-LLC. FCCSU-LLC shall offer
Credit Card(s) to Company Users in accordance with the following provisions:
(a) Subject to subparagraph (c) of this Paragraph 3,
FCCSU-LLC shall, at its own expense, design and develop such marketing,
promotion and solicitation materials as it deems appropriate to promote the
Program among Company Users, and the Company shall endorse and reasonably
assist FCCSU-LLC with the administration of such promotional and solicitation
activities. FCCSU-LLC and the Company will jointly schedule and direct the
solicitation of Company Users, provided, that FCCSU-LLC reserves the right to
limit its solicitation materials to those persons deemed to be creditworthy in
accordance with FCCSU-LLC's and/or FUSA's normal credit criteria and credit
practices.
(b) In the event of any change in its Marks, the Company
shall bear and promptly reimburse FCCSU-LLC for any reasonable expenses
incurred by FCCSU-LLC in connection with the mutually agreed upon
implementation and use of the altered Marks.
(c) FCCSU-LLC shall submit to Company, for its prior
approval, samples of all marketing, promotional or solicitation materials,
printed or otherwise, which FCCSU-LLC intends to utilize to market the Program
to and among Company Users. Company shall review such materials and respond to
FCCSU-LLC's requests for approval on a timely basis. Approval by Company of
any marketing materials submitted by FCCSU-LLC for review shall not be
unreasonably withheld.
(d) On-line Offering of Credit Cards. During the initial
term of this Agreement, Company agrees to provide site integration to FUSA and
FCCSU-LLC through impressions as well as other site integration (e.g. user
registration processing, bundling and other company marketing activities) for
the purpose of providing a vehicle to market and advertise the Program (the
"Impressions"). In order to test the optimal usage of the aforementioned
Impressions and/or to take advantage of information garnered through
FCCSU-LLC's use of the Impressions, FCCSU-LLC and Company may, exchange the
allotment of Impressions (i.e. banner advertisements, popup banner
advertisements, etc.). The Company agrees that during the term of this
Agreement it shall provide no less of a marketing and advertising commitment,
(both quantity and quality) than that which was provided in the preceding
period in order to ascertain the marketing goal and Advance earned within the
prior period. In other words, if in a given three (3) month period, the
Company provided 5,000,000 Impressions in order to ascertain the marketing
goal and Advance paid for the associated period pursuant to this Agreement,
then the Company shall provide no less than 5,000,000 Impressions for the
following three (3) months and all equivalent three (3) month periods thereafter
until termination of this Agreement. Essentially, it is agreed that the
Company will provide no less of a marketing commitment and provide at least
the same quantity and quality of Impressions as that which was provided so as
to earn the Advance level ascertained. The parties agree that at the end of
each year, FCCSU-LLC and the Company will meet to review the year-to-date
performance of the Program. If at the end of the year, the Program has not
attained the anticipated goals, then the parties may adjust the marketing
program by increasing the delivery of Impressions or the manner in which the
Impressions are displayed in order to attain the anticipated goals. Company
acknowledges and agrees that Company's provision of the Credit Card
advertising is material to FCCSU-LLC's decision to enter into this transaction
with Company and that a failure to provide the minimum advertising
3
<PAGE>
commitment described herein shall be deemed a material default under Section
11(b) of this Agreement.
(e) Further, this Program shall include the ability to process
Credit Card applications on-line at Company sites provided that processing
such applications does not violate applicable laws or regulations. Company
shall provide an icon on Company's Website (the "Company Credit Card
Application Vehicle") whereby Company Users shall be connected to the Company
Credit Card Application Vehicle. Company shall work with FCCSU-LLC in the
design, development and maintenance of same.
4. [Intentionally Omitted]
5. Fees.
(a) During the term of this Agreement (including any renewal terms
as provided in Paragraph 11 hereof) and in consideration of the use of
Company's Marks, the supplying of Impressions to FCCSU-LLC, and the Company's
endorsement of the Program, FCCSU-LLC shall pay to Company certain Marketing
Fees (the "Fees") as set forth on Exhibit A attached hereto.
(b) Notwithstanding any of the above, FCCSU-LLC shall not be
obligated to pay to the Company any duplicate Fees described in Exhibit A in
the event that the Accounts on which such fees are calculated represent
substitute Accounts, including, but not limited to, Accounts which are
established due to the loss or theft of a cardmember's existing Credit Card or
Accounts which were established as a result of former joint cardmembers
requesting individual Accounts.
(c) FCCSU-LLC shall provide Company with a reconciliation report
within sixty (60) days following the end of each calendar quarter setting
forth the amount of Fees earned by Company during such calendar quarter. Any
amounts owing to Company and payable pursuant to the terms of this Paragraph
5 shall be paid to Company within sixty (60) days following the end of such
calendar quarter.
(d) FCCSU-LLC's obligation to pay any of the aforementioned Fees
to the Company shall cease immediately upon the termination of this Agreement
for any reason whatsoever, provided that such Fees shall be reconciled and
paid to the date of termination.
6. Records.
During the term of this Agreement (including any renewals), FCCSU-LLC
shall keep accurate books of account and copies of all documents and other
material related to FCCSU-LLC's obligations under this Agreement at FUSA's
principal office, including without limitation (a) Marketing Fees, (b) all
Accounts established under this Agreement. The Parties agree that within
thirty (30) days of the Company's written request, but not more frequently
than once per year, Company, by its duly authorized agents and
representatives, shall have the right, upon reasonable notice to FCCSU-LLC, to
audit such books, documents and other material from time to time and shall
have access thereto during ordinary business hours, and shall be at liberty to
make copies of such books, documents and other material, subject to such
security procedures as FCCSU-LLC may reasonably impose and subject to such
limitations as may be required under applicable rules, regulations or statutes
governing the conduct of FCCSU-LLC's business. Company shall maintain the
confidentiality of all information obtained as a result of auditing FCCSU-LLC,
and shall not reveal any such information to any third party except in
connection with any
4
<PAGE>
legal action or other proceeding implemented to enforce any rights under this
Agreement. If any audit of FCCSU-LLC's books and records reveals that
FCCSU-LLC has failed to account for and pay Marketing Fees owed, FCCSU-LLC
shall promptly pay such underpayment.
7. Relationship. Nothing in this Agreement is intended to or shall
be construed to constitute or establish an agency, joint venture, partnership
or fiduciary relationship between the parties, and neither party shall have
the right or authority to act for or on behalf of the other party.
8. Confidentially
(a) The parties acknowledge and agree that the terms of this
Agreement and all information provided to or in connection with either party's
performance under this Agreement shall be considered confidential and
proprietary information ("Confidential Information") and shall not be
disclosed to any third party without the prior written consent of the party
providing the Confidential Information ("Disclosing Party"). Confidential
Information shall include, without limitation: (i) names, addresses, and
demographic, behavioral, and credit information relating to FCCSU-LLC
Cardholders, potential FCCSU-LLC Cardholders or the Lists provided to FCCSU-LLC
pursuant to Paragraph 2; (ii) marketing materials, strategies and targeting
methods; (iii) business objectives, assets and properties; and (iv)
programming techniques and technical, developmental, cost and processing
information.
(b) The party receiving such Confidential Information ("Receiving
Party") shall use Confidential Information only for the purpose of performing
the terms of this Agreement and shall not accumulate in any way or make use of
Confidential Information for any other purpose. The Receiving Party shall
ensure that only its employees, authorized agents, or subcontractors who need
to know Confidential Information to perform this Agreement will receive
Confidential Information and that such persons agree to be bound by the
provisions of this Paragraph and maintain the existence of this Agreement and
the nature of their obligations hereunder strictly confidential.
(c) The obligations with respect to Confidential Information shall
not apply to Confidential Information that: (i) either party or its personnel
already know at the time it is disclosed as shown by their written records;
(ii) is publicly known without breach of this Agreement; (iii) either party
received from a third party authorized to disclose it without restriction;
(iv) either party, its agents or subcontractors, developed independently
without use of Confidential Information; or (v) either party is required by
law, regulation or valid court or governmental agency order or request to
disclose, in which case the party receiving such an order or request, to the
extent practicable, must give notice to the other party, allowing them to seek
a protective order.
(d) Each party agrees that any unauthorized use or disclosure of
Confidential Information may cause immediate and irreparable harm to the
Disclosing Party for which money damages may not constitute an adequate
remedy. In that event, each party agrees that injunctive relief may be
warranted in addition to any other remedies the Disclosing Party may have. In
addition, the Receiving Party agrees promptly to advise the Disclosing Party
in writing of any unauthorized misappropriation, disclosure or use by any
person of the Confidential Information which may come to its attention and to
take all steps at its own expense reasonably requested by the Disclosing Party
to limit, stop or otherwise remedy such misappropriation, disclosure or use.
5
<PAGE>
(e) Upon either Party's demand, or upon the termination of this
Agreement, the Parties shall comply with each other's reasonable instructions
regarding the disposition of Confidential Information which may include return
of any and all Confidential Information (including any copies or reproductions
thereof). Such compliance shall be certified in writing, including a statement
that no copies of confidential information have been kept.
(f) Except as necessary for its performance under this Agreement
and/or the Marketing Agreement, neither Party shall use the name of the other
Party, its affiliates or subsidiaries in connection with any representation,
publication or advertisement, or make any public statement relating to the
other Party, its affiliates or subsidiaries, without the prior full disclosure
of same to the other Party, and the prior written consent of the respective
Party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, either Party may utilize the name of the other
Party for the purpose of advertising within any Party related advertising
portfolio (e.g. SEC filings, Q's and 1OK's), without the prior written consent
of the respective Party.
(g) Except as may be required by law, regulation or any
governmental authority, neither Party, nor any of its affiliates, shall issue
a press release or make public announcement or any disclosure to any third
party related to the transactions contemplated by this Agreement without the
prior consent of the other Party, which consent shall not be unreasonably
withheld or delayed.
(h) The obligations of this Paragraph 8 shall survive the
termination of this Agreement for a period of two (2) years.
9. Representations and Warranties.
(a) FCCSU-LLC represents and warrants that (i) it is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and (ii) the execution and delivery by
FCCSU-LLC of this Agreement, and the performance by FCCSU-LLC of the
transactions contemplated hereby, are within FCCSU-LLC's corporate powers, have
been duly authorized by all necessary corporate action, do not require any
consent or other action by or in respect of, or filing with, any third party
or governmental body or agency (other than informational filings required by
MasterCard or Visa), and do not contravene, violate or conflict with, or
constitute a default under, any provision of applicable law or regulation or
of the charter or by-laws of FCCSU-LLC or of any agreement, judgment,
injunction, order, decree or other instrument binding upon FCCSU-LLC.
(b) The Company represents and warrants that it is a Delaware
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Company further represents and warrants that
(i) the execution and delivery by Company of this Agreement, and the
performance by Company of the transactions contemplated hereby, are within
Company's powers, have been duly authorized by all necessary action, do not
require any consent or other action by or in respect of, filing with, any
third party or any governmental body or agency, and do not contravene, violate
or conflict with, or constitute a default under, any provision of applicable
law, regulation, or under any governing documents, charter or bylaw, or any
agreement, judgment, injunction, order, decree or other instrument binding on
Company; (ii) it is not currently aware of any claims, and is not currently
involved in any litigation, challenging Company's ownership of the Marks and
(iii) it is not aware of any claims, and is not currently involved in any
litigation, challenging the Company's access to the Web
6
<PAGE>
and/or the Internet. Company represents and warrants that it has the right,
power and authority to execute this Agreement and act in accordance herewith.
10. Release and Indemnification.
(a) FCCSU-LLC shall not be responsible in any way for any
misrepresentation, negligent act or omission or willful misconduct of Company,
its affiliates, officers, directors, agents, or employees in connection with
the entry into or performance of any obligation of Company under this
Agreement. Further, Company shall indemnify, defend and hold FCCSU-LLC
harmless from and against all claims, actions, suits or other proceedings, and
any and all losses, judgments, damages, expenses or other costs (including
reasonable counsel fees and disbursements), arising from or in any way
relating to (i) any actual or alleged violation or inaccuracy of any
representation or warranty of Company contained in Paragraph 9 above, (ii) any
actual or alleged infringement of any trademark, copyright, trade name or
other proprietary ownership interest resulting from the use by FCCSU-LLC
and/or FUSA of the Marks of Company as contemplated by this Agreement, and
(iii) any negligent act or omission or willful misconduct of Company or its
directors, officers, employees, agents or assigns in connection with the entry
into or performance of this Agreement.
(b) Company shall not be responsible in any way for any
misrepresentation, negligent act or omission or willful misconduct of
FCCSU-LLC, its affiliates, officers, directors, agents, or employees in
connection with the entry into or performance of any obligation of FCCSU-LLC
under this Agreement. Further, FCCSU-LLC shall indemnify, defend and hold
Company harmless from and against all claims, actions, suits or other
proceedings, and any and all losses, judgments, damages, expenses or other
costs (including reasonable counsel fees and disbursements), arising from or
in any way relating to (i) any actual or alleged violation or inaccuracy of
any representation or warranty of FCCSU-LLC contained in Paragraph 9 above,
(ii) any act or omission of FCCSU-LLC in connection with the marketing of
Credit Card(s), and (iii) any negligent act or omission or willful misconduct
of FCCSU-LLC or its directors, officers, employees, agents or assigns in
connection with the entry into or performance of this Agreement.
11. Term/Termination
(a) Subject to the provisions of subparagraphs 11(b), (c),
(d) and (e) below, this Agreement shall be effective as of the date hereof and
shall continue for an initial term of three (3) years (the "Initial Term").
Following the Initial Term, this Agreement shall be automatically renewed for
successive renewal terms of two (2) years each (the "Renewal Term(s)") unless,
at least ninety (90) days prior to the termination of the Initial Term or the
then current Renewal Term, either party shall have notified the other in
writing of its decision not to renew this Agreement. Notwithstanding the
foregoing, the Issuance and Servicing Agreement and this Agreement shall
terminate at the same time, so that the term of this Agreement shall not be
deemed to have been extended for a Renewal Term unless the Issuance and
Servicing Agreement has also been extended for the same Renewal Term. If the
terms hereof are to be amended in connection with any Renewal Term, an
appropriate addendum shall be added hereto reflecting, as applicable, the
revised terms hereof.
(b) If there is a material default by either party in the
performance of the terms and conditions of this Agreement, and such default
shall continue for a period of thirty (30) days after receipt by the
defaulting party of written notice thereof from the nondefaulting party
(setting forth in detail the nature of such default), then this Agreement
shall terminate at the option of the non-defaulting party as of the
thirty-first (31st) day following
<PAGE>
the receipt of such written notice. If, however, the default cannot be
remedied within such thirty (30) day period, such time period shall be
extended for an additional period of not more than thirty (30) days, so long
as the defaulting party has notified the non-defaulting party in writing and
in detail of its plans to initiate substantive steps to remedy the default and
diligently thereafter pursues the same to completion within such additional
thirty (30) day period.
(c) This Agreement shall be deemed immediately terminated,
without the requirement of further action or notice by either party, in the
event that either party, or a direct or indirect holding company of either
party, shall become subject to voluntary or involuntary bankruptcy,
insolvency, receivership, conservatorship or like proceedings (including, but
not limited to, the takeover of such party by the applicable regulatory
agency) pursuant to applicable state or federal law.
(d) In the event that any material change in any federal,
state or local law, statute, operating rule or regulation, or any material
change in any operating rule or regulation of either MasterCard or Visa makes
the continued performance of this Agreement under the then current terms and
conditions unduly burdensome, then FCCSU-LLC shall have the right to terminate
this Agreement upon ninety (90) days advance written notice. Such written
notice shall include a detailed explanation and evidence of the burden imposed
as a result of such change.
(e) In the event that of any breach of a representation or
warranty set forth in Paragraph 9 of this Agreement, the non-breaching party
shall have the right to immediately terminate this Agreement and all of its
obligations contained herein by notice to the breaching party.
(f) Upon termination of this Agreement:
(i) Company shall promptly return to FCCSU-LLC all
marketing materials that have been supplied to Company by FCCSU-LLC, if any;
(ii) Except those provisions which by their terms
shall survive, all obligations to Company shall cease after the effective date
of termination.
12. Exclusivity.
(a) During the term of this Agreement, FCCSU-LLC shall have
the exclusive right to perform the credit card marketing services contemplated
by this Agreement. Company agrees that during the term hereof it shall not by
itself or in conjunction with others, directly or indirectly, or through any
parent, affiliate or subsidiary, offer, advertise, endorse, or facilitate any
on-line processing or enter into any agreement with any Competitor for the
provision of any credit card, charge card or credit card related products or
services to Company Customers. For the purposes of this Agreement, "Competitor"
shall mean any entity (other than FUSA or FCCSU-LLC) which advertises, markets,
issues or otherwise provides access to consumer card products or any entity
which is a member of the bankcard associations now known as Visa and
MasterCard. Visa and MasterCard themselves shall not be considered Competitors
so long as they are not representing, or otherwise working on behalf of, a
bankcard association member. Further, the Company agrees that during the term
hereof it shall not by itself or in conjunction with others, directly or
indirectly, or through any parent, affiliate or subsidiary, offer, advertise,
endorse, or facilitate any marketing or advertising, of any products and/or
services, regardless of whether the products or services are in the credit
8
<PAGE>
card category, to or on behalf of any of the following: MBNA American, N.A.,
Capital One, Providian, Associates Bank, Household Credit Corporation, Metris,
U.S. Bank Corporation and Advanta (the "Specific Competitors"). Additionally,
the parties agree that any future Competitor shall be defined as any
individual, corporation, corporate division, retail site, Web site or other
entity that either derives more than fifty percent (50%) of its annual gross
revenues from the issuance of consumer card products, or is primarily known as
an issue of consumer card products. Notwithstanding the foregoing, the Company
may accept advertising (e.g. banners on a web page) from a Competitor, but not
a Specific Competitor, provided that the advertising does not include the
advertising of credit cards or charge cards, nor does the advertising enable a
Internet user to link directly to a web page that is used to process, accept,
and/or market applications for any credit card, charge card or credit card
related products or services.
(b) In the event Company desires to introduce any current new or
unaddressed product, service, property and/or entity relating to consumer
credit products and related services ("New Product") by itself or through
another entity, Company agrees to work with FCCSU-LLC, so as to negotiate in
good faith an agreement whereby FCCSU-LLC could provide some or all of its
products or services through or on behalf of the New Product.
13. Non-Competition. With respect to all Accounts established
pursuant to this Agreement, Company agrees that neither Company, nor any entity
which Company controls including any parent, affiliate or subsidiary, shall by
itself or in conjunction with others, during the term of this Agreement
(including any Renewal Term) and for a period of one (1) year following the
termination of this Agreement for any reason whatsoever, specifically target
any offer of a credit card, charge card or credit card related product to
cardmembers possessing an Account.
14. Notices. Any and all notices or other communications required
or permitted under this Agreement shall be in writing and shall be delivered
either by personal delivery; by telex, telegram, mailgram or telecopy; by
nationally recognized overnight courier service; or by certified or registered
mail, return receipt requested, addressed as follows:
If to FCCSU-LLC, to:
FIRST CREDIT CARD SERVICES USA L.L.C.
Three Christina Centre
201 North Walnut Street
Wilmington, DE 19801
Attention: General Manager
with a copy to:
General Counsel
General Counsel
iVILLAGE INC.
170 Fifth Avenue
New York, New York 10010
with copies to:
Attention: Vice President of Finance/Legal Affairs
9
<PAGE>
or to such other person or address as either party shall have previously
designated to the other by written notice given in the manner set forth above.
Where notice requires a response in ten (10) or less business days, the notice
should be sent by hand delivery or telecopy. Notices shall be deemed given one
day after sent, if sent by telex, telegram, mailgram, telecopy or by overnight
courier; when delivered and receipted for, if hand delivered; or when
receipted for (or upon the date of attempted delivery where delivery is
refused) if sent by certified or registered mail, return receipt requested.
15. Alternative Dispute Resolution. Company and FCCSU-LLC hereby
waive their rights to resolve disputes through any court proceeding or
litigation and acknowledge that all disputes shall be resolved pursuant to
Paragraphs 16 and 17 as referenced below, except that equitable relief may be
sought pursuant to Section 8 from any court of competent jurisdiction. Both
parties represent to the other that this waiver is made knowingly and
voluntarily after consultation with and upon the advice of counsel and is a
material part of this Agreement.
16. Informal Dispute Resolution. Any controversy or claim between
Company, on the one hand, and FCCSU-LLC on the other hand, arising from or in
connection with this Agreement or the relationship of the parties under this
Agreement whether based in contract, tort, common law, equity, statute,
regulation, order or otherwise ("Dispute") shall be resolved as follows:
(a) Upon written request of either Company, on the one hand, or
FCCSU-LLC on the other hand, a duly appointed representative(s) of each party
will meet for the purpose of attempting to resolve such Dispute. Should they
be unable to resolve the Dispute, the designated representative of iVILLAGE,
INC. will meet with FCCSU-LLC's Executive Vice President of Marketing (the
"Executives") in an effort to resolve the Dispute. Said meeting shall be in
person or by telephone.
(b) The Executives shall meet as often as the parties agree to
discuss the problem in an effort to resolve the Dispute without the necessity
of any formal proceeding.
(c) Formal proceedings for the resolution of a Dispute may not be
commenced until the earlier of
i. the parties concluding in good faith that amicable
resolution through the procedures set forth in subsections
(a)-(b) hereof does not appear likely; or
ii. the expiration of a thirty-five (35) day period immediately
following the initial request to negotiate the Dispute;
provided, however, that this Paragraph will not be construed to prevent a
party from instituting formal proceedings earlier to avoid the expiration of
any applicable Statute of Limitations or to preserve a superior position with
respect to other creditors or to seek temporary or preliminary injunctive
relief. The commencement of a proceeding pursuant to this provision does not
relieve a party from the executive consultation requirement contained in this
Paragraph.
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<PAGE>
17. Arbitration.
(a) If the parties are unable to resolve any Dispute as contemplated
above, such Dispute shall be submitted to mandatory and binding arbitration at
the election of either Company, on the one hand, or FCCSU-LLC on the other
hand (the "Disputing Party"). Except as otherwise provided in this Paragraph,
the arbitration shall be pursuant to the Code of Procedure of the National
Arbitration Forum ("NAF'), P.O. Box 50191, Minneapolis, MN 55405, (800)
474-2371.
(b) To initiate arbitration, the Disputing Party shall notify the
other party in writing (the "Arbitration Demand") with a copy to the NAF,
which shall (i) describe in reasonable detail the nature of the Dispute, (ii)
state the amount of the claim, and, (iii) specify the requested relief. Within
fifteen (15) days after the other party's receipt of the Arbitration Demand,
such other party shall file, and serve on the Disputing Party, a written
statement (i) answering the claims set forth in the Arbitration Demand and
including any affirmative defenses of such party; (ii) asserting any
counterclaim, which shall describe in reasonable detail the nature of the
Dispute relating to the counterclaim, state the amount of the counterclaim,
and specify the requested relief.
(c) If the amount of the controversy set forth in either the claim or
counterclaim is less than $100,000, then the matter shall be resolved by a
single Arbitrator selected pursuant to the rules of the NAF.
(d) If the amount of the controversy set forth in either the claim or
counterclaim is equal to or exceeds $100,000, then the matter shall be
resolved by a panel of three arbitrators (the "Arbitration Panel") selected
pursuant to the rules of the NAF. Decisions of a majority of the members of the
Arbitration Panel shall be determinative.
(e) The arbitration hearing shall be held in such neutral location as
the parties may mutually agree or, if they cannot agree, Wilmington, Delaware.
The Arbitrator or Arbitration Panel is specifically authorized in proceeding
pursuant to Section (d) to render partial or full summary judgment as provided
for in the Federal Rules of Civil Procedure. Unless otherwise agreed by the
parties, partial or full summary judgment shall not be available in
proceedings pursuant to subsection (c) above. In the event summary judgment or
partial summary judgment is granted, the non-prevailing party may not raise as
a basis for a motion to vacate an award that the Arbitrator or Arbitration
Panel failed or refused to consider evidence bearing on the dismissed claim(s)
or issue(s). The Federal Rules of Evidence shall apply to the arbitration
hearing. The party bringing a particular claim or asserting an affirmative
defense will have the burden of proof with respect thereto. The arbitration
proceedings and all testimony, filings, documents and information relating to
or presented during the arbitration proceedings shall be deemed to be
information subject to the confidentiality provisions of this Agreement. The
Arbitration Panel will have no power or authority, under the Code of Procedure
of the NAF or otherwise, to relieve the parties from their agreement hereunder
to arbitrate or otherwise to amend or disregard any provision of this
Agreement, including, without limitation, the provisions of this Paragraph.
(f) Should an Arbitrator refuse or be unable to proceed with
arbitration proceedings as called for by this Paragraph, the Arbitrator shall
be replaced pursuant to the rules of the NAF. If an arbitrator is replaced
after the arbitration hearing has commenced, then a rehearing shall take place
in accordance with this Section and the Code of Procedure of the NAF.
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<PAGE>
(g) At the time of granting or denying a motion of summary judgment
as provided for in (e) and within fifteen (15) days after the closing of the
arbitration hearing, the Arbitrator or Arbitration Panel will prepare and
distribute to the parties a writing setting forth the Arbitrator's or
Arbitration Panel's finding of facts and conclusions of law relating to the
Dispute, including the reasons for the giving or denial of any award. The
findings of fact and the conclusions of law along with the award, if any,
shall be deemed to be information subject to the confidentiality provisions of
this Agreement.
(h) The Arbitrator of Arbitration Panel is instructed to schedule
promptly all discovery and other procedural steps and otherwise to assume case
management initiative and control to effect an efficient and expeditious
resolution of the Dispute. The Arbitrator or Arbitration Panel is authorized
to issue monetary sanctions against either party if, upon a showing of good
cause, such party is unreasonably delaying the proceeding.
(i) Any award rendered by the Arbitrator or Arbitration Panel will
be final, conclusive and binding upon the parties and any judgment hereon may
be entered and enforced in any court of competent jurisdiction.
(j) Each party will bear a pro rata share of all fees, costs and
expenses of the Arbitrators, and notwithstanding any law to the contrary, each
party will bear all the fees, costs and expenses of its own attorneys, experts
and witnesses; provided, however, that in connection with any judicial
proceeding to compel arbitration pursuant to this Agreement or to confirm,
vacate or enforce any award rendered by the Arbitrator or Arbitration Panel,
the prevailing party in such a proceeding shall be entitled to recover
reasonable attorney's fees and expenses incurred in connection with such
proceedings, in addition to any other relief to which it may be entitled.
18. Entire Agreement/Amendment. This Agreement, including exhibits,
constitutes the entire understanding between the parties with respect to the
subject matter, and supersedes all prior written and oral proposals,
understandings, agreements and representations, all of which are merged
herein. No amendment or modification of this agreement shall be effective
unless it is in writing and executed by all of the parties hereto.
19. Non-Waiver of Default. The failure of either party to insist, in
any one or more instances, on the performance of any terms or conditions of
this Agreement shall not be construed as a waiver or relinquishment of any
rights granted hereunder or of the future performance of any such term or
condition, and the obligations of the non-performing party with respect
thereto shall continue in full force and effect.
20. Severability. In the event that any provision of this Agreement
shall, for any reason, be deemed to be invalid and unenforceable, the
remaining provisions of this Agreement shall remain in full force and effect.
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<PAGE>
21. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware without
regard to its conflict of law principles.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first above written.
iVILLAGE, INC.
By: /s/ Steven Elkes
--------------------------
(type/print name & title below line)
Steven Elkes
VP Finance/Legal Affairs
FIRST CREDIT CARD SERVICES USA L.L.C.
By: /s/ Dennis Moroney
-------------------------
(type/print name & title below line)
Dennis Moroney
F.C.C.S. CEO
13
<PAGE>
EXHIBIT A
FEES
During the term of this Agreement and any renewal terms
thereof, FCCSU-LLC agrees to pay to Company the following in conjunction with
the marketing of the Program which is the subject of this Agreement.
1. FCCSU-LLC shall pay to Company a one-time payment in the sum of
[*] dollars. The payment shall be due to Company by FCCSU-LLC upon the display
of the first of the Impressions, scheduled for the 31st of May 1998, 1998 (the
"Launch Date") and paid within forty-five (45) days thereafter.
2. Furthermore, FCCSU-LLC shall pay to the Company four equal
quarterly payments of [*] dollars. The first quarterly payment shall be due
ninety (90) days after the Launch Date and paid within thirty (30) days
thereafter. Each additional quarterly payment of [*] dollars shall be due within
ninety (90) days of the prior quarterly payment and paid within thirty (30) days
thereafter.
3. In addition, FCCSU-LLC shall advance the following sums (the
"Advance(s)") to be offset against all amounts earned by the Company under
this Program. The Advance shall be paid as follows:
a.) Within Three (3) months after the Launch Date: If the
Company adds the following aggregate Accounts within three (3) months
after the Launch Date, then the Company will be paid the respective
Advance:
Three Months after the Accounts Attained Additional Advance:
Launch Date:
1.) [*] [*]
2.) [*] [*]
3.) [*] [*]
b.) Within Six (6) months after the Launch Date: If the
Company adds the following incremental Accounts within six (6) months
after the Launch Date, then the Company will be paid the respective
Advance:
Six Months after the Additional Accounts: Additional Advance:
Launch Date:
1.) [*] $[*]
2.) [*] $[*]
3.) [*] $[*]
All Marketing Fees earned shall be off-set against all Advances paid as a
result of the Agreement.
<PAGE>
4. After the first [*] Accounts are opened, the Company shall be
paid a minimum of a $[*] Marketing Fee for every Account opened thereafter
during the term of this Agreement and during any extensions and/or renewals.
5. Furthermore, FCCSU-LLC agrees that if after the first [*]
Accounts are opened the Company's performance exceeds the below listed
projected account goal for any given quarter during the remaining term of this
Agreement, that FCCSU-LLC will retroactively increase the Marketing Fee
applicable to the quarter, and only that quarter, in accordance with the
following schedule:
QUARTERLY MARKETING FEE INCREASE:
OPENED ACCOUNTS: INCREMENTAL INCREASE:
[*] $[*]
[*] $[*]
[*] $[*]
[*] $[*]
The cumulative opened Accounts for each remaining quarter shall be
deemed to be zero (0) as of beginning of each quarter for the purpose of
establishing the Marketing Fee Incremental Increase.
For example, in the first quarter, after the opening of [*]
Accounts, the Company shall be paid a Marketing Fee of $[*] for each Account
opened. If in that first cumulative quarter, the Company opens [*] Accounts,
then the Company will be paid a $[*] incremental increase for the [*]
opened Accounts, retroactively (essentially an additional Marketing Fee of
$[*]). If in the next applicable quarter, the Company opens an incremental
[*] Accounts (for a cumulative total of [*] Accounts) then the Company
will be paid a $[*] increase for the [*] incremental opened Accounts,
retrospectively (essentially an additional Marketing Fee of $[*]).
If this Agreement is terminated by FCCSU-LLC and/or its affiliates,
then the payment of any and all future Advances, shall immediately cease.
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<PAGE>
EXHIBIT B
LICENSED MARKS
--------------
[iVillage logo]
16
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* Confidential treatment has been requested for certain portions of this
exhibit.
PROMOTION, DISTRIBUTION & LICENSE AGREEMENT
Promotion Distribution and License Agreement (this "Agreement"), dated October
21, 1998 ("Effective Date") between:
AT&T Corp., a New York corporation with an office at 295 N. Maple Avenue,
Basking Ridge, New Jersey 07920, on behalf of itself and its Affiliates
(collectively, "AT&T"); and
iVillage, Inc., a Delaware corporation with an office at 170 Fifth Avenue, New
York, NY 10010, on behalf of itself and its Affiliates (collectively,
"iVillage")
RECITALS
A. AT&T is a provider of certain telecommunication services.
B. iVillage owns and operates websites currently known as "iVillage"
(www.ivillage.com), and all current and future domains thereof, including
without limitation the Parent Soup, Parents Place, Better Health, Money, Work
from Home, Shopping and Career, and owns or operates certain other web sites on
the public Internet, both within and outside the United States (collectively,
the "iVillage Sites"), where it offers end users certain chat and search
services and other products and services.
C. AT&T and iVillage wish to work together (1) to promote and market certain
AT&T telecommunication services on the iVillage Sites, and (2) to integrate,
test and promote on the iVillage Sites certain AT&T telecommunication services
that combine web-based services with both traditional and non-traditional (e.g.,
Internet Protocol) communication services.
D. This Agreement includes the following exhibits: Exhibit A:
Bounties/Compensation; Exhibit B: Promotion Plan: Exhibit C: AIC Trial Plan;
Exhibit D: Editorial Guidelines; Exhibit E: Definitions; Exhibit F: Key Words.
AT&T CORP. iVILLAGE, INC.
/s/ D. H. Schulman /s/ Steven Elkes
- --------------------------- -------------------------------
Signature Signature
D. H. Schulman Steven Elkes
- --------------------------- -------------------------------
Print Name Print Name
Vice President Vice President
- --------------------------- -------------------------------
Title Title
10/21/98 10/22/98
- --------------------------- -------------------------------
Date Date
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1. PROMOTION OF AT&T SERVICES: AIC TRIAL PLAN
1.1 Promoted AT&T Services. iVillage shall promote and market the AT&T
services listed on Exhibit A ("Promoted AT&T Services") on the iVillage Sites
during the Term in accordance with the placement commitments, Guaranteed
Impression Levels and other terms of the Promotion Plan attached as Exhibit B.
The list of Promoted AT&T Services shall be amended from time to time by the
parties in accordance with Section 1.8. Any reference to a specific URL or web
site in this Agreement shall be deemed to include any successor URL or web site
at which the same or substantially similar content, products or services are
offered on the public Internet.
1.2 Co-Branded Communications Center. iVillage shall, at its expense,
develop and make available on the iVillage Sites in accordance with the
Promotion Plan one or more pages that will reside on its servers and contain
offers for Promoted AT&T Services as well as certain other functionality and
features to be mutually determined (the "Co-Branded Communications Center"). The
Co-Branded Communications Center will link directly to AT&T's servers for online
sign-up by users. iVillage shall be responsible for the design of the Co-Branded
Communications Center, subject to AT&T's reasonable design specifications and
final approval by AT&T. iVillage shall provide AT&T with mock-ups of the
Co-Branded Communication Center on a password protected web site for AT&T's
final review and approval at least ten (10) days prior to the Deployment Date.
Without AT&T's prior consent, there shall be no advertisements, promotions or
other offers for any products or services on or through the Co-Branded
Communication Center, other than for AT&T's products and services.
1.3 Co-Branded AnyWho. iVillage shall, at its expense, develop and make
available on the iVillage Sites in accordance with Promotion Plan, a co-branded
interface page (i.e., initial navigation page and query forms) for AT&T's AnyWho
directory, which page will reside on iVillage's servers (the "Co-Branded
AnyWho"), iVillage shall provide AT&T with design guidelines, graphics and other
creative so that AT&T can develop mock-ups of the "search results" page of the
Co-Branded AnyWho for each of the iVillage Sites. iVillage and AT&T shall
mutually agree on the final design of the Co-Branded AnyWho. iVillage shall
provide AT&T with a mock-up of the interface page of the Co-Branded AnyWho on a
password protected web site for AT&T's review at least fourteen (14) days prior
to the agreed upon deployment date for the Co-Branded AnyWho. iVillage is solely
responsible for serving ads on the Co-Branded AnyWho and revenues from such ads
shall be split between the parties in accordance with Section 3.5. AT&T shall
have the right, on a monthly basis, to use up to [*] of all Unsold Inventory in
the Co-Branded AnyWho for promotions of AT&T products and services (but may not
resell such inventory to third parties). iVillage will manage and keep AT&T
informed of all Unsold Inventory on the Co-Branded AnyWho to ensure that AT&T is
able to fill such Unsold Inventory on a monthly basis. iVillage will place
AT&T's in-house ads for any such Unsold inventory within 2 days of its receipt
of the creative for such ads from AT&T.
1.4 AT&T WorldNet Promotions. (a) iVillage will promote, on the
iVillage Sites, the AT&T WorldNet Service, which shall be marketed and Promoted
exclusively as "iVillage Online Powered by AT&T WorldNet Service", or some other
branding mutually agreed to by the parties ("iVillage Online").
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(b) AT&T will create a Gold Master of the consumer version of its
standard AT&T WorldNet Software that will default to a co-branded iVillage Site
or the standard AT&T WorldNet home page, as provided in (e) below. Promotions of
AT&T WorldNet Service from iVillage Sites will direct users to either download
the AT&T WorldNet Service client software, or order the software on CD-ROM.
(c) iVillage will develop programs specifically designed to retain
iVillage Online Powered by AT&T WorldNet Service customers.
(d) AT&T will include and promote the iVillage sites through the AT&T
WorldNet Service "Come to Your Senses Sweepstakes". iVillage may promote the
sweepstakes prominently on iVillage sites as mutually agreed. Promotion of the
sweepstakes will not be counted against the Guaranteed Impressions Levels or
Clickthrus.
(e) iVillage will have the option to determine whether iVillage Online
customers should default to the AT&T WorldNet Service home page or the iVillage
home page. If iVillage opts to have the customers default to the iVillage home
page, iVillage will design and host a co-branded version of the iVillage Sites
and incorporate a content area (size & format TBD), above the fold, on the home
page, to be used for AT&T WorldNet Service customer communication. Such area
shall include space for AT&T to promote and offer its communications services,
customer care and such other services as mutually agreed. Links to AT&T WorldNet
customer care will be included throughout iVillage Online as mutually agreed.
(f) AT&T and iVillage will collaborate and mutually agree on the
appearance, content, and user interface of the co-branded version of the
iVillage Sites.
(g) iVillage shall provide all support, including without limitation
customer care, in connection with the iVillage Online content at a level at
least as high as the customer care it provides with respect to similar content
on the unbranded iVillage Sites. AT&T will provide billing, network care and
access-related customer care in connection with iVillage Online. The parties
shall agree on an interface agreement for providing "seamless" customer support
and problem resolution for subscribers to iVillage Online, including a mechanism
for transferring subscribers between AT&T and iVillage.
1.5 Targeting and Marketing. Subject to iVillage's privacy policy,
iVillage will actively market the Promoted AT&T Services on the iVillage Sites
during the Term using a variety of targeting tools, including without limitation
Domain Name Targeting and category specific placements; in each case with a goal
to maximize take rates and ensure an optimal product mix (as mutually agreed by
the parties) for the Promoted AT&T Services.
1.6 Change Requests. The Anchor Positions set forth in Exhibit B may
not be changed without AT&T's prior written consent, which shall not be
unreasonably denied (it shall not be unreasonable for AT&T to deny such consent
if it believes the change will reduce the value of the exposure to AT&T's
services). In the event of a redesign of the iVillage Sites, iVillage will
provide AT&T with similar placement in any successor or equivalent content areas
provided the change does not reduce the value of the exposure to AT&T's
services. AT&T and iVillage will mutually define and may verbally agree on the
locations of the Promotional
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Positions set forth in Exhibit B; provided that (a) all such placements conform
to AT&T's Marcom Guidelines as provided to iVillage (b) if AT&T objects to any
placement position, iVillage shall, within 3 business days notice from AT&T,
remove any AT&T Mark (and any related material referencing an AT&T product or
service) from such position and provide an alternative position acceptable to
AT&T, provided that if AT&T designates such a change as "Urgent", iVillage shall
remove the AT&T Mark (and any related material referencing an AT&T product or
service) within 8 hours of AT&T's request. AT&T may, from time to time,
reasonably request that iVillage update the AT&T Marks and for other trade dress
on the Co-Branded Communications Center, the Co-Branded AnyWho or other
previously AT&T branded areas on the iVillage Sites, in which case iVillage
shall make such changes to the AT&T Marks or trade dress within 3 days of
receipt of any update's from AT&T. The parties shall also cooperate with respect
to reasonable changes and updates to the layout, general image, formats and
appearance (i.e., the "look and feel") of the Co-Branded Communications Center,
the Co-Branded AnyWho and other AT&T branded areas of the iVillage Sites;
iVillage agrees to make any changes to such "look and feel" reasonably requested
by AT&T in accordance with a production schedule mutually determined by the
parties, which the parties agree shall mean that changes will be implemented
within 10 days of AT&T's written request.
1.7 AIC Services. iVillage and AT&T shall participate in a trial for
AIC Services in accordance with the AIC Trial Plan attached as Exhibit C. The
AIC Trial Plan will include items such as AT&T's and iVillage's deliverables for
the AIC Trial, the schedule for the AIC Trial and how the parties will staff the
AIC Trial.
1.8 Other Services. iVillage shall, in accordance with this Agreement,
promote any AT&T Telecommunication Services not listed on Exhibit A as AT&T
makes them available and provides them to iVillage with reasonable advance
notice, provided the parties can mutually agree upon a bounty. During the Term,
AT&T will also have the right to buy additional impressions for the Promoted
AT&T Services or other products and services at no more than a $[*] CPM (capped
at [*]% of available inventory).
1.9 Control over Products & Services. Except as expressly provided
below in this Section 1 and Section 2, each party shall have complete control
over the timing, ramp-up, type, pricing, continuation or termination and all
other aspects of its offers for its respective products or services.
(a) Without AT&T's prior written consent, iVillage shall not charge
users any fees for any of the Promoted AT&T Services, for any of the AIC
Services or for accessing or using any AT&T-branded area of the iVillage Sites.
(b) For as long as AT&T offers its "One Rate Online" calling plan (i.e.
under the terms of its existing tariff), iVillage registered members that
subscribe to AT&T One Rate Online will be eligible to pay 9 cents per minute and
no monthly fee (or such other rate as determined by any change to such tariff)
on all direct dialed state-to-state residential long distance calls. iVillage
shall clearly and prominently state on all promotional and other materials on
the iVillage Sites relating to the 9 cent One Rate Online offer that the 9 cent
offer is made available by iVillage to registered members of iVillage only.
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1.10 Each party shall appoint and maintain a designated representative
to manage the provision and updating of Promoted AT&T Services on the iVillage
Sites. Each party will provide the other with access (which may be by beeper) to
the other's technical support for "emergency purposes" twenty-four (24) hours
per day, three hundred sixty-five (365) days per year during the Term of this
Agreement.
1.11 AT&T Promotions. (a) AT&T will display a persistent, above the
fold, text link for the iVillage Site on the standard version of the consumer
AT&T WorldNet Service (i.e., www.att.net) for [*] during the Term. The size and
form of the teaser link shall be mutually agreed and shall conform with AT&T
then-standard requirements for teaser links.
(b) During the Term, AT&T will promote and market iVillage through the
inclusion of iVillage marks in at least [*] dollars (measured using AT&T's
standard accounting practices and average CPMs) worth of AT&T television, mass
media marketing (at least [*] dollars of which will be done in the first
Contract Year); provided that AT&T does such television mass media marketing for
the AT&T WorldNet Service. If AT&T does not do such television mass media for
AT&T WorldNet Service, such [*] dollar commitment shall be fulfilled in other
mass media (e.g., radio, print and TV). The specific form of the advertisement
shall be jointly worked out by the parties, provided that the final
determination as to the media buy shall be made by AT&T.
2. EXCLUSIVITY
2.1 Except as expressly stated in Section 2, this Agreement is
non-exclusive and does not prohibit either party from entering into similar
agreements with third parties involving identical, similar, or different
products, services, and technologies.
2.2 During the Term, (A) AT&T will be the exclusive provider of
Telecommunication Services (as defined in Exhibit E) on iVillage Sites and
iVillage will not itself provide or enter into any agreement with any third
party to provide any Telecommunications Services and (B) no page of the iVillage
Sites that contains any AT&T Anchor Position or Promotional Position, as set
forth in the Promotion Plan, or any other page that contains any AT&T Mark,
shall contain any marketing, advertising or other promotion for any
Telecommunication Service other than a Telecommunication Service offered by
AT&T, except that: [*].
2.3 During the Term, AT&T will be the exclusive white page directory
provider (i.e., a directory that includes residential, business, governmental
listings of phone numbers, addresses, email addressees, etc,) on the iVillage
Sites.
2.4 If and when AT&T makes such a service available, AT&T will be the
exclusive yellow page directory provider (i.e., a directory primarily devoted to
business listings) on the iVillage Sites; [*].
2.5 Notwithstanding anything in this Agreement to the contrary,
iVillage may provide custom online content aggregation, hosting services and/or
branded versions of iVillage's services to third parties (including providers of
Telecommunication Services) ("Content Outsourcing"), subject to the following:
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In consultation with AT&T, iVillage will offer the Promoted AT&T Services and
the AIC Services under this Agreement to all web sites that involve a Content
Outsourcing arrangement in existence at the execution of this Agreement or
created by iVillage during the term of this Agreement; provided that if such
third party objects to using or promoting AT&T's services on its sites, iVillage
shall have no obligation to include any AT&T products and services on their web
sites to the extent that such third party objects to their inclusion. AT&T shall
have the right to approve or disapprove, on a case by case basis, the extension
of any AT&T offers for products or services as part of any such Content
Outsourcing arrangement. AT&T shall respond to iVillage's request for such
approval within 10 business days.
3. FINANCIAL MATTERS
3.1 In General. Except as this Section 3 provides, neither party is
obligated to compensate the other in any way in connection with this Agreement.
Each party will fully fund and pay for all of the costs and expenses it incurs
in connection this Agreement, including the costs of providing its deliverables
as specified in the Promotion Plan and the AIC Trial Plan.
3.2 Minimum Payments. During each Contract Year, subject to Section 3.4
(Shortfalls) and Section 10 (Termination), AT&T will make "Quarterly Minimum
Payments" to iVillage equal as follows:
(a) in the first Contract Year, $[*] (1/4 of an "Annual Minimum" of
$[*]) as a non-refundable, minimum payment for iVillage's performance under this
Agreement;
(b) in the second Contract Year,
(i) if iVillage's Market Reach is less than [*]%. $[*] (1/4 of an
"Annual Minimum" of $[*]) as a non-refundable, minimum payment for iVillage's
performance under this Agreement; and
(ii) if iVillage's Market Reach has increased to [*]% or greater,
$[*] (1/4 of an "Annual Minimum" of $[*]) as a non-refundable, minimum payment
for iVillage's performance under this Agreement.
Where "Market Reach" means the percentage of unduplicated World Wide Web users
that visit iVillage at least once per month "from home" and excludes the reach
that iVillage receives from within AOL or any other proprietary online service,
as measured by Media Metrix as of the date that is 45 days proceeding the
beginning of the second Contract Year (or if Media Metrics no longer provides
such statistics, some other mutually agreed upon industry leading traffic
measurement authority).
3.3 Bounties. As full compensation for each Delivered Customer who
signs up for the Promoted AT&T Services on the iVillage Sites, iVillage will
accrue quarterly bounties ("Accrued Quarterly Bounties") for Delivered Customers
in accordance with the bounty schedule in Exhibit A. iVillage will "earn out"
the Quarterly Minimum Payments against the Accrued Quarterly Bounties as
follows: At the end of each Contract Quarter, if the total Accrued Quarterly
Bounties in such Contract Year are greater than the Quarterly Minimum Payments
to date in such Contract Year, AT&T will pay iVillage the difference between the
Accrued
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Quarterly Bounties due in such Contract Quarter and the Quarterly Minimum
Payment for such Contract Quarter. However, if the Accrued Quarterly Bounties to
date in such Contract Year are less than the Quarterly Minimum Payments to date
in such Contract Year, no payment shall be due iVillage for any bounties in such
Contract Quarter.
3.4 Shortfalls. (a) If at the end of the first Contract Year, iVillage
has not provided AT&T with a minimum of [*] Clickthrus (as audited by a third
party in accordance with Section 3.7) during the first Contract Year ("Clickthru
Shortfall") then iVillage will continue to perform under this Agreement (without
any change to Anchor Positions, Guaranteed Impression Levels, etc.) during a
"Make Good Period" not to exceed 3 months, provided AT&T has not exercised its
termination right under Section 10.3. AT&T shall have no obligation to make any
Quarterly Minimum Payments or other payments during the Make Good Period unless
and until the Clickthru Shortfall is covered. If AT&T does not exercise its
termination right under Section 10.3, regardless of whether or not the Clickthru
Shortfall has been covered in such 3 month period Make Good Period, AT&T will
resume making Quarterly Minimum Payments as of the next following Contract
Quarter.
(b) If there is a Clickthru Shortfall at the end of the second Contract
Year (meaning that iVillage has not delivered at least [*] Clickthrus in the
case that the Annual Minimum for the second Contract Year is $[*]; and [*]
Clickthrus during the second Contract Year in the case that the Annual Minimum
for the second Contract Year is $[*]), iVillage shall have the option of either
(a) requesting payment of the final Quarterly Minimum Payment, pro rated to
cover the shortfall or (b) providing a make good period, for up to 6 months,
and, at any time during such 6 month period, requesting payment of the final pro
rated Quarterly Minimum Payment. iVillage will continue during any such make
good period to perform under this Agreement (without any change to Anchor
Positions, Guaranteed Impression Levels, etc.)
3.5 Advertising. iVillage shall pay AT&T an amount equal to [*]%
multiplied by the Net Advertising Revenues generated on each page of the
Co-Branded AnyWho. iVillage will furnish AT&T with a current version of
iVillage's advertising rate card for each such iVillage Site and the parties
shall mutually agree on financial terms of the rate card (and any changes
thereto) for the Co-Branded AnyWho, from which iVillage will not, on average for
any month, deviate by more than [*]% without AT&T's approval.
3.6 Payments. Quarterly Minimum Payments will be due 45 days following
the end of the applicable Contract Quarter and bounty payments in excess of the
Quarterly Minimum Payment will be due within 45 days after the end of the
applicable Contract Quarter, provided that (a) AT&T will pay iVillage $[*]
within two weeks of the Effective Date and (b) the final Quarterly Minimum
Payment in the second Contract Year, which will be due 45 days after the date
determined pursuant to the last sentence in Section 3.4 or pursuant to 10.6, as
the case may be. iVillage's payments to AT&T for advertising revenues on the
Co-Branded AnyWho will be due within 45 days after the applicable Contract
Quarter.
3.7 Reports.
3.7.1 AT&T Reports. AT&T will provide iVillage with monthly reports
containing the following: (1) the number of Delivered Customers during such
month for each
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Promoted AT&T Service (2) the bounties due iVillage for such Delivered
Customers, (3) information concerning the results of the AIC Trial, as set forth
in the AIC Trial Plan.
3.7.2 iVillage Reports. iVillage will provide AT&T with monthly
reports containing the following: (1) the number of impressions and the amount
of gross and Net Advertising Revenues on a per ad basis for advertisements on
all pages of the Co-Branded AnyWho, the % of Unsold Inventory on the Co-Branded
AnyWho, and the number of impressions (on a per ad basis) of advertisements
placed in all Unsold Inventory allocated to AT&T, (2) the locations, number of
Page Views and Clickthru rates for all Anchor Positions and Promotional
Positions on the iVillage Sites, and (3) reports concerning the results of the
AIC Trial on the iVillage Sites, as set forth in the AIC Trial Plan.
3.7.3 Third Party Reports. All user-viewed impressions and
Clickthrus related to AT&T products and services on the iVillage Sites will be
audited on a monthly basis by Coopers & Lybrand IPRO, Netcount, or Interse, as
the parties shall agree, or by another third party auditing firm to be mutually
approved by the parties, at iVillage's sole expense, and iVillage shall furnish
copies of such reports to AT&T within 5 days following receipt by iVillage. Such
reports shall include the total number of viewed impressions and Clickthrus of
each individual advertisement that appears during the monthly reporting period
on each page of the iVillage Sites and other Information as AT&T shall
reasonably require.
3.8 Taxes. Each party will bear all taxes for which it is legally
liable in connection with this Agreement. If one party is obligated to collect
or remit any taxes for which the other is liable, the party that is liable will
reimburse the other party upon request and submission of reasonable proof that
the taxes were paid.
4. INTERNATIONAL AFFILIATES
iVillage shall use commercially reasonable efforts to (provided that it fits in
with iVillage's strategic objectives for its affiliates operating outside of the
United States) promote on its Web sites outside the United States any
Telecommunication Services that AT&T offers in any such country on terms
substantially similar to the terms of this Agreement; provided that iVillage
shall, upon 90 days' notice to AT&T, have no such obligation in the event that
the AT&T offer in such country is not competitive (taking into account price and
quality) with a local offer of a third party.
5. PUBLICITY; BRANDING
5.1 AT&T and iVillage will communicate and cooperate with respect to
advertising and publicity regarding this Agreement and their relationship, and
will obtain the written consent of the other in each instance before publishing
or releasing any advertising or publicity.
5.2 If iVillage is required under applicable securities laws to
publicly disclose the fact that iVillage has signed this Agreement, iVillage
shall provide AT&T with prompt written notice so that AT&T can work with
iVillage to limit the disclosure to the greatest extent possible consistent with
legal obligations.
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5.3 The parties agree that all AT&T's Telecommunication Services
offered an or through the iVillage Sites shall be branded using the AT&T Marks
as mutually agreed by the parties, provided that with respect to the trial of
the AIC Services, AT&T may determine, in its discretion, to offer one or more of
services on an unbranded or private label basis.
6. USER CONSIDERATIONS
6.1 Editorial Standards. The content at the iVillage Sites shall at all
times during the Term conform with the Editorial Standards (attached as Exhibit
D).
6.2 Minimum Specifications. iVillage's server on which the AT&T
Communications Center, iVillage Online, and the interface page of the Co-Branded
AnyWho will be hosted will have download times at least as fast as, and
availability rates at least as high as, other "key areas" on the iVillage Sites.
AT&T's servers on which the Co-Branded AnyWho (or the Yellow Pages, if and when
available under Section 2.5) will be hosted will, on average, have download
times at least as fast as, and availability rates at least as high as, other
comparable areas (e.g., search results pages) on the iVillage Sites.
6.3 Customer Care. iVillage shall use commercially reasonable efforts
to perform customer care obligations as promptly as possible and, at a minimum,
within the following parameters: (a) forward any electronic mail inquiries
regarding any AT&T Telecommunication Services (additional requirements for the
AIC Services, which is covered in the AIC Trial Plan) to AT&T as soon as
possible (and within 24-hour target turn-around time) following receipt; (b)
electronically notify AT&T of any problems preventing users from linking to
AT&T's online registration site as soon as possible (by putting AT&T on a
"priority list" of contacts maintained by its web hosting operators) of
iVillage's becoming aware of its occurrence (except for the AIC Services, which
will be covered in the AIC Trial Plan); (d) give AT&T at least 24 hours notice
of any scheduled down time of any area of the iVillage Sites that will affect
AT&T products and services, and (d) serve as Tier 1 Customer Support for the AIC
Services as provided in the AIC Trial Plan. "Tier 1 Customer Support" means
acting as the initial point of contact with the customers using AIC Services on
the iVillage Sites and referring user questions, as appropriate, to AT&T by
either email or through a FAQ link.
6.4 Security Standards. iVillage shall provide secure connections,
Secure Sockets Layer ("SSL"), to the iVillage Sites for the transfer of
information in connection with any electronic transaction involving any of
AT&T's Telecommunication Services or in connection with the trial of the AIC
Services. iVillage shall provide and maintain the necessary hardware and
software to support SSL, version 2, at a minimum, at its sole expense. iVillage
agrees to store all user-identifiable information off-line either behind a
secure firewall or on a system that is not directly or indirectly connected to
the Internet.
6.5 User Privacy. (a) Without the customer's affirmative and specific
consent to the particular use (and without limiting any of rights under Section
6.6), iVillage agrees that it will not sell, lease, barter, give away or
disclose to third parties any customer-identifiable information concerning users
on the iVillage Sites, including without limitation name, telephone number,
e-mail address, residential address, office address and/or fax number.
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(b) iVillage further agrees that it will not send unsolicited e-mail
messages or other unsolicited communications to users that reference any AT&T
mark or any AT&T Telecommunications Service; provided that iVillage may send
e-mail to users so long as such users have been given the option (and continue
to have the option at all times) to elect not to receive such e-mail and in the
case of e-mail referencing AT&T or an AT&T Mark, AT&T has approved such email in
advance, which approval shall not be unreasonably withheld or delayed.
6.6 User Data. (a) All data or other information collected by iVillage
from users of the iVillage Sites independent of the relationships, activities or
offers covered by this Agreement and without referencing or solicited in
connection with any AT&T Mark or any AT&T product or service ("iVillage User
Data"), is the proprietary and Confidential Information of iVillage; provided
that, during the Term, iVillage agrees it shall not use any iVillage User Data
in connection with the marketing, promotion, or distribution of any
Telecommunication Services, except Telecommunications Services offered by AT&T
and Unavailable Telecommunication Services (as defined in Section 2).
(b) All data or other information, no matter how collected, concerning
any of AT&T's products or services, concerning users' use of or interest in any
AT&T product or service, or derived from or obtained during the use, promotion,
marketing or other activities related to any AT&T's products and services
(including, without limitation, the Promoted AT&T Services and the AIC Trial),
whether such data or information is obtained on the iVillage Sites or otherwise,
is the proprietary and Confidential Information of AT&T, including, without
limitation, information (individually, in the aggregate, or otherwise),
identifying AT&T customers, their usage patterns, their product preferences,
etc. ("AT&T User Data"). iVillage may not use any AT&T User Data, except in
connection with the promotion of AT&T's products and services in accordance with
this Agreement.
7. CONFIDENTIALITY
The parties agree and acknowledge that, as a result of negotiating, entering
into and performing this Agreement, each party has and will have access to
certain of the other party's Confidential Information. Each party also
understands and agrees that misuse and/or disclosure of that information could
adversely affect the other party's business. Accordingly, the parties agree that
each party shall use and reproduce the other party's Confidential Information
only for purposes of this Agreement and only to the extent necessary for such
purpose and shall restrict disclosure of the other party's Confidential
Information to its employees, consultants or independent contractors with a need
to know and shall not disclose the other party's Confidential Information to any
third party without the prior written approval of the other party. "Consultants"
includes legal counsel, accountants, banks and other financing sources and their
advisors who are hired by a party under confidentiality obligations at least as
stringent as those set forth in this Agreement. Notwithstanding the foregoing,
it shall not be a breach of this Agreement for either party to disclose
Confidential Information of the other party if compelled to do so under law, in
a judicial or other governmental investigation or proceeding, provided the other
party has been given prior notice to permit such other party a reasonable
opportunity to object to the judicial or governmental requirement to disclose.
The provisions of this Section shall apply for the duration of the Term of this
Agreement and for three (3) years after the expiration or termination of this
Agreement.
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8. LICENSE GRANTS
8.1 AT&T Marks. AT&T hereby grants to iVillage during the Term a
worldwide, nonexclusive. nontransferable, nonassignable right to use the AT&T
Marks on the iVillage Sites solely in accordance with this Agreement. All such
use of the AT&T Marks shall inure to the benefit of AT&T. Nothing in this
Agreement shall create any rights, title or interest for iVillage in the AT&T
Marks (except to the extent provided in the first sentence of this Section) or
in any of AT&T's other names, trademarks, service marks, design marks, symbols
and for other indicia of origin and no use of such will be made by iVillage for
any purpose without the prior written approval of AT&T. iVillage shall use the
AT&T Marks in accordance with such reasonable guidelines as AT&T may provide to
iVillage from time to time. iVillage agrees to cooperate with AT&T in
facilitating AT&T's monitoring and control of the use of the AT&T Marks, and to
supply AT&T with samples of use of such icons upon request. Except as set forth
in the first sentence of this Section, all uses of the AT&T Marks shall be
subject to AT&T's prior approval. iVillage shall not modify any aspect of any
AT&T Mark as provided by AT&T to iVillage without AT&T's prior written approval.
iVillage shall not use the letters "att", any of AT&T's other names or marks, or
any name or mark confusingly similar to an AT&T name or mark as pad of any
domain name (e.g., iVillage will not use a domain name such as
"att.iVillage.com", but may use, during the Term of this Agreement, a URL such
as "iVillage.com/att" with AT&T's prior consent.).
8.2 iVillage Marks. iVillage hereby grants to AT&T during the Term a
worldwide, nonexclusive, nontransferable, nonassignable right to use the
iVillage Marks on promotional and other materials in accordance with this
Agreement and as mutually agreed by the parties. All such use of the iVillage
Marks shall inure to the benefit of iVillage. Nothing in this Agreement shall
create any rights, title or interest for AT&T in the iVillage Marks (except to
the extent provided in the first sentence of this Section) or in any of
iVillage's other names, trademarks, service marks, design marks, symbols and/or
other indicia of origin and no use of such will be made by AT&T for any purpose
without the prior written approval of iVillage. AT&T shall use the iVillage
Marks in accordance with such reasonable guidelines as iVillage may provide to
AT&T from time to time. AT&T agrees to cooperate with iVillage in facilitating
iVillage's monitoring and control of the use of the iVillage Marks, and to
supply iVillage with samples of use of such icons upon request. Except as set
forth in the first sentence of this Section, all uses of the iVillage Marks
shall be subject to iVillage's prior approval. AT&T shall not modify any aspect
of any iVillage Mark as provided by iVillage to AT&T without iVillage's prior
written approval. AT&T shall not use the word "iVillage", any of iVillage's
other names or marks, or any name or mark confusingly similar to an iVillage
name or mark as part of any domain name (e.g., AT&T will not use a domain name
such as "iVillage.att.com" but may use, during the Term of this Agreement, a URL
such as "att.com/iVillage" with iVillage's prior consent).
8.3 AT&T Licensed I.P. AT&T grants to iVillage a personal, revocable,
nonexclusive, nontransferable right to use the AT&T Licensed I.P. solely under
the terms and conditions stated in this Agreement, solely for the purpose of
conducting and only for so long as the AIC Trial and solely in accordance with
documentation for the AT&T Licensed I.P. and in accordance with the AIC Trial
Plan as set forth in Exhibit C ("Permitted Uses"). iVillage may make copies of
modified or unmodified AT&T Licensed I.P. only to the extent necessary ,to
support the Permitted Uses, but not in any event more than 5 copies. iVillage
shall not make any
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other use of, commercial or otherwise, market, sell, or otherwise distribute, in
any form, any AT&T Licensed I.P. iVillage agrees that the licenses received from
AT&T for the AT&T Licensed I.P. may not be used to design or develop products
for itself or any third party or to market and distribute any products designed
or developed by any third party. iVillage may use AT&T Licensed I.P., and all
copies thereof only at the location or locations specified in the AIC Trial
Plan. iVillage may not assign. sublease, sublicense, lease, or in any other way
transfer any rights under any AT&T Licensed I.P. to any third party.
8.4 Except as expressly granted in this Section, no license or right is
granted to either party, under the Intellectual Property of the other party,
whether directly or by implication, estoppel, or otherwise.
9. INTELLECTUAL PROPERTY
9.1 As between the parties, each party shall exclusively own all
Intellectual Property that it developed or acquired before the Effective Date
and all such Intellectual Property shall remain the sole property of that party.
AT&T shall own any Intellectual Property, no matter how developed (whether
independently or jointly with AT&T or with some other third party) that is
derivative of the AIC Services or the AT&T Licensed I.P. (an "AIC Development").
9.2 Without AT&T's written consent, iVillage shall not use, or disclose
to any third party, any AIC Development except in connection with the AIC
Services in accordance with this Agreement.
9.3 iVillage will reproduce all copyright, proprietary information
notices, and other notices appearing in AT&T Licensed I.P. on all copies
iVillage makes of AT&T Licensed I.P. under Section 8.3. iVillage shall not
disassemble, decompile, or reverse engineer any AT&T Licensed I.P. or other of
AT&T's Intellectual Property.
9.4 iVillage may use third party consultants or subcontractors
("Subcontractor") to perform development work as provided in the AIC Trial Plan,
provided iVillage (1) informs AT&T as to the identity of such Subcontractor, (2)
obtains a written confidentiality agreement from the Subcontractor that contains
conditions and obligations no less restrictive that those set forth in this
Agreement and which is directly enforceable by AT&T, (3) ensures that its legal
relationship with the Subcontractors allows iVillage to meet its obligations in
this Agreement, and (4) iVillage remains directly liable to AT&T for the
obligations of such Subcontractor.
10. TERM AND TERMINATION
10.1 The term of this Agreement (the "Term") shall begin on the
Effective Date and end 2 calendar years following the Deployment Date, unless
terminated earlier pursuant to this Section 10 or extended in writing by
authorized representatives of the parties or, at AT&T's discretion, pursuant to
the last sentence of Section 3.4. The "Deployment Date" means the date that one
or more of the Anchor Positions and Promotional Positions set forth in Exhibit B
or in Exhibit C are first made available on the Service, which the parties
currently project will be November, 1998 or such other date as mutually agreed
upon by the parties. Either party shall have the right to delay the Deployment
Date by up to 45 days upon 10 days notice to the other party. The Deployment
Date will be memorialized in a written document signed by both parties.
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10.2 If either party has materially breached this Agreement, the other
party may terminate this Agreement 30 days after giving a written notice to the
breaching party that describes the breach in reasonable detail, unless the
breaching party has cured the breach before the end of that 30 day period.
Without limitation, it shall be a material breach if iVillage fails to deliver
the agreed upon number of impressions at the end of each Contract Quarter.
Either party may terminate this Agreement immediately if the other party ceases
normal operations or becomes Insolvent.
10.3 AT&T shall have the right to terminate this Agreement upon notice
to iVillage at least 15 days prior to the end of the first Contract Year if
there is a Clickthru Shortfall under Section 3.4 as measured using the first [*]
months of the Contract Year (i.e., if iVillage has delivered less than [*]
Clickthrus during the first [*] months).
10.4 AT&T shall have the right to terminate this Agreement at any time
during the Term with 30 days' written notice if AT&T ceases or substantially
ceases its ordering process for its products and services via the Internet.
10.5 AT&T shall have the right to terminate this Agreement at any time
during the Term with 30 days' written notice if iVillage is subject to a Change
in Control by an entity whose "primary business" is a provider of
Telecommunication Services or an Affiliate of an entity whose primary business
is a provider of Telecommunication Services.
10.6 If AT&T terminates this Agreement pursuant to Section 10.2,
Section 10.4, or Section 10.5, then AT&T shall be relieved of any obligation to
pay any Quarterly Minimum Payments as of the date of such breach, change in
control or notice of termination as the case may be and any partial Quarterly
Minimum Payments accrued prior to such date shall be pro rated and paid in
accordance with Section 3.6. in all other cases of termination, each party shall
be responsible to the other party for amounts accruing prior to the effective
date of any termination and such amounts shall be paid in accordance with
Section 3.
10.7 If at any time AT&T believes that the AIC Trial is no longer
feasible because of (i) substantial changes in the market for the AIC Services,
or (ii) substantial technical issues that cannot be resolved within the
timeframes contemplated in the AIC Trial Plan schedule, then AT&T may terminate
the AIC Trial, but not the remainder of this Agreement, with no further
liability or obligation to the other, on written notice to iVillage after (a)
giving iVillage a written notice that specifies in reasonable detail the reasons
for its beliefs, and (b) at iVillage's request, negotiating in good faith for a
period of up to 15 days to continue the AIC Trial on the same or different
terms, although the terminating party is not obligated to agree to any such
continuation.
10.8 If this Agreement terminates for any reason or if iVillage no
longer makes the AIC Services available on the iVillage Sites, iVillage will, at
AT&T's option and within 10 working days following termination or at AT&T's
request, either return to AT&T or destroy the original and all copies of AT&T
Licensed I.P. and any of AT&T's proprietary or Confidential Information, and
certify to AT&T that they have been destroyed. The licenses granted in Section
8.3 of this Agreement shall immediately terminate if the AIC Services are no
longer made available on the iVillage Sites.
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10.9 Termination by either party under this Section 10 does not waive
any rights or remedies it may have under this Agreement.
10.10 Provisions of this Agreement that by their nature continue beyond
the expiration or termination of this Agreement, and those provisions that are
expressly stated to survive termination, shall survive the termination or
expiration of this Agreement, including, without limitation, Section 7
(Confidentiality), Section 9 (Intellectual Property), Section 11 (for the
purposes of Section 12.4 and to the extent of any breach of a representation or
warranty prior to the effective date of termination), Section 12 (Risk
Allocation), Section 13 (Notices), Section 15.1 (Disputes).
11. REPRESENTATIONS AND WARRANTIES
11.1 Each party represents and warrants that: (a) it has the right to
enter into this Agreement and to grant the rights and licenses granted herein;
and (b) it shall comply with all applicable laws, statutes, ordinances, rules
and regulations of each county, state and city or other political entity with
respect to the provision of the Telecommunication Services, in the case of AT&T,
and the products and services on the iVillage Sites in the case of iVillage.
11.2 AT&T represents that the AT&T Marks and any other content provided
to iVillage by AT&T for use under this Agreement does not infringe or violate
any third party's copyright, trade secret, local, state or federal U.S.
trademark, right of publicity or right of privacy, or contain any defamatory
content.
11.3 iVillage represents that the iVillage Marks and any other content
provided to AT&T by iVillage for use under this Agreement does not infringe or
violate any third party's copyright, trade secret, local, state or federal U.S.
trademark, right of publicity or right of privacy, or contain any defamatory
content.
12. RISK ALLOCATION
12.1 Trial Nature of AIC Services
iVillage acknowledges that AT&T may in its discretion and without
liability of any kind to iVillage elect not to make one or all of the AIC
Services commercially available, or may delay the commercial availability of the
AIC Services for an indeterminate period of time, or may make the AIC Services
commercially available with features and functions that are substantially
different than the features and functions of the AIC Services offered in
connection with the AIC Trial.
12.2 Disclaimer of Representations and Warranties
EACH PARTY ACKNOWLEDGES THAT THE AIC TRIAL IS EXPERIMENTAL IN NATURE
AND IS CONDUCTED ON AN "AS IS" BASIS. EXCEPT AS EXPRESSLY SPECIFIED IN THIS
AGREEMENT, EACH PARTY DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES, EXPRESS AND
IMPLIED, CONCERNING OR RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT, AIC
TRIAL OR THE TECHNOLOGY OR OTHER HARDWARE, SOFTWARE, SERVICES, OR INFORMATION
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PROVIDED OR USED IN CONNECTION THEREWITH, INCLUDING ANY REPRESENTATIONS OR
WARRANTIES OF TITLE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
THAT THE USE OF THE TECHNOLOGY OR OTHER HARDWARE, SOFTWARE, SERVICES, OR
INFORMATION WILL NOT INFRINGE ANY INTELLECTUAL PROPERTY RIGHT OF A THIRD PARTY,
OR THAT ANY HARDWARE, SOFTWARE, AND SERVICES WILL PERFORM IN THE MANNER EXPECTED
OR WITHOUT INTERRUPTION OR ERROR. This disclaimer does not affect the
indemnification obligations under Section 12.4.
12.3 Limitations of Liability
Each party's liability to the other for any loss, cost, claim, injury,
liability, or expense, including reasonable attorney's fees, relating to or
arising out of any negligent act or omission in its performance of or under the
terms of this Agreement shall be limited to the amount of direct damages
incurred up to an aggregate of US$[*]; provided that with respect to breaches of
Section 8 (Licenses), Section 9 (Intellectual Property), Section 7
(Confidentiality) and 12.4 (Third Party Claims) a cap of US [*] shall apply. IN
ANY EVENT, NEITHER AT&T NOR iVILLAGE WILL BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, INCLUDING LOSS OF
PROFITS OR REVENUES OR LOSS OF PROSPECTIVE BUSINESS ADVANTAGE, REGARDLESS OF
WHETHER THAT LIABILITY ARISES IN CONTRACT, TORT, STRICT LIABILITY, BREACH OF
WARRANTY, OR OTHERWISE.
12.4 Third Party Claims
Each party ("Indemnitor") will defend, at its expense, and will pay the
cost and Damages of a settlement or award resulting from any claim brought
against the other ("Respondent) by any third party in connection with (a) a
breach of representation or a warranty, (b) an independent business relationship
that Indemnitor may have with the claimant, or (c) infringement of any United
States patent, trademark, copyright or trade secret that relates solely to (i) a
component of an AIC Service performed by the Indemnitor pursuant to this
Agreement, (ii) Intellectual Property received from the Indemnitor under this
Agreement, or (iii) the Indemnitor's web sites or the content thereon covered
under this Agreement; except where, in each case (i) through (iii), the claim
arises out of or results from modifications made by, or combinations with
content, products or services provided by, Respondent or others that are not
authorized in writing by the Indemnitor, or, use of the content, AIC Service or
Intellectual Property in violation of this Agreement. In each case (a) through
(c), the Respondent shall (i) promptly notify the Indemnitor in writing of the
claim; (ii) give Indemnitor all requested information that the Respondent has
concerning the claim; (iii) reasonably cooperate with and assist the Indemnitor
in defending the claim, at the Indemnitor's expense, and (iv) give the
Indemnitor sole authority to defend or settle the claim (however, Indemnitor
will not have authority to obligate the Respondent in any way or to compromise
any of Respondent's rights in connection with the defense or settlement).
Respondent may participate in the defense of the claim at its expense through
counsel of its choosing.
12.5 Advertising Insertion Orders
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The indemnification and warranty provisions of the advertising
insertion order form agreement to be used by iVillage in connection with
advertising placed on the Co-Branded AnyWho or any other co-branded page of the
iVillage Sites (which shall not include the Promotional Positions or other
standard banner ads), for which AT&T receives compensation for ads, shall
benefit AT&T.
12.6 Limitation of Actions
No action or proceeding against a party may be begun more than one year
after the termination of this Agreement. This Section will not apply to disputes
under Section 7 (Confidentiality), Section 8 (Licenses), Section 9 (Intellectual
Property), or Section 12.4 (Third Party Claims).
12.7 Force Majeure
Neither party will be liable to the other for delays in the performance
of this Agreement if the delay is caused by shortage of labor, strike, default
or failure of suppliers, riot, war, government action, law, or regulation, act
of God, fire, flood, or other cause beyond the party's reasonable control.
13. NOTICES AND REQUESTS
All notices and requests required under this Agreement will be in writing and
will reference this Agreement. Notice will be deemed given upon delivery or
receipt of registered or certified mail, postage prepaid, return receipt
requested, to the addresses listed below:
Notices to iVillage will be sent to:
iVillage, lnc., 170 Fifth Avenue, New York, NY 10010,
Vice President Finances/Legal Affairs.
Notices to AT&T will be sent to:
AT&T Corp.: 295 N. Maple Avenue; Basking Ridge, N.J.
07920; Attn: Marlene Beeler (or such other individual as
AT&T may designate from time to time), AT&T Interactive
Group; with a copy to the "General Attorney, AT&T
Interactive Group," at the same address.
14. ASSIGNMENT
14.1 No Assignment. Except as expressly provided in this Section,
neither party may assign this Agreement without the prior written consent of the
other party; except that no such consent will be required with a sale of all, or
substantially all, of such party's assets, provided that in the case of
iVillage, such sale does not involve an entity whose "primary business" is a
provider of Telecommunication Services or whose Affiliate is an entity whose
"primary business" is a provider of Telecommunication Services. Such consent
shall be in the sole discretion of the party requested to give consent. Any
attempt to sublicense, assign or transfer
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(except as expressly provided herein) any of the rights, duties or obligations
under this Agreement in derogation hereof shall be null and void.
14.2 AT&T Restructuring. By the provision of notice in accordance with
this Agreement, AT&T shall have the right to assign this Agreement and to assign
its rights and delegate its obligations and liabilities under this Agreement,
either in whole or in part (an "Assignment") to (i) any entity that is, or that
was immediately preceding such Assignment: a current or former subsidiary,
business unit, or division of AT&T; or (ii) an entity in which AT&T has an
ownership interest and that is licensed to promote and market the Promoted AT&T
Services using the AT&T brand. The notice of Assignment shall state the
effective date thereof. Upon the effective date and to the extent of the
Assignment, AT&T shall be released and discharged from all obligations and
liabilities under this Agreement. Such Assignment, release and discharge shall
be complete and shall not be altered by the termination of the affiliation
between AT&T and the entity assigned rights or delegated obligations and
liabilities under this Agreement.
15. GENERAL
15.1 This Agreement will be governed by the laws of the State of New
York, regardless of what laws might otherwise apply under applicable choice of
law rules. In the event of a dispute arising out of or relating to any matter
under this Agreement that cannot be resolved by the parties, the dispute shall
be referred to a Vice President of AT&T and an Officer of iVillage, who will
attempt to resolve the dispute within 10 business days of such referral date. If
such officers are unable to resolve the dispute within such 10 business day
period, then either party may immediately seek to resolve the dispute pursuant
to arbitration as set forth below. All disputes hereunder which cannot be
amicably resolved by the parties as described above, except those solely
concerned with AT&T's Intellectual Property or iVillage's Intellectual Property,
shall be settled exclusively by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. The
arbitration shall be held in New York City, New York and shall be conducted by a
single arbitrator who shall be a lawyer familiar with Internet business. The
decision of the arbitrator shall be final and binding upon the parties and may
be enforced by either party in any court of competent jurisdiction. Each party
shall bear the cost of preparing and presenting its case. The costs of the
arbitration, including the fees and expenses of the arbitrator, will be shared
equally by the parties unless the award otherwise provides. This provision shall
not be construed to prohibit either party from seeking preliminary or permanent
injunctive relief in any court of competent jurisdiction to the extent not
prohibited by this Agreement.
15.2 AT&T Licensed I.P. may be controlled for export purposes by the
U.S. Government. iVillage will not export, either directly or indirectly, AT&T
Licensed I.P. without AT&T's prior consent and without first obtaining any
required license or other approval from the U.S. Department of Commerce or any
other agency or department of the United States Government as required.
15.3 This is the entire agreement between AT&T and relating to the
subject matter hereof and supersede all previous communications, representations
or understandings, either oral or written, between the parties relating to the
subject matter hereof. No amendments will be
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effective unless in a writing signed by both parties. AT&T and iVillage may from
time to time amend the AIC Trial Plan or the Promotion Plan upon mutual
agreement signed by both parties.
15.4 A waiver of a breach of any term of this Agreement will not be
construed as a waiver of any succeeding breach of that term or as a waiver of
the term itself. A party's performance after the other's breach will not be
construed as a waiver of that breach.
15.5 iVillage acknowledges that any disclosure, commercialization, or
public use of the AT&T Licensed I.P. would cause irreparable injury to AT&T and
AT&T may seek the grant of an injunction by any court of competent jurisdiction
in the event of a threatened or actual breach.
15.6 This Agreement may be executed in counterparts, each of which will
be deemed an original and together will serve to evidence the parties' binding
agreement.
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EXHIBIT A
PROMOTED AT&T SERVICES
- --------------------------------------------------------------------------------
Service Bounty Criteria for Delivered Customers/
Other Compensation
- --------------------------------------------------------------------------------
One Rate Online o $[*] for each new Approved LD Account,
plus $[*] for each new Approved LD
Account active for at least 6 months,
plus $[*] if such new Approved LD
Account generates > $[*] of LD Revenue
(excludes taxes, refunds, etc.) on
average per month over such [*] month
period.
o $[*] for each existing AT&T LD
customer who switches to One Rate
Online and is active for at least [*]
months.
- --------------------------------------------------------------------------------
Pre-Paid Calls [*]% of the retail value of cards
sold.
- --------------------------------------------------------------------------------
AT&T Wireless $[*] for each new Approved Delivered
Wireless Customer, whose account is
active for at least [*] months, and who
did not terminate a separate wireless
services account with AWS at any time [*]
months prior to activation.
- --------------------------------------------------------------------------------
AIC Services Bounty specifics to be agreed upon for
Controlled Introduction and General
Availability phases of the project and
will be based on learning from Market
Trial. Bounties will not be paid in the
Market Trial
- --------------------------------------------------------------------------------
Co-Branded AnyWho Net Ad Revenues split [*]% to iVillage
and [*]% to AT&T, based on mutually
agreed upon rate cards. AT&T will receive
all Unsold Inventory in the Co-Branded
AnyWho.
- --------------------------------------------------------------------------------
AT&T WorldNet(R) Service o $[*] for each Delivered Customer, plus
$[*] for each Delivered Customer that
remains with the service for [*]
months.
- --------------------------------------------------------------------------------
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EXHIBIT B
PROMOTION PLAN
o iVillage will provide the following minimum "Anchor Positions":
o iVillage will provide an above the fold, persistent graphical,
AT&T-branded, promotional service area for the Promoted AT&T Services on
the following channel pages of the iVillage Sites.
- --------------------------------------------------------------------------------
iVillage Channel Placement within Channel
- --------------------------------------------------------------------------------
Parents Soup Sponsor Specials
Parents of Teens
Parents of School Age Children
Expecting Parents
- --------------------------------------------------------------------------------
Parents Place Sponsor Specials
- --------------------------------------------------------------------------------
Career Front Page
Job Listings
- --------------------------------------------------------------------------------
Member Center Front Page
E-Mail Main Page
Instant Messenger
- --------------------------------------------------------------------------------
Money Channel Main page - below the fold
- --------------------------------------------------------------------------------
o iVillage will provide AT&T with an above the fold, persistent top level
home page graphical promotion lasting for one week, at least once per
Contract Quarter.
o AT&T will also have at least 100% of the top level, standard-size, banner
space on all search result pages from all Key Words (defined in Exhibit F)
input by users on iVillage Sites.
o Prominent, above the fold placement for an exclusive AT&T Communications
Area for Telecommunications Services in the iVillage Chat area.
o On the "top level" home page of the Work From Home and Shopping Channels
(and other areas to be mutually agreed) on the on the iVillage Sites as
follows: (a) an above the fold, graphical, category exclusive, AT&T
branded link for the Co-branded Communications Center.
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o The graphical representation of the Click2Dial icons and other icons for
the AIC Services to be developed by AT&T and provided to iVillage will be
placed in the following locations: in the AT&T Communications Area (as
provided above), in the Co-Branded Communications Center, in prominent
locations, above the fold in the instant messaging and chat areas of the
iVillage Sites (specifically Parents Soup, Parents Place, Career, Work
from Home, and Relationships) and in other areas to be jointly determined
by AT&T and iVillage. AT&T shall have the right to recommend certain
positioning based on its own learnings regarding the AIC Services and to
target specific customer segments, and iVillage shall implement such
positioning provided shall recommendation is reasonable and consistent
with this Agreement.
o A link for the Co-Branded AnyWho labeled "Find a Person" or another name
that is mutually agreed to, will be present, (a) on the Co-Branded
Communications Center and (b) in the Tools section of the Relationship
Channel and in the Quick Click tool (above the fold within the scroll box)
on the top level home page of the iVillage Sites. On any intermediate page
between the main directory link and the Co-Branded AnyWho, AT&T will have
a brand presence on such page and the search form for the Co-Branded
AnyWho will reside on that page. In accordance with the AIC Trial Plan,
iVillage will integrate the Clickable Directory feature into the
Co-Branded AnyWho. Links to AnyWho will not be counted towards the
Guaranteed Impression levels below.
o If and when AT&T makes a yellow page service available to iVillage in
accordance with Section 2.5, a co-branded "yellow pages" will be directly
linked from the top level home pages of each of the iVillage Sites. If
iVillage implements a query page which incorporates both the White and
Yellow pages then only one link will be required.
o iVillage will provide "Promotional Positions" for AT&T's Telecommunication
Services at locations mutually determined by iVillage and AT&T based on the
results of the learnings derived from marketing the Promoted AT&T Services on
the iVillage Sites during the Term.
o iVillage will integrate AT&T marketing messages in its newsletters and email
campaigns at a minimum of once per month during the Term. The details of such
campaigns shall be worked out jointly by the parties and approved by each
party.
o iVillage will develop and implement, at its sole expense, at least [*]
AT&T-specific promotions per Contract Year. The details of such promotions
shall be worked out jointly by the parties and approved by each party.
o Except as provided in the following paragraph, iVillage guarantees [*] Pages
Views for combined Anchor Positions and Promotional Positions in the each
Contract Year ("Guaranteed Impression Levels"). The following shall not be
counted towards these Guaranteed Impression Levels: (1) promotion of the AT&T
sweepstakes pursuant to Section 1.4, (2) promotion of AnyWho White and Yellow
pages, (3) promotions of and links to the Co-Branded Communications Center.
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o If iVillage does not achieve [*] Clickthrus during the first Contract Year or
the Make Good Period, then the Guaranteed Impression Levels will be increased
in the second Contract Year based on the following schedule:
- --------------------------------------------------------------------------------
Year Two Guaranteed Year Two Guaranteed
Impressions Levels Impressions Levels
if Annual Minimum is if Annual Minimum is
Year One Clickthrus $[*] under Section 3.2 $[*] under Section 3.2
- --------------------------------------------------------------------------------
[*] [*] [*]
- --------------------------------------------------------------------------------
[*] [*] [*]
- --------------------------------------------------------------------------------
[*] [*] [*]
- --------------------------------------------------------------------------------
o iVillage will provide AT&T with specifications (i.e., pixel size and byte
size) for all Promotional Positions, Anchor Positions; and other uses of the
AT&T Marks on the iVillage Sites; provided that, unless the parties agree
otherwise, (1) no graphical representation of an AT&T Mark shall be less than
22 pixel height by 20 pixel width (if vertical) and 45 pixel width by 20
pixel height (if horizontal) and no text representation of an AT&T Mark shall
be smaller than the surrounding text for similar content and/or offers on the
page (and in no event less than 16 pixels)and (ii) all representations of the
AT&T Marks shall otherwise conform to the reasonable AT&T Marcom Guidelines
as provided to iVillage by AT&T from time to time.
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EXHIBIT C
AIC TRIAL PLAN
1. The following trial plan, as amended from time to time by mutual
agreement of the parties ("AIC Trial Plan") sets forth additional terms under
which AT&T and iVillage will cooperate in a trial (the "AIC Trial") whose goals
are to integrate, test and promote on the iVillage Sites certain existing and
future AT&T services, such as "AT&T Click2Dial", "AT&T Chat 'N Talk" and "AT&T
Click2Dial Directories" (or their successors) that combine web-based services,
with both traditional and non-traditional (e.g., Internet Protocol )
communication services ("AIC Services").
2. Introduction of AIC Services on the iVillage Site will be
facilitated through a joint learning and highly controlled trial environment
involving a targeted and limited number of users at the iVillage Sites. The
Parties will work together to control access to these AIC Services during all
Trial phases based upon the usage projections/results and capacity limitations
of the AIC Services.
3. AT&T will accept iVillage, and iVillage agrees to participate as, a
Market Trial participant for AT&T Chat 'N Talk, AT&T Click2Dial, and AT&T
Click2Dial Directories that is expected to commence during the fourth quarter of
1998.
4. In addition to its commitments in the Promotion Plan in Exhibit B,
iVillage will provide the following in conjunction with the AIC Services:
o iVillage will integrate AT&T's Chat 'N Talk functionality within the
iVillage chat service.
o Placement of Click2Dial icons at prominent locations, above the
fold, on the iVillage Sites and other areas to be jointly determined
by AT&T and iVillage.
o iVillage will integrate the Click2Dial feature within all applicable
iVillage directories used to display telephone numbers, including
Yellow Pages and White Pages.
o The Click2Dial Icons and Chat 'N Talk Icons that iVillage displays
on the iVillage Site shall be at least 120WX60H pixel size. AT&T
shall provide the banner ad or button in a "jpeg" or "gif" file
ready for posting.
o iVillage will, at its expense, develop code to embed AT&T's
Click2Dial functionality in the iVillage Instant Messenger, when
available, or in other locations on the iVillage site to be jointly
determined by AT&T and iVillage.
5. AIC may, at its discretion, provide AT&T AIC software on the AT&T
WorldNet Gold master disk for manufacture and distribution by iVillage.
6. iVillage will serve as Tier 1 customer support via email for AIC
Services on the iVillage Sites, with a maximum response time of 24 hours. The
parties will work together to
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develop a customer care program that provides response times and other customer
care support that is "best in class", considering both the type of AIC Service
involved, the nature of the iVillage Site and both parties' concerns over
protecting their respective brands.
7. iVillage will provide relevant monthly usage reports for the AIC
Services on the iVillage Sites. Reports from iVillage will include information
on (i) the page from which the use of the AIC Service originated, (ii) which
feature on the page was used, (iii) the number of impressions on that page, (iv)
notice of any schedule downtime of the AIC Services on the iVillage Sites, and
(V) other information reasonably requested by AT&T. AT&T shall provide iVillage
with information at "a summary level" concerning the number of customers who
signed up for each AIC Service and the usage patterns of such customers.
8. Locations for iVillage's Use of Licensed AT&T I.P. are: New York or
other locations as mutually agreed to by the parties.
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EXHIBIT D
EDITORIAL STANDARDS
Subject to the last sentence of this Exhibit, neither the iVillage
Sites nor any product or service offered at the iVillage Sites shall contain:
1. Any matter which is libelous, defamatory or which discloses private
or personal matters concerning any person, including home phone numbers and
addresses, credit card information, and/or user account information.
2. Any messages, data, images, programs, or other matter which are
obscene or which contain racial, ethnic or religious slurs or similar epithets,
or advocating violence, hate or other language that is deeply and widely
offensive.
3. Any messages, data, images, programs, or other matter that would
violate the property fights of others, including unauthorized copyrighted text,
images or programs, trade secrets or other confidential proprietary information
or trademarks or service marks used in an infringing fashion.
The foregoing shall not apply to third party information or materials
that may be located through end user queries on the iVillage Sites or materials
posted on the iVillage Sites (including without limitation chat and bulletin
board areas of the iVillage Sites) by third parties for which iVillage receives
no consideration.
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EXHIBIT E
DEFINITIONS
Capitalized terms used and not defined in the body of the Agreement
shall have the following meaning:
"Affiliate" means a corporation or other entity that controls, is
controlled by or is under common control with another corporation or entity,
where "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract or credit
arrangement, as trustee or executor, or otherwise. In the case of AT&T,
Affiliates shall include any venture in which AT&T has an equity stake or any
other contractual venture formed for the purpose of offering an AT&T product or
service covered under this Agreement.
"AIC Trial" is defined in Exhibit C.
"AIC Trial Plan" is defined in Exhibit C.
"AIC Services" is defined In Exhibit C.
"Anchor Positions" is defined in Exhibit B.
"AT&T Licensed I.P." means (1) Intellectual Property embodied in AT&T's
CallBroker client libraries and APIs, including the modules and specifications
that: (i) define the basic programming interface exposed to CallBroker clients
and provides for control of voice calls from a client via a Java APIs and/or
HTTP APIs; (ii) implement the authentication methods used by CallBroker (CB)
clients; and (iii) provide support for the ASCII message protocol used for CB
client to CB server communications; and (2) documentation (including information
provided orally or in other intangible forms) related to the Call Broker client
libraries, including: API definitions; and software installation and
administration guides; and (3) any derivative works (including Object Code
derived from modified or unmodified Source Code), modifications or improvements
of any of the above provided by AT&T to iVillage from time to time.
"AT&T Marks" means the names, trademarks. services marks, text, logos
or other insignia of AT&T and its Affiliates that iVillage uses on the iVillage
Sites in accordance with Section 8.1.
"Change in Control" means the direct or indirect acquisition of 25% or
more of the outstanding voting shares of iVillage or the acquisition of the
ability, by contract or otherwise, to direct or control the management of
iVillage.
"Clickthrus" means that a user has clicked on an AT&T Anchor or
Promotional Position and received a full Page View from an AT&T Site. The
following shall not be counted as Clickthrus: (1) promotion of the AT&T
sweepstakes pursuant to Section 1.4, (2) promotion of AnyWho White and Yellow
pages, and (3) promotions of and links to the Co-Branded Communications Center.
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"Co-Branded AnyWho" is defined in Section 1.3.
"Co-Branded Communications Center" is defined in Section 1.2.
"Confidential Information" means (a) the terms and conditions of this
Agreement; (b) each party's trade secrets, business plans, strategies, methods
and/or practices; (c) any and all information governed by any now-existing or
future non-disclosure agreement between the parties; and (d) any other
information relating to either party that is not generally known to the public,
including information about either party's personnel, products, customers,
marketing strategies, services or future business plans and any learning
concerning the other party's customers, products or services generated as a
result of the promotional activities on the iVillage Sites or the AIC Trial.
Notwithstanding the foregoing, the term "Confidential Information" specifically
excludes (i) information that is now in the public domain or subsequently enters
the public domain by publication or otherwise through no action or fault of the
other party; (ii) information that is known to either party without restriction,
prior to receipt from the other party under this Agreement, from its own
independent sources and which was not acquired from the other party or as a
result of the activities under this Agreement; (iii) information that either
party receives from any third party having a legal right to transmit such
information, and not under any obligation to keep such information confidential;
and (iv) information independently developed by either party's employees or
agents provided that either party can show that those same employees or agents
had no access to the Confidential Information received hereunder.
"Contract Quarter" means, for the first Contract Quarter, the calendar
quarter beginning on the Deployment Date and ending 3 calendar months following
the Deployment Date (on the same day of the month as the Deployment Date); each
subsequent Contract Quarter shall end on that same day of the month in the
subsequent calendar quarter, adjusted as required pursuant to Section 3.4 and
adjustments to the Contract Year.
"Contract Year" means, for the first Contract Year, the calendar year
beginning on the Deployment Date and ending on the one year anniversary of the
Deployment Date (on the same day of the month as the Deployment Date). If there
is a Make Good Period in accordance with Section 3.4, the second Contract Year
shall begin on the expiration or termination, as the case may be, of the Make
Good Period and shall end on the 1 year anniversary thereof or as extended
pursuant to Section 3.4. If there is no Make Good Period in the first Contract
Year, then the second Contract Year shall begin on the 1 year anniversary of the
Deployment Date and shall end on the 1 year anniversary thereof or as extended
pursuant to Section 3.4.
"Damages" means any loss, debt, liability, damage, obligation, claim,
demand, judgment or settlement of any nature or kind, known or unknown,
liquidated or unliquidated, including without limitation all reasonable costs
and expenses incurred (legal, accounting or otherwise).
"Delivered Customer" means an approved AT&T customer (a) who
electronically links directly from the tracking URLs established for the Anchor
Positions and Promotional Positions on the iVillage Sites to an AT&T website (b)
who electronically registers to become a customer of the Promoted AT&T Services
on such AT&T website (c) whose order is processed and accepted by AT&T and (d)
who meets the relevant criteria established in Exhibit A. In the event of a
dispute as to whether an AT&T customer meets the conditions of the preceding
sentence and
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of Exhibit A or was the result of another marketing effort, the confirmed
customer enrollment that Is first in time to be received by AT&T shall determine
the eligibility for compensation. For purposes of bounties for AT&T WorldNet
Service, "Delivered Customer" means, in addition to the above, a person or
entity who (I) has registered, and has been billed, for iVillage Online; and
(II) has paid at least [*] of Subscriber Revenue to AT&T using the iVillage
Online during the first three months after registration. "Subscriber Revenue"
means any revenue derived from iVillage Online that is received by AT&T from a
Delivered Customer, less rebates and refunds, and less any federal, state or
local taxes based on such fees (except taxes based an AT&T's net income). In no
event shall Subscriber Revenue be deemed to Include unbundled charges for
transport, tarriffed services not bundled with iVillage Online, or value added
Internet-related services (e.g., hosting, security, directory, content services,
products, etc.). No bounties shall be payable for subscribers to iVillage Online
who register for the service through AT&T WorldNet Alliance Marketing Program.
"Delivered Wireless Customer" means a customer who meets the definition
of a Delivered Customer and (i) who places an order with AT&T Wireless Services
for Service on an authorized rate plan in an area served by AT&T Wireless
Services, (ii) who is accepted by AT&T Wireless Services, (iii) for whom
wireless voice service is activated and a wireless telephone number assigned,
(iv) whose wireless voice service has not been terminated prior to [*] months
after such subscribers activation date and whose account has remained in good
standing throughout this period, and (v) who did not terminate a separate
wireless services account with AT&T Wireless Services at any time within [*]
days prior to such subscriber's activation date, when an individual or entity
places more than one order and each order is for a different wireless telephone
number to be assigned to a separate wireless telephone and electronic; serial
number, each order will be treated as a separate Delivered Wireless Customer.
"Deployment Date" is defined in Section 1 0.
"Guaranteed Impressions Levels" is defined in Exhibit B.
"Insolvent" means a party is unable to pay its debts as they become
due, files or has filed against it a petition under any bankruptcy law (which.
if involuntary, is not dismissed within 60 calendar days), proposes any
dissolution, liquidation, composition, financial reorganization, or
recapitalization with creditors, makes an assignment or trust mortgage for the
benefit of creditors, or that a receiver, manager trustee, custodian, or similar
agent is appointed or takes possession with respect to any major property or
business of that party.
"Intellectual Property" means all intellectual property protectible by
law throughout the world, including all copyrights (including the exclusive
right to reproduce, distribute copies of, display, and perform the copyrighted
work and to prepare derivative works), copyright registrations and applications,
trademark rights (including trade dress), trademark registrations and
applications. patent rights (including the right to apply therefor), patent
applications therefor (including the right to claim priority under applicable
international conventions) and all patents issuing thereon, and inventions,
whether or not patentable, together with all utility and design, know-how,
specifications, trade names, mask-work rights, trade secrets, moral rights,
author's rights, algorithms, rights In packaging, goodwill, and other
intellectual property rights, as may exist now and hereafter come into
existence, and all renewals and extensions thereof, regardless
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of whether any of such rights arise under the laws of the United States or of
any other state, country, or jurisdiction.
"iVillage Sites" is defined in Recital B.
"iVillage Marks" means the names, trademarks, services marks, text,
logos or other insignia of iVillage and its Affiliates that iVillage provides to
AT&T for use in accordance with Section 8.2
"Key Words" are attached as Exhibit F.
"Net Advertising Revenues" means gross consideration actually received
by iVillage derived from advertising, which consideration is paid or credited at
any time to iVillage or to any Affiliate of iVillage, without deductions except
reasonable and actual commissions for which iVillage has satisfactory
documentation and which shall not exceed 20 percent of such gross consideration.
"Page View" means a full page viewed by a user, Multiple AT&T Marks on
a page shall count as one Page View. Cached pages shall not count as Page Views.
"Promotional Positions" is defined In Exhibit B.
"Telecommunication Service(s)" means [*].
"Unsold Inventory" means all inventory for advertisement or promotional
space other than inventory that iVillage sells to third parties.
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EXHIBIT F
KEY WORDS
[*]
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* Confidential treatment has been requested for certain portions of this
exhibit.
EXCLUSIVE SPONSORSHIP AGREEMENT
This Exclusive Sponsorship Agreement ("Agreement") is entered into as
of February 28, 1998 (the "Effective Date") by and between Amazon.com, Inc., a
Delaware corporation ("Amazon.com") with offices at 1516 Second Avenue, 4th
Floor, Seattle, Washington 98 1 01 and iVillage, Inc., a Delaware corporation,
("iVillage") with offices at 170 Fifth Avenue, New York, New York 10010.
Amazon.com and iVillage may be referred to generically as a "Party", or
collectively as "Parties".
WHEREAS, iVillage operates a site on the World Wide Web and America
OnLine, which contains channels including but not limited to Parent Soup,
ParentsPlace, Better Health and Armchair Millionaire as well as career, fitness
& beauty, food, relationships and work from home channels (collectively the
"Network").
WHEREAS, Amazon.com seeks to drive Network users ("Users") to its World
Wide Web site (the "Amazon.com Web site"), to acquire repeat customers, to
increase book purchases focusing on lifestyle categories such as parenting,
health, finance and career, and to reinforce the Amazon.com brand as the
"Earth's Biggest Bookstore".
WHEREAS, iVillage and Amazon.com now desire to enter into this
Agreement whereby Amazon.com shall be an exclusive sponsor and retailer
throughout the Network (the "Program") subject to the terms and conditions
stated herein.
Section 1. Exclusivity
For the term of this Agreement and any subsequent renewal thereto,
iVillage agrees that Amazon.com shall be the exclusive book sponsor and
retailer, with respect to entities whose primary business is that of a book
retailer, throughout the Network and that no advertising, links, promotional
information or marketing materials for or relating to any of the entities listed
in Exhibit A hereto or any other individual, entity or web site which derives
more than ten percent (10%) of its annual gross revenue from the sales of books
or magazines (whether in printed, audio, electronic or other format) or is
primarily functioning or primarily known as a seller of books or magazines,
shall be placed or displayed on the Network. In addition, iVillage will not (a)
sell, or permit any other person or entity to sell, any books or magazines on
the Network; or (b) use, or permit any other person or entity to use, all or any
part of iVillage's customer information database to sell any books or magazines;
provided, that such books or magazines are available from Amazon.com. Nothing
herein shall (a) prevent an author or subject matter expert from discussing or
promoting the sale of a particular book or magazine on the Network, provided
that such author or expert does not recommend or promote the purchase of -such
book or magazine from a specific party other than Amazon.com; or (b) prevent any
other sponsor from selling books or magazines on its own web site, provided that
the sale of such books or magazines is not promoted or referenced on the
Network. In the event that iVillage produces or publishes any private label
books, iVillage will offer Amazon.com the first right of refusal as to the
ability to sell such books before such opportunity is offered to any third
party. Amazon.com's sponsorship and exclusivity with regard to products other
than books or magazines shall be determined on a case by case basis, whereby
Amazon.com shall provide
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iVillage with written notice of any other products it seeks to include within
the scope of this Agreement, and iVillage shall have sole discretion as to
whether such other product(s) shall be included.
Section 2. Term and Termination
2.1 Term
The initial term of this Agreement (the "Initial Term") shall commence
on the Effective Date and shall continue for a period of twelve (12) months from
the date that all of the Promotional Placements and Opportunities described in
Section 3 below are available on the Network (the "Implementation Date") unless
terminated earlier or extended as provided herein. Promptly after the
Implementation Date has occurred, the parties shall in good faith agree upon and
document in writing such Implementation Date. Upon mutual agreement of the
parties within no less than sixty (60) days prior to the expiration date of the
Initial Term, the Agreement may be renewed for an additional twelve (12) month
term (the "Renewal Term"). The Parties agree to discuss, in good faith, prior to
the end of the Initial Term, the status of the relationship of the Parties and
the terms of the Agreement. Notwithstanding the foregoing, if the parties agree
to renew the Agreement, the terms of the Agreement, including without limitation
the compensation terms stated in Section 7 below, shall remain in full force and
effect without amendment. However, if prior to sixty (60) but no more than
ninety (90) days before the expiration of the Initial Term, iVillage receives a
bona fide offer from a third party to become the exclusive book sponsor and
retailer throughout the Network on financial terms more advantageous to iVillage
than those stated in Section 7 herein and provides Amazon.com with written
notice and a copy of such offer, Amazon.com must notify iVillage in writing
within thirty (30) days of receiving such notice whether it is willing to amend
the Agreement to match the financial terms offered by such third party for the
Renewal Term. If Amazon.com notifies iVillage that it is willing to renew the
Agreement upon the amended financial terms, then those terms shall be applied to
the Renewal Term, notwithstanding anything in this Agreement to the contrary. If
Amazon.com does not notify iVillage that it is willing to amend the financial
terms of the Agreement for the Renewal Term within thirty (30) days of receiving
such notice, then iVillage shall have fifteen (15) days thereafter to give
Amazon.com written notice to terminate this Agreement at the end of the Initial
Term and may then enter into an Agreement with such third party on the amended
terms offered to Amazon.com.
2.2 Termination
In the event of a material breach by either party of any term of this
Agreement, the nonbreaching party may terminate this Agreement by written notice
to the breaching party if the breaching party fails to cure such material breach
within thirty (30) days of receipt of written notice thereof. Either party may
terminate this Agreement effective upon written notice stating its intention to
terminate in the event the other party (a) ceases to function as a going concern
or to conduct operations in the normal course of business, or (b) has a petition
filed by or against it under any state or federal bankruptcy or insolvency law
which petition has not been dismissed or set aside within sixty (60) days of its
filing.
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2.3 Survival
Sections 9, 11, 12, 13, 15 and 16 hereof shall survive any termination
of this Agreement.
Section 3. Promotion
Throughout the term of this Agreement, and any extensions or renewals
thereof, iVillage will provide links, advertisements and other promotional
placements and opportunities to promote Amazon.com and its sponsorship of the
Network (collectively the "Promotional Placements and Opportunities") in a
manner to be agreed upon by the parties. The Promotional Placements and
Opportunities provided by iVillage will at a minimum be no less prominent or
frequent than those provided to any other Network sponsor or advertiser. The
parties will cooperate in good faith to develop and implement such Promotional
Placements and Opportunities and to maximize the effectiveness of all such
Promotional Placements and Opportunities. The Promotional Placements and
Opportunities as described herein shall be available on the Network no later
than May 31 and shall include, without limitation, the following promotions:
3.1 Book Club Sponsorship
3.1.1 iVillage shall create and make available a Network-wide
Book Club ("Book Club") which shall be sponsored exclusively by
Amazon.com and accessible from the ivillage.com home page located at
the URL: http://www.ivillage.com. Members of the Network will be
invited to become Book Club Members ("Book Club Members") and those who
join the Book Club will be eligible for special promotional benefits
including but not limited to book-related gifts and discounts from
iVillage and Amazon.com. Book Club Members will also have the
opportunity to submit questions to featured book authors. Amazon.com
will cooperate with iVillage in the implementation of these and other
special promotional premiums in connection with the Book Club, but will
have no financial obligation to iVillage for such promotions. Subject
to availability and budget, the Parties agree to work together to
produce and promote co-branded premiums.
3.1.2 iVillage, its editors and producers, shall select book
titles from the Ainazon.com library which shall be prominently featured
in the Book Club throughout the Network ("Selected Titles") and shall
provide a direct link to the Amazon.com Web Site for the purchase of
such Selected Titles. Selected Titles may be works of fiction or
non-fiction and it is anticipated that selection of Selected Titles may
also be made by Book Club Members. iVillage shall select and feature
those titles which concern subjects and/or issues that appeal to the
Users and/or which have been published within 3 months of the date the
title is featured and/or would appear on the Network for the first time
anywhere online.
3.1.3 In connection with Selected Titles, iVillage shall post
excerpts from featured authors and shall host message boards and chats
to be moderated by a Book Club leader and to be accessed by Book Club
Members.
3.1.4 iVillage shall also include a "Click here to buy from
Amazon.com" icon to be placed throughout the Book Club areas of the
Network which shall link Users to the Amazon.com Web site.
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3.2 Channel Book Lists
Throughout the channels of the Network, iVillage shall promote reading
lists ("Reading Lists"), on a rotating basis, of topic-specific titles which are
appropriate for those given subchannels of the Network channel on which the
Reading Lists are featured. The "Click here to buy from Amazon.com" icon will
also appear in connection with the Reading Lists.
3.3 Search Engine Integration
iVillage shall fully integrate the Amazon.com database of available
titles into an iVillage search database, resulting in identical queries being
carried to both the iVillage search database and that of Amazon.com. When a User
accesses the iVillage search engine, a "Click here to find Related Books" icon
will appear as part of the search results, allowing a User to view a list of
related titles for purchase. In addition, iVillage will reserve the key words
listed in Exhibit B exclusively for Amazon.com and will display an Amazon.com
banner (in addition to the Amazon.com "Click here to find Related Books" icon)
whenever one of these key words is used in a search query of the iVillage site.
3.4 Shopping
iVillage shall prominently feature Amazon.com, its products and
services, in its Shopping Channel, located at the URL
http:Hwww.ivillage.com/shopping.htmi. During the term of this Agreement,
Amazon.com shall be listed in the Shopping Channel with a branded button which
shall link Users directly to the Amazon.com Web site.
3.5 Newsletter
Amazon.com will have the opportunity to include a promotional message
of its choosing, subject to iVillage's reasonable approval, in at least one
email newsletter per month (twelve (12) total newsletters per year) that
iVillage will send to its email subscribers.
3.6 Banner Advertising
During the term of this Agreement, iVillage agrees to provide
advertising banners that will run across the tops of the home pages of various
channels within the Network. The advertising banners will permit recipients to
navigate directly to a page on the Amazon.com Web Site selected by Amazon.com.
3.7 Right of First Presentation and Promotion
iVillage will present to Amazon.com an equal opportunity (prior to
presenting the opportunity to any other sponsor or other third party) to
participate in any new advertising, promotional or merchandising placement or
activity on any Network service or other service that is wholly or partially
owned by iVillage and/or any of its corporate parents or wholly or partially
owned subsidiaries. Any such Amazon.com placements will come at no additional
fixed costs to Amazon.com, but instead will earn referral fees in accordance
with the schedule specified in Section 7 of this Agreement.
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iVillage will make a good faith effort to include Amazon.com whenever
reasonably possible in its marketing campaigns (including without limitation any
TV, radio, print, and online ads) and will work with Amazon.com to determine the
method and content to be used in such marketing campaigns. iVillage will feature
Amazon.com at least as prominently as any other sponsor in such marketing
campaigns. Possible methods include selection and use of Amazon.com screenshots
and/or logo where the iVillage bookclub and Amazon.com logo are visible,
voice-over mentions of iVillage bookclub in association with Amazon-com,
voice-over mentions of iVillage channel book lists in association with
Amazon.com, or voice-over mentions of the Amazon.com / iVillage partnership when
discussing iVillage features. Any such promotional placement featuring the
Amazon.com brand will come at no additional cost to Amazon.com.
3.8 Amazon.com Policies
iVillage acknowledges that Users who purchase books through the Program
will be deemed to be customers of Amazon.com and subject to all Amazon.com
rules, policies and operating procedures concerning customer orders, customer
service and books sales. Amazon.com may change its policies and operating
procedures at any time. In addition, Amazon.com will provide commercially
reasonable efforts to present accurate information with respect to any given
book or Amazon.com program.
Section 4. Impression Guarantees
4.1 In connection with each of the promotions listed below (as
described in further detail in Section 3 above), iVillage guarantees to provide
at least the following number of Impressions (as defined below) to Amazon.com
during each of the Initial Term and the Renewal Term, if any (the "Impression
Guarantees"):
------------------------------------------ ---------------------------------
PROMOTION NO. OF IMPRESSIONS
------------------------------------------ ---------------------------------
Book Club [*]
------------------------------------------ ---------------------------------
Search Engine Integration [*]
------------------------------------------ ---------------------------------
Shopping [*]
------------------------------------------ ---------------------------------
Banner Advertising [*]
------------------------------------------ ---------------------------------
Newsletter
[*]
------------------------------------------ ---------------------------------
4.2 In the event that iVillage fails to meet the Impression Guarantees,
then iVillage shall be required to either, at Amazon.com's option: (a) continue
to provide the Promotional Placements and Opportunities until the guaranteed
number of Impressions have been met, in which case the applicable term of this
Agreement shall be extended, at no additional cost to Amazon.com, until such
guarantees are met; or (b) cooperate in good faith with Amazon.com to
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develop and implement such other advertising or promotional placements as are
acceptable to Amazon.com to "make good" the shortfall. In addition, if iVillage
fails to meet the Impression Guarantees, Amazon.com may at any time thereafter
terminate this Agreement upon thirty (30) days written notice.
4.3 iVillage shall provide to Amazon.com on a quarterly basis, within
thirty (30) days following the end of each calendar quarter, a written report
signed by an authorized representative of iVillage showing in reasonable detail
the number of Impressions delivered during such quarter. iVillage shall keep and
retain, during the term of this Agreement and for a period of three years
thereafter, books and records sufficient to demonstrate the number of
Impressions delivered, and Amazon.com shall have the right to have such books
and records examined by an independent third party acceptable to iVillage as are
necessary to verify the number of Impressions reported to Amazon.com. Amazon.com
is entitled to conduct such an audit only during normal business hours and no
more frequently than once per calendar year. Amazon.com agrees to provide
iVillage with at least one (1) week advance notice of any audit. If the audit
reveals that the number of Impressions was misreported by more that ten percent
(10%), iVillage will pay for all costs reasonably incurred by Amazon.com in
connection with the audit.
4.4 As used herein, the term "Impressions" shall mean a User's viewing
of a web page or equivalent containing one or more promotional hypertext links
to the Amazon.com Web Site of the nature specified in the applicable portion of
Section 3.
Section 5. Legal Compliance
Both Parties shall operate their respective Web sites and services in
compliance with all applicable laws and regulations and each will be solely
responsible for obtaining all required governmental authorizations necessary for
the full performance of its services as provided for under this Agreement.
Section 6. Maintenance
Each Party shall monitor and periodically test the general availability
and operation of its Web site.
Section 7. Compensation
7.1 Upfront Fees
7.1.1 Amazon.com agrees to pay iVillage, upon the signing of
this Agreement, an upfront, nonrefundable, non-recoupable setup fee in
the amount of [*].
7.1.2 In the event that this Agreement is renewed, Amazon.com
agrees to pay iVillage, within thirty (30) days after the commencement
of the Renewal Term, an upfront, nonrefundable, non-recoupable renewal
fee in the amount of [*].
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7.2 Referral Fees
7.2.1 In addition to the above fee, Amazon.com shall pay to
iVillage, on a quarterly basis-and payable within thirty (30) days
after the end of each quarter, referral fees based upon a percentage of
the Sale Price of Qualifying Books actually purchased from Amazon.com
(the "Referral Fees'). Amazon.com shall receive a credit for any
Referral Fees paid on Qualifying Books which are later returned. The
term "Sale Price" as used herein shall mean the sale price (i.e. the
price listed under the "Our Price" heading) for such book listed in the
Amazon.com catalog in effect at the time of order and does not include
costs for shipping, handling, gift-wrapping, and taxes. The term
"Qualifying Books" as used herein shall mean all in-print books listed
in Amazon.com's catalogue at the time of order that are purchased by
Users as a direct result of following a hypertext link from the Network
to the Amazon.com Web Site. Notwithstanding anything herein to the
contrary, sales of books listed in our catalog or in search results a.%
"out of print" or "hard to find" are not eligible for any Referral
Fees.
7.2.2 iVillage will earn referral fees according to the
following fee schedule:
(a) [*]% of the Sales Price on sales of each
Individually Linked Book (as defined below)
that, on the date of order, is listed in the
Amazon.com catalog at [*]%-[*]% off the
publishers list price;
(b) [*]% of the Sales Price on sales of each
Individually Linked Book that, on the date
of order, is listed in the Amazon.com
catalog at the publisher's list price (such
as special order books);
(c) [*]% of the Sales Price on sales of
Individually Linked Book that, on the date
of order, is listed in the Amazon.com
catalog at more than [*]% off the publishers
list price;
(d) [*]% of the Sales Price on sales of
Qualifying Books other than Individually
Linked Books; and
(e) the Referral Fees for Individually Linked
Books as set forth in Sections 7.2.2 (a),
(b) and (c) shall be increased to [*]% of
the fees specified therein for any
Individually Linked Books shipped prior to
June 30, 1998.
The term "Individually Linked Books" as used herein shall mean books which are
specifically featured by title in a Promotional Placement or Opportunity on the
Network (as described in Section 3 above) and purchased by Users as a direct
result of following a link on the Network to the Amazori.com Web Site that
specifically identifies the title of such book.
7.3 Referral Fee Guarantee
7.3.1 Initial Term
Notwithstanding the foregoing Section 7.2, if during the
course of the Initial Term of this Agreement iVillage earns less than
[*] in Referral
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Fees (the "Target Referral Fee Amount"), Amazon.com shall include, in
the final quarterly Referral Fee payment for Referral Fees earned
during the Initial Term, that amount which causes iVillage's total
Referral Fees for the Initial Term to equal not less than the Target
Referral Fee Amount. Any amount earned by iVillage during the Initial
Term in excess of the Target Referral Fee Amount shall be due and owing
to iVillage in accordance with the above-mentioned quarterly payment
schedule.
7.3.2 Renewal Term
Notwithstanding the foregoing Section 7.2, if during the
course of the Renewal Term of this Agreement, iVillage earns less than
[*] in Referral Fees (the "Renewal Target Referral Fee Amount"),
Amazon.com shall include, in the final quarterly Referral Fee payment
for Referral Fees earned during the Renewal Term, that amount which
causes iVillage's total Referral Fee for the Renewal Term to equal not
less than the Renewal Target Referral Fee Amount. Any amount earned by
iVillage during the Renewal Term in excess of the Renewal Target
Referral Fee Amount shall be due and owing to iVillage in accordance
with the abovementioned quarterly payment schedule.
Section 8. Reports and Audit
Amazon.com shall track sales from iVillage through a uniform resource
locator and shall provide iVillage with monthly reports in a form satisfactory
to iVillage. iVillage shall have the right to have examined by an independent
certified public accounting fin-n acceptable to Amazon.com, such of Amazon.com's
books and records as are necessary to verify the accuracy of payments made to
iVillage pursuant to this Agreement. iVillage is entitled to conduct such an
audit only during normal business hours and no more frequently than once per
calendar year. iVillage agrees to provide Amazon.com with at least one week
advance notice of any audit. The audit will be limited to revenue generated
pursuant to this Agreement and the calculation of payments due to iVillage under
this Agreement. If the audit reveals that Amazon.com has paid iVillage less than
the sum to which iVillage is entitled, Amazon.com agrees to pay iVillage the
additional sums due. If such sums exceed [*] of the total monies paid to
iVillage under the Agreement, Amazon.com will pay for all costs reasonably
incurred by iVillage in connection with the audit.
Section 9. Representations and Warranties; Limitation of liability
9.1 Each party hereby represents and warrants that: (a) it is a
corporation duly organized and validly existing and in good standing under the
laws of the state of its incorporation, (b) it has full power and authority to
enter into this Agreement and to perform its obligations hereunder; (c) it has
obtained all permits, licenses, and other governmental authorizations and
approvals required for its performance under this Agreement; and (d) the
services to be rendered by each party under this Agreement neither infringe nor
violate any patent, copyright, trade secret, trademark, or other proprietary
right of any third party.
9.2 Amazon.com will remain solely responsible for the operation of the
Amazon.com Site, and iVillage will remain solely responsible for the operation
of the Network. Each Party (a) acknowledges that the Amazon.com Web Site and the
Network may be subject to temporary
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shutdowns due to causes beyond the operating Party's reasonable control, and (b)
subject to the specific terms of this Agreement, retains sole right and control
over the programming, content and conduct of transactions over its respective
site or service. EACH PARTY SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR
WARRANTY REGARDING (A) THE AMOUNT OF SALES THAT AMAZON.COM MAY GENERATE DURING
THE TERM, AND (B) ANY ECONOMIC OR OTHER BENEFIT THAT THE OTHER PARTY MIGHT
OBTAIN THROUGH ITS PARTICIPATION IN THIS AGREEMENT.
9.3 NEITHER AMAZON.COM NOR iVILLAGE WILL BE LIABLE TO THE OTHER FOR ANY
INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT
LIMITATION, LOST PROFITS OR LOST DATA) ARISING OUT OF THIS AGREEMENT. EACH
PARTY'S ENTIRE LIABILITY ARISING FROM THIS AGREEMENT (EXCEPT FOR LIABILITIES
ARISING UNDER SECTION 13 OR RESULTING FROM THE PARTY'S WILLFUL MISCONDUCT),
WHETHER IN CONTRACT OR TORT, WILL NOT EXCEED THE AMOUNTS TO BE PAID BY
AMAZOIN.COM UNDER SECTION 7.
Section 10. Fulfillment
Amazon.com shall be solely responsible for (a) fulfilling all orders
for its products and (b) calculating, collecting and paying all appropriate
taxes associated with payment processing. Amazon.com's products offered through
the Network will be supported by the same warranty and return policy for such
products as offered through other Amazon.com channels.
Section 11. Intellectual Property Rights
11.1 Subject to the license granted to iVillage under Section 11.3,
Amazon.com reserves all of its right, title and interest in its intellectual
property rights (e.g., patents, copyrights, trade secrets, trademarks and other
intellectual property rights). Subject to the license granted to Amazon.com
under Section 1 1.2, iVillage reserves all of its right, title and interest in
its intellectual property rights.
11.2 Amazon.com hereby grants to iVillage, during the term of this
Agreement and any extensions or renewals thereof, a non-exclusive,
non-transferable, royalty-free license to establish hyperlinks between the
Party's Web Sites and to use Amazon.com's trade names, logos, trademarks and
service marks (the "Amazon.com Marks") on the Network as is reasonably necessary
to establish and promote such hyperlinks and to otherwise perform its
obligations under this Agreement; provided, however, that any promotional
materials or usages containing any of the Amazon.com Marks will be subject to
Amazon.com's prior written approval.
11.3 iVillage hereby grants to Amazon.com, during the term of this
Agreement and any extensions or renewals thereof, a non-exclusive,
nontransferable, royalty-free license to establish hyperlinks between the
Party's Web Sites and to use iVillage's trade names, logos, trademarks and
service marks (the "iVillage Marks") as is reasonably necessary to establish and
promote such hyperlinks and to otherwise perform its obligations under this
Agreement;
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provided, however, that any promotional materials or usages containing any of
the iVillage Marks will be subject to iVillage's prior written approval.
11.4 Neither Party will modify, alter or obfuscate the other Party's
Marks or use the other Party's Marks in a manner that disparages the other Party
or its products or services, or portrays the other Party or its products or
services in a false, competitively adverse or poor light. Each Party will comply
with the other Party's requests as to the form of use of the other Party's Marks
and will avoid any action that diminishes the value of such Marks. Either
Party's unauthorized use of the other's Marks is strictly prohibited. Upon
termination of this Agreement and upon written request, the Party in receipt of
the requesting Party's intellectual or proprietary property and/or information
pursuant to this Agreement shall return such information to the requesting
Party.
Section 12. Confidentiality
Except as expressly set forth herein, iVillage and Amazon.com shall
maintain in confidence the terms of this Agreement. It is expected that pursuant
to discussions to date and to this Agreement, the Parties may disclose to one
another certain information, as defined herein, which is considered by the
disclosing Party to be proprietary or confidential information (the
"Confidential Information"). Confidential Information is defined as any
information, communication or data, in any form, including, but not limited to
oral, written, graphic or electromagnetic forms, models or samples, which the
disclosing party identifies as confidential or which or is of such a nature that
the receiving party should reasonably understand that the disclosing party
desires to protect such information, communication or data against unrestricted
disclosure or use, including without limitation, business information, financial
data and marketing data. All Confidential Information shall remain the sole
property of the disclosing party and its confidentiality shall be maintained and
protected by the receiving party with the same degree of care as the receiving
party uses for its own confidential and proprietary information. The receiving
party shall not use the Confidential Information of the other party except as
necessary to fulfill its obligations under this Agreement, nor shall it disclose
such Confidential Information to any third party without the prior written
consent of the disclosing party. The restrictions on the use or disclosure of
any Confidential Information shall not apply to any Confidential Information:
(i) after it has become generally available to the public without breach of this
Agreement by the receiving party; (ii) is rightfully in the receiving party's
possession prior to disclosure to it by the disclosing party; (iii) is
independently developed by the receiving party; (iv) is rightfully received by
the receiving party from a third party without a duty of confidentiality; or (v)
is disclosed under operation of law.
Section 13. Indemnification
13.1 Amazon.com will defend and indemnify iVillage and its affiliates
(and their respective employees, directors and representatives) against any
claim or action brought by a third party, to the extent relating to (a) the
operation of the Amazon.com Web Site, (b) any breach of its obligations under
this Agreement, or (c) the violation of third-party intellectual property rights
by any editorial content or other materials provided by Amazon.com for display
on the Network. Subject to iVillage's compliance with the procedures described
in Section 13.3, Amazon.com will pay any award against iVillage or its
affiliates (or their respective employees,
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directors or representatives) and any costs and attorneys' fees reasonably
incurred by iVillage and its affiliates resulting from any such claim or action.
13.2 iVillage will defend and indemnify Amazon.com and its affiliates
(and their respective employees, directors and representatives) against any
claim or action brought by a third party, to the extent relating to (a) the
operation of the Network, (b) any breach of its obligations under this
Agreement, or (c) the violation of third-party intellectual property rights by
any materials provided by iVillage for display on the Amazon.com Web Site.
Subject to Amazon.com's compliance with the procedures described in Section
13.3, iVillage will pay any award against Amazon.com or its affiliates (or their
respective employees, directors or representatives) and any costs and attorneys'
fees reasonably incurred by Amazon.com and its affiliates resulting from any
such claim or action.
13.3 " In connection with any claim or action described in this
Section, the Party seeking indemnification (a) will give the indemnifying Party
prompt written notice of the claim, (b) will cooperate with the indemnifying
Party (at the indemnifying Party's expense) in connection with the defense and
settlement of the claim, and (c) will permit the indemnifying Party to control
the defense and settlement of the claim, provided that the indemnifying Party
may not settle the claim without the indemnified Party's prior written consent
(which will not be unreasonably withheld). Further, the indemnified Party (at
its cost) may participate in the defense and settlement of the claim.
Section 14. Traffic Data
On a quarterly basis, iVillage will use its best efforts to provide
Amazon.com with mutually agreed data concerning search and browsing behavior on
the Network, to the extent such behavior reasonably could relate to the online
promotion or sale of books or other products that Amazon.com i-nay sell from
time to time. Amazon.com shall treat such data as Confidential Information and
will not use it iii except in accordance with reasonable guidelines to be agreed
by the Parties. Notwithstanding anything contained in this Section, iVillage
will not be required to deliver to Amazon.com any user data in violation of its
then-existing policies regarding the protection of user information.
Section 15. Dispute Resolution
15.1 In a] I discussions and activities relating to this Agreement,
Amazon.com and iVillage will cooperate in good faith to accomplish the
objectives specified in this Agreement. If any dispute arises relating to either
Party's rights or obligations under this Agreement, and the Parties are unable
to resolve the dispute in the ordinary course of business, Amazon.com and
iVillage will use good-faith efforts to resolve the matter in accordance with
this Section 15.
15.2 Within five (5) business days following the written request of
either Party (which will describe the nature of the dispute and other relevant
information), the Parties' managers who are responsible for the
Amazon.com/iVillage relationship will meet to resolve the dispute at a mutually
convenient time and place. If the relationship managers are unable to resolve
the dispute within two (2) business days following their initial meeting, they
will refer the matter to the Parties' divisional executives who are responsible
for the administration of this Agreement,
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along with a written statement (or statements) describing the nature of the
dispute and other relevant information.
15.3 Within five (5) business days following the referral of the matter
to the Parties' divisional executives, the divisional executives will meet to
resolve the dispute at a mutually convenient time and place. Additional
representatives of the parties may be present at the meeting. If the divisional
executives are unable to resolve the dispute within two (2) business days
following their initial meeting, they will refer the matter to the Parties'
Chief Executive Officers (or other appropriate corporate officer with the
authority to settle disputes), along with a written statement (or statements)
describing the nature of the dispute and other relevant information.
15.4 Within five (5) business days following the referral of the matter
to the Parties' CEOs, the CEOs will meet to resolve the dispute at a mutually
convenient time and place. Additional representatives of the parties may be
present at the meeting. If the CEOs are unable to resolve the dispute within two
(2) business days following their initial meeting (or such later date as they
may agree), the Parties will be free to pursue whatever remedies may be
available at law or in equity.
15.5 All negotiations pursuant to this Section IS will be confidential
and treated as compromise and settlement negotiations for purposes of applicable
rules of evidence. Any resolution reached under this Section will be reduced to
writing and signed by the Parties. During any dispute resolution procedure
conducted under this Section, the Parties will diligently perform all
obligations hereunder that are not directly related to the dispute.
Section 16. General Provisions
16.1 The Parties are entering this Agreement as independent
contractors, and this Agreement will not be construed to create a partnership,
joint venture or employment relationship between them. Neither Party will
represent itself to be an employee or agent of the other or enter into any
agreement on the other's behalf of or in the other's name.
16.2 Following the execution of this Agreement, Amazon.com and iVillage
will prepare and distribute a joint press release (or coordinated press
releases) announcing the transaction. The contents and timing of the release (or
releases) will be mutually agreed by the Parties. Neither Party will issue any
further press releases, make any other disclosures regarding this Agreement or
its terms or use the other Party's trademarks, trade names or other proprietary
marks without the other Party's prior written consent.
16.3 In its performance of this Agreement, each Party will comply with
all applicable laws, regulations, orders and other requirements, now or
hereafter in effect, of governmental authorities having jurisdiction. Without
limiting the generality of the foregoing, each Party will pay, collect and remit
such taxes as may be imposed with respect to any compensation, royalties or
transactions under this Agreement. Except as expressly provided herein, each
Party will be responsible for all costs and expenses incurred by it in
connection with the negotiation, execution and performance of this Agreement.
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16.4 Neither Amazon.com nor iVillage will be liable for, or will be
considered to be in breach of or default under this Agreement on account of, any
delay or failure to perform as required by this Agreement as a result of any
causes or conditions that are beyond such Party's reasonable control and that
such Party is unable to overcome through the exercise of commercially reasonable
diligence. If any force majeure event occurs, the affected Party will give
prompt written notice to the other Party and will use commercially reasonable
efforts to minimize the impact of the event.
16.5 Any notice or other communication under this Agreement given by
any Party to any other Party will be in writing and will be deemed properly
given when sent to the intended recipient by registered letter, receipted
commercial courier, or electronically receipted facsimile transmission
(acknowledged in like manner by the intended recipient) at its address and to
the attention of the individual specified below its signature at the end of this
Agreement. Any Party may from time to time change such address or individual by
giving the other Party notice of such change in accordance with this Section
16.5.
16.6 Neither Amazon.com nor iVillage may assign this Agreement, in
whole or in part, without the other Party's prior written consent (which will
not be withheld unreasonably), except to (a) any corporation resulting from any
merger, consolidation or other reorganization involving the assigning Party, (b)
any of its Affiliates, or (c) any individual or entity to which the assigning
Party may transfer substantially all of its assets; provided that the assignee
agrees in writing to be bound by all the terms and conditions of this Agreement.
Subject to the foregoing, this Agreement will be binding on and enforceable by
the Parties and their respective successors and permitted assigns.
16.7 The failure of either party to enforce any provision of this
Agreement will not constitute a waiver of the party's rights to subsequently
enforce the provision. Any remedies specified in this Agreement are in addition
to any other remedies that may be available at law or in equity.
16.8 This Agreement (a) represents the entire agreement between the
parties with respect to the subject matter hereof and supersedes any previous or
contemporaneous oral or written agreements regarding such subject matter, (b)
may be amended or modified only by a written instrument signed by a duly
authorized agent of each party, and (c) will be interpreted, construed and
enforced in all respects in accordance with the laws of the State of Washington,
without reference to its choice of law rules. If any provision of this Agreement
is held to be invalid, such invalidity will not effect the remaining provisions.
The parties agree that the venue for any disputes hereunder shall be King
County, Washington, if such dispute is brought by iVillage, and in New York
City, Borough of Manhattan, New York, if such dispute is brought by Amazon.com..
16.9 If any provision of this Agreement shall be declared by any court
of competent jurisdiction to be illegal, void or unenforceable, all other
provisions of this Agreement shall not be affected and shall remain in full
force and effect.
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16.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
Amazon.com, Inc. iVillage, Inc.
By [illegible] By /s/ Steven Elkes
------------------------------ ---------------------------
Its SVP Its VP Finance/Legal
------------------------------ ---------------------------
Date 3/28/98 Date 3/28/98
------------------------------ ---------------------------
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EXHIBIT A
Competitors
As used in this Agreement, "Competitors" includes (without limitation) the
following entities:
alt.bookstore
Baker & Taylor
Barnes & Noble (including B. Dalton)
Bibliofind
BooksAmerica
BooksNow
Bookpages
Bookport
Bookserve
Booksamillion
BookSearch
BookSite
Booksmith
Book Stacks Unlimited
Book Web
Book Zone
Borders (including Walden Books)
CBooks
Computer Literacy Bookshop
Cody's Books
Crown Books
Ingram
Interloc
Internet Book Shop
Intertain Internet Bookstore
Online BookStore
Powell's Books
Simon and Schuster
Tower Books
Waterstone's
WordsWorth Books
<PAGE>
EXHIBIT B
Keywords
As used in this Agreement, "Keywords" includes (without limitation) the
following terms and phrases:
Book
Books
Bookstore
Bookstores
Bookseller
Booksellers
Amazon
Amazon.com
AMZN
Book Store
Book Stores
<PAGE>
August 17, 1998
iVillage
Attention: Sara Halpern
170 5th Ave.
New York, NY 10010
Dear Sara,
Per our discussion, Amazon.com and iVillage agree that July 1st, 1998 shall be
deemed the "Implementation Date" of the Amazon.com/iVillage contract signed and
dated March 28, 1998. The contract will run for 12 months from the
"Implementation Date" unless terminated earlier or extended as provided in the
contract.
Please have this document signed and returned to us as soon as possible.
Thank you
Julia King
iVillage and Amazon.com agree that July 1st, 1998 shall be the "implementation
date" of the contract signed and dated on March 28th, 1998.
/s/ Sujay Jhaveri /s/ Shawn E. Haynes
- ------------------------------ ------------------------------
iVillage Representative Amazon.com Represenative
SUJAY JHAVERI
VP, Strategic Development & Sales Operations
<PAGE>
* Confidential treatment has been requested for certain portions of this
exhibit.
SNAP PROMOTION AGREEMENT
------------------------
(iVillage)
This Promotion Agreement (the "Agreement") is dated as of November 6, 1998
between Snap! LLC, with its principal place of business located at One Beach
Street, San Francisco, California 94111 ("Snap"), and iVillage, Inc., with
its principal place of business located at 170 Fifth Avenue, New York, NY
10010 (the "Company"). Pursuant to this Agreement, Snap will provide various
promotions to the Company to assist the Company in promoting its network of
Internet sites and related services. Accordingly, the parties hereby agree
as follows:
1. Background.
1.1 The Company. The Company operates a network of Internet
sites including but not limited to content pertaining to
parenting, work and health, including the site located at
http://www.ivillage.com.
1.2 Snap. Snap operates a search and aggregation "portal" site
on the World Wide Web.
2. Definitions.
"Above the Fold" means that a particular item on a Web page is
viewable on a computer screen at an 800 x 600 pixels resolution
when the User first accesses such Web page, without scrolling down
to view more of the Web page.
"Agreed Channels" means all of the Targeted Impressions plus up to
five additional channels, as mutually agreed. Such additional
channels shall initially be Business & Money, Computing, Travel,
Education and Entertainment.
"Company Marks" means any trademarks, trade names, service marks
and logos that may be delivered by the Company to Snap expressly
for inclusion in the Promotions.
"Company Sites" means the Internet sites operated by the Company and
promoted on Snap through the Promotions, including the Internet sites
expressly referenced in Section 3, together with any mirror
sites, co-branded sites and successors thereto.
"Content Portal" means an area on the front page of a Resource
Center that is designed to be programmed with content from a third
party content provider such as the Company.
"Family Center" means a Resource Center within Snap's Kids & Family
Channel that is focused on family issues and is linked to directly
from the front door of the Snap Site and from within the Kids &
Family Channel.
"Health Center" means a Resource Center within Snap's Health
Channel, currently referred to as the "Guide to Better Health,"
that is focused on health issues and is linked to directly from the
front door of the Snap Site and from within the Health Channel.
<PAGE>
"Impression" means the display of a Promotion for any Company Site
on any Snap Site in accordance with this Agreement.
"Parenting Center" means a Resource Center within Snap's Kids &
Family Channel that is focused on parenting issues and is linked to
from within the Kids & Family Channel and from the parenting
section of Snap's Living Channel.
"Products" means any product or service sold on or through the
Company Sites.
"Promotions" means banners, buttons, text links, branded text,
Content Portals, links within email newsletters distributed by Snap
and other promotions displayed on any Snap Site, including the
specific types of promotions referenced in Section 3.
----------
"Referral Users" are any users that access the Company Site through a
Promotion. All Referral Users will be tagged and tracked by the Company
during the first and any subsequent visit to the Company Site via the
Snap Site for the purpose of revenue sharing as referenced in Section
5.3.
"Resource Center" means a collection of related Web pages, links,
portals and other resources on the Snap Site focused on a
particular subject matter.
"Snap Box" means a search box with Snap's full Internet search
functionality and containing icons for and links to the Snap Site.
Each Snap Box will take users directly to the Snap Site to view the
results of their search query.
"Snap Results Page" means a successful search results page on the
Snap Site that is served by Snap in response to a search inquiry
through a Snap Box on the Company Site.
"Snap Marks" means any trademarks, trade names, service marks and
logos delivered by Snap to the Company expressly for inclusion on a
Company Site.
"Snap Site" means the search and aggregation "portal" site operated by
Snap at http://www.snap.com, together with any co-branded editions of
such site that have been or may be developed for Snap's third party
distribution partners and licensees.
"Targeted Impressions" means (a) any Impressions within the Kids &
Family, Health, Living, or Shopping Channels; (b) other Impressions
that appear in context within editorial content or tools provided
by the Company (for example, a "calorie counter" feature); (c)
Impressions within email newsletters distributed pursuant to
Section 3.4; (d) Impressions within My Snap!, as contemplated by
Section 3.5; and (e) Keyword banner Impressions delivered pursuant
to Section 3.6.
"Term" means the term of this Agreement, as set forth in Section 5.
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"User" means a user of the Snap Site.
3. Promotions.
3.1 Promotions within the Health Channel.
3.1.1 During the Term, the Company will have the
exclusive right to program the Content Portal on
the front page of the Health Center with health
related content from its Better Health site or
any successor Web site thereto ("Better Health"),
as well as health related content from the
ivillage.com Site, subject to the reasonable
discretion of a Snap producer.
3.1.2 Subject to the mutual agreement of the parties,
to the extent Snap reasonably deems it to be
appropriate editorially, Snap may include other
Promotions for Better Health throughout the
Health Center and may provide additional
opportunities for the Company to provide content
from the Better Health site for display within
the Health Channel.
3.1.3 Notwithstanding the foregoing or anything herein
to the contrary, the parties mutually agree that
the Company's content will appear in the Health
Center 31 days after Snap gives notice to the
content providers currently in such center, which
notice will be given within 10 days following the
execution of this Agreement.
3.2 Promotions within the Kids and Family Channel
3.2.1 During the Term, the Company will have the
exclusive right to program the Content Portals on
the front pages of the Family Center and the
Parenting Center with content from its Parent
Soup site, subject to the reasonable discretion
of a Snap producer.
3.2.2 Subject to the mutual agreement of the parties,
to the extent Snap reasonably deems it to be
appropriate editorially, Snap may include other
Promotions for Parent Soup throughout the Family
Center and the Parenting Center and may provide
additional opportunities for the Company to
provide content from the Parent Soup site for
display on the Snap Site.
3.3 Promotions for iBaby. Snap shall, subject to Snap's
discretion include Promotions for the Company's iBaby site
throughout the Kids and Family, Health, Living and
Shopping Channels, and Snap may provide additional
opportunities for the Company to provide content from the
iBaby site for display on the Snap Site, including working
with Snap to create a Baby Shop.
3.4 Newsletters. If Snap develops an area where Users can
register for e-mail newsletters from third party content
providers, Snap will provide the Company a reasonable
opportunity to offer a newsletter to Users through such
area.
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3.5 Promotions for My Snap!. The Company's Better Health and
Parent Soup content and links will be included as an
initial default option for Snap's "My Snap!" personalized
home page, meaning that initial default links for Better
Health and Parent Soup will automatically appear on the My
Snap! start page for each first time User. All Company
content linked to from within My Snap! will be hosted in
its entirety by Snap!.
3.6 Keyword Banners. The Company will receive [*]% of the
banner advertisements served on search results pages that
result from searches that include any of the 30 search
terms identified in Exhibit A.
---------
3.7 Best Labels. To the extent Snap deems it to be appropriate
editorially, links to Company Sites included within Snap
search results will include a "Best" editorial label.
3.8 Snap may provide standard Promotions throughout the Snap Site
in an amount sufficient to meet the minimum impressions in
Section 3.9. The Company may request any reasonable
reallocation of the location and type of the Promotions
subject to Snap's then-current inventory availability. Snap
shall not charge the Company any extra fees for such requested
reallocations of Promotions if they are equivalent in value to
those that would otherwise be provided by Snap hereunder.
3.9 Minimum Impressions.
3.9.1 During the first year of the Term, Snap will
deliver a total of at least [*] Impressions. Snap
will deliver [*] additional Impressions at no
additional charge on a run-of-site basis.
3.9.2 During the second year of the Term, Snap will
deliver a total of at least [*] Impressions. Snap
will deliver [*] additional Impressions at no
additional charge on a run-of-site basis.
3.9.3 In each year of the of the Term, at least [*]% of
the minimum number of Impressions will be
Targeted Impressions. Of the remaining minimum
number of Impressions, at least half will be
displayed within Agreed Channels. The remaining
Impressions may be untargeted and may appear
anywhere within the Snap Site (for example,
run-of-site banner advertisements).
Notwithstanding these minimum requirements, Snap
will endeavor to deliver a larger percentage of
Targeted Impressions during the Term, subject to
Snap's discretion.
3.9.4 If Snap does not deliver the required number of
Impressions during any year of the Term, Snap
will have an additional three months to deliver
such Impressions (together with any other
Impressions otherwise required during such three
month period hereunder) on the Snap Site. Such
Impressions delivered during this three month
period shall be allocated to the appropriate
category, (i.e. targeted or untargeted) to
fulfill the impressions guarantee pursuant to
Section 3.9.3.
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3.9.5 If Snap does not deliver the required number of
Impressions during the additional three month
period described in Section 3.9.4, Snap will have
a second three month period to deliver such
Impressions (together with any other Impressions
otherwise required during such three month period
hereunder) on the Snap Site or any other Internet
site operated by CNET, Inc. or the National
Broadcasting Company, Inc. or their affiliates,
subject (in the case of sites other than the Snap
Site) to the Company's prior consent, which shall
not be unreasonably withheld, and provided that
such substituted Impressions are substantially
equivalent in value.
4. Exclusivity.
4.1 Content provided by On Health, Women.com and Oxygen
(individually, a "Competitor") will not constitute, in the
aggregate, more than [*]% of the total content provided on
the front page of the Health Center; the aforementioned
notwithstanding, each Competitor may provide not more than
[*]% of the total content on that page. In addition Snap
will agree not to receive any payment for such content.
Promotions for On Health, Women.com and Oxygen will not
constitute, in the aggregate, more than [*]% of the total
number of Promotions displayed within the Health Center of
Snap.
4.2 Content provided by Home Arts and Oxygen (individually, a
"Competitor") will not constitute, in the aggregate, more
than [*]% of the total content provided on the front page
of the Family Center or the Parenting Center; the
aforementioned notwithstanding, each Competitor may
provide not more than [*% of the total content on that
page. In addition Snap will agree not to receive any
payment for such content. Promotions for Home Arts and
Oxygen will not constitute, in the aggregate, more than
[*]% of the total number of Promotions displayed on the
front page of the Family Center or the Parenting Center.
4.3 For purposes of this Section 4, the percentage of content
provided on a page will be measured based on the total
area of the page on which such content appears. In the
event that Snap plans to offer any Competitor an editorial
or promotional opportunity, other than standard media buys
that are up to three months, or aggregation and selection
of content, provided such content is not paid for, in
connection with the Health Center, Family Center or
Parenting Center, Snap agrees to provide the Company with
such opportunity first Notwithstanding the foregoing,
Company shall, at all times during the Term of this
Agreement, be the preferred provider of content and
promotions throughout those areas of the Snap Site which
are set forth herein, the Health Center, Family Center and
Parenting Center.
5. Payments.
5.1 First Year. The Company will pay Snap a total of
$[*] with respect to the first year of the Term, as
follows:
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5.1.1 The Company will pay Snap a one time development
fee of $[*] for content integration payable
within five days after execution of this
Agreement;
5.1.2 The Company will pay Snap an annual slotting fee
of $[*] for carriage of the Promotions within
the Snap Site, payable in twelve equal monthly
installments, within 30 days of each month; and
5.1.3 The Company will pay Snap a partnership fee of
$[*], payable in the following installments
by the fifth day of each calendar month:
5.1.3.1 $[*] per month during months 1-6
of the Term
5.1.3.2 $[*] per month during months 7-12
of the Term
5.2 Second Year. The Company will pay Snap a total of
$[*] with respect to the second year of the Term, as
follows:
5.2.1 The Company will pay Snap an annual slotting fee
of $[*] for carriage of the Promotions within
the Snap Site, payable in twelve equal monthly
installments, within 30 days of each month; and
5.2.2 The Company will pay Snap a partnership fee of
$[*] payable in equal monthly
installments of $[*] by the fifth day of
each calendar month.
5.3 Revenue Sharing. The Company will pay to Snap an amount
equal to [*]% of all gross margin earned by the Company
from sales made through the Company's iBaby site to
Referral Users. Such revenue sharing will be payable
monthly, simultaneously with delivery of the monthly
reports referenced in Section 8.2, which will support the
Company's calculation of the required payment for the
preceding month.
5.4 Required payments hereunder will be made by check or wire
transfer of immediately available funds as reasonably
directed by Snap.
5.5 Notwithstanding the foregoing: if Snap has not delivered:
(i) [*] impressions on or before the date that is
six months from this Agreement then Snap and the Company
will meet in good faith within 30 days of that time to
re-negotiate the agreement; if no agreement is reached
after that time, the Company may terminate the agreement,
or (ii) [*] impressions (based on the proportions
described in section 3.9 including the additional
impressions as referenced in section 3.9.1 and section
3.9.2.), on or after the date that is twelve months from
the date of this agreement the Company may terminate the
agreement.
5.6 Snap Results Pages. Snap will pay the Company a standard
monthly fee based on the daily average number of Snap
Results Pages delivered to users. Such fee will be
calculated as follows: (1) divide the total number of Snap
Results Pages for the
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month by the number of days in the month, (2) divide the
result by [*], (3) multiply the result by the appropriate
Guaranteed Daily CPM as set forth below, and (4) multiply
the result by the number of days in the month. For
example, if the Company's Snap Box produces a total of
[*] Snap Results Pages for June, the monthly fee for
June will be calculated by the following formula: ((([*]
/ [*]) / [*]) * $[*]) = $[*] = $[*]. Thus, Snap will
pay the Company $[*] for [*] Snap Results.
Average Number of
Daily Snap Results Pages Guaranteed Daily CPM
------------------------ --------------------
[*] $[*]
[*] $[*]
[*] $[*]
[*] $[*]
[*] $[*]
[*] $[*]
6. Design of the Promotions and Operation of the Company Site and Snap
Site
6.1 Snap and the Company will cooperate in good faith to
create an "implementation team," which will include an
account manager designated by Snap and an appropriate
representative of the Company, to oversee the creation and
delivery of the Promotions contemplated by this Agreement.
6.2 The Company will design any graphics and other materials
required for the Promotions and will supply digital copies
of such materials to Snap. Such materials will be designed
and delivered in accordance with Snap's technical and
editorial guidelines as defined in Exhibit B, as may be
changed from time to time and communicated by Snap to the
Company. Snap will provide reasonable assistance to the
Company in connection with the design and delivery of such
materials.
6.3 On each page of a Company Site to which Users are linked
from the Promotions, the Company will display a button or
other graphical link to be provided by Snap, which links
back to the default Snap Site. All such links on the
Company Sites will be displayed Above the Fold. Snap
agrees not to specifically target (separately from the
general database of Snap Users) any Users who access the
Snap Site through such links.
6.4 Both parties will be responsible for ensuring that each
URL provided to the other party for use as set forth in
this Agreement, takes the User to the appropriate area
within the respective site and that each party's site
functions with reasonable reliability and in a
commercially reasonable manner throughout the Term. In
particular, both parties agree that each party's
respective site will comply with the following performance
standards throughout the Term:
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<PAGE>
6.4.1 Each party's site will be operational and fully
functional in all material respects (i.e. capable
of displaying information and conducting
transactions as contemplated in the ordinary
course of business) at least 97% of the time
during any 30 day period.
6.4.2 The average time required to start displaying the
HTML on a page of a party's site after a link
from the other party's shall not exceed a daily
average of three seconds, and the average time
required to deliver an entire page of a party's
site over the open Internet shall not exceed a
daily average of six seconds. For measurements
required in this Paragraph, both parties may
assume standard T1 connectivity to the Internet.
6.4.3 Without limiting the effect of Paragraphs 6.4.1
and 6.4.2 above, the Company shall provide to
Users coming to the Company Sites from the
Promotions at least the same level of service as
is offered to Users coming directly to such
Company Sites.
6.4.4 The Company Sites e shall not, to the best of the
Company's knowledge: (a) contain defamatory or
libelous material or material which discloses
private or personal matters concerning any
person, without such person's consent; (b) permit
to appear or be uploaded any messages, data,
images or programs which are illegal, contain
nudity or sexually explicit content or are, by
law, obscene, profane or pornographic; or (c)
permit to appear or be uploaded any messages,
data, images or programs that would knowingly or
intentionally (which includes imputed intent)
violate the property rights of others, including
unauthorized copyrighted text, images or
programs, trade secrets or other confidential
proprietary information, or trademarks or service
marks used in an infringing fashion.
6.4.5 If any of the performance standards set forth
above are not met by either party with respect to
that party's site, the other party may, after
notifying the violating party, remove any or all
links to such party's, at the non violating
party's sole discretion. If a party's site fails
to operate fully and functionally in any material
respect for any period of four or more
consecutive hours, even if otherwise in
compliance with the performance standards, the
other party may, after notifying the violating
party, remove any or all links to such violating
party's site, at the non-violating party's sole
discretion, until such time as the violating
party notifies the non-violating party that such
site has resumed acceptable operation. These
remedies are for each party's editorial purposes
and in no way limit either party's ability to
terminate this contract or pursue any other
remedies hereunder in the event the performance
standards set forth herein are not met.
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7. Termination.
7.1 The term of this Agreement (the "Term") will begin on the
date hereof and will end on the second anniversary of the
date hereof, unless otherwise terminated or extended as
provided in this Agreement.
7.2 If either party commits a material breach of its
obligations hereunder that is not cured within 30 days
after notice thereof from the non-breaching party, the
non-breaching party may terminate this Agreement at any
time by giving written notice of termination to the
breaching party (or ten days in the event of non-payment).
7.3 The provisions of Sections 12, 13 and 14 and any payment
obligations arising prior to termination will survive any
termination of this Agreement.
8. Reporting.
8.1 Within 30 days after the end of each calendar month during
the Term, Snap will provide to the Company standard
advertising reports, as generally offered by Snap, with
respect to the Promotions.
8.2 Within 30 days after the end of each calendar month during
the Term, the Company will provide to Snap a report
indicating (a) the number of Users who access any Company
Site by clicking on a link embedded within a Promotion
delivered by Snap hereunder, in the aggregate and for each
Company Site, and (b) the total revenues and gross profit
earned by the Company from sales made through the
Company's iBaby site to such Users. The Company will
obtain such data by tagging each User who accesses any
Company Site through a Promotion using a cookie or other
similar technology, as agreed upon by the parties.
9. User Data.
The Company will be the sole owner of any information that the
Company collects from Users through the Company Sites, and Snap
will be the sole owner of any information that Snap collects from
Users through the Snap Site. Notwithstanding the foregoing and
subject to the provisions of Section 14.8, each party will have the
unrestricted right and license to use any information provided by
the other party pursuant to Section 7.
10. Company Integration of Snap.
10.1 The Company will feature a Snap Box as a part of the front
page of each of the Company Sites and throughout the
Company Sites as appropriate, the design, size and
positioning of which will be mutually agreed upon by Snap
and the Company, provided that the Snap Box appear above
the fold. Snap will pay the Company for Snap Results Pages
as provided in Section 5.6, above.
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10.2 The Snap Results Pages delivered to users as a result of a
query from Company's Snap Box will be co-branded edition
of the Snap Service located at www.snap.com.
10.3 On each page of a Snap Site to which Users are linked from
the Company Site, Snap will display a mutually agreed upon
button or other graphical link to be provided by the
Company, which links back to the default Company Site. All
such links on the Snap Site will be displayed Above the
Fold. Company agrees not to specifically target
(separately from the general database of Company Users)
any Users who access the Company Site through such links.
11. Trademark Licenses.
11.1 The Company hereby grants to Snap a non-exclusive,
royalty-free license, effective throughout the Term, to
use, display and publish the Company Marks solely within
the Promotions. Any use of the Company Marks by Snap must
comply with any reasonable usage guidelines communicated
by the Company to Snap from time to time. Nothing
contained in this Agreement will give Snap any right,
title or interest in or to the Company Marks or the
goodwill associated therewith, except for the limited
usage rights expressly provided above. Snap acknowledges
and agrees that, as between the Company and Snap, the
Company is the sole owner of all rights in and to the
Company Marks.
11.2 Snap hereby grants to the Company a non-exclusive, royalty
free license, effective throughout the Term, to use,
display and publish the Snap Marks solely within the
Company Sites as provided in Section 8 above. Any use of
the Snap Marks by the Company must comply with any
reasonable usage guidelines communicated to the Company by
Snap from time to time. Nothing contained in this
Agreement will give the Company any right, title or
interest in or to the Snap Marks or the goodwill
associated therewith, except for the limited usage rights
expressly provided above. The Company acknowledges and
agrees that, as between the Company and Snap, Snap is the
sole owner of all rights in and to the Snap Marks.
12. Responsibility for the Products.
The Company acknowledges and agrees that, as between the Company
and Snap, the Company will be solely responsible for any claims or
other losses associated with or resulting from the marketing or
operation of the Company Sites or the offer or sale of any Products
by the Company or through the Company Sites. Snap is not authorized
to make, and agrees not to make, any representations or warranties
concerning the Company Sites or the Products, except to the extent
(if any) contained within Promotions delivered to Snap by the
Company or approved by the Company.
13. Mutual Indemnification.
13.1 Indemnification by Snap. Snap shall indemnify and hold the
Company harmless from and against any costs, losses,
liabilities and expenses, including all court
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<PAGE>
costs, reasonable expenses and reasonable attorney's fees
(collectively, "Losses") that the Company may suffer,
incur or be subjected to by reason of any legal action,
proceeding, arbitration or other claim by a third party,
whether commenced or threatened, arising out of or as a
result of any claims of infringement or misappropriation
of intellectual property rights, or arising from the
operation of Snap Site.
13.2 Indemnification by the Company. The Company shall
indemnify and hold Snap harmless from and against any
Losses that Snap may suffer, incur or be subjected to by
reason of any legal action, proceeding, arbitration or
other claim by a third party, whether commenced or
threatened, arising out of or as a result of (a) the use
of the Company Marks by Snap in accordance with this
Agreement; (b) any content provided by the Company to Snap
for display on the Snap Site; (c) the operation of the
Company Sites; or (e) the offer or sale of any Products by
the Company or through the Company Sites.
13.3 Indemnification Procedures. If any party entitled to
indemnification under this Section (an "Indemnified
Party") makes an indemnification request to the other, the
Indemnified Party shall permit the other party (the
"Indemnifying Party") to control the defense, disposition
or settlement of the matter at its own expense; provided
that the Indemnifying Party shall not, without the consent
of the Indemnified Party enter into any settlement or
agree to any disposition that imposes an obligation on the
Indemnified Party that is not wholly discharged or
dischargeable by the Indemnifying Party, or imposes any
conditions or obligations on the Indemnified Party other
than the payment of monies that are readily measurable for
purposes of determining the monetary indemnification or
reimbursement obligations of Indemnifying Party. The
Indemnified Party shall notify Indemnifying Party promptly
of any claim for which Indemnifying Party is responsible
and shall cooperate with Indemnifying Party in every
commercially reasonable way to facilitate defense of any
such claim; provided that the Indemnified Party's failure
to notify Indemnifying Party shall not diminish
Indemnifying Party's obligations under this Section except
to the extent that Indemnifying Party is materially
prejudiced as a result of such failure. An Indemnified
Party shall at all times have the option to participate in
any matter or litigation through counsel of its own
selection and at its own expense.
14. Miscellaneous.
14.1 Women's Channel. If, during the Tenn, Snap creates a
Women's Channel or a Women's resource center, Snap will
negotiate in good faith with the Company, for at least 15
days before negotiating with any third party, concerning
the terms on which the Company could provide content or
receive branding within such channel or resource center.
Should Snap and the Company agree on such terms then, as
part of that agreement, (i) content provided by Women.com,
Home Arts and Oxygen
11
<PAGE>
will not constitute, in the aggregate, more than 40% of
the total content provided within the Women's Channel or
Women's resource center, as the case may be; (ii) content
provided by Women.com, Home Arts and Oxygen will not
constitute individually more than 25% of the total content
in the Women's Channel or Women's resource center, and
(iii) promotions for Women.com, Home Arts and Oxygen will
not constitute, in the aggregate, more than 50% of the
total number of Promotions displayed within the Women's
Channel or Women's resource center, provided that each
company's promotions may not constitute more than 25% of
the total Promotions displayed within the Women's Channel
or Women's resource center; and (iv) the Company shall at
all times during the term of the agreement be the
preferred provider of content and promotions throughout
such Women's Channel.
14.2 LIMITATION OF DAMAGES. NEITHER PARTY WILL BE LIABLE FOR
ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES
ARISING OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING
NEGLIGENCE), AND EVEN IF SUCH PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. FURTHER, EXCEPT FOR ANY
CLAIM FOR INDEMNIFICATION ARISING UNDER SECTION 13 ABOVE,
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR DAMAGES IN
EXCESS OF THE TOTAL PAYMENTS REQUIRED TO BE MADE UNDER
THIS AGREEMENT.
14.3 Assignment. Snap may not assign this Agreement, except (a)
in connection with the transfer of substantially all of
the business operations of Snap (whether by asset sale,
stock sale, merger or otherwise); (b) to an affiliate of
Snap; or (c) with the written permission of the Company,
which will not be unreasonably withheld. The Company may
not assign this Agreement, except with the written
permission of Snap, which will not be unreasonably
withheld or delayed.
14.4 Relationship of Parties. This Agreement will not be
construed to create a joint venture, partnership or the
relationship of principal and agent between the parties
hereto, nor to impose upon either party any obligations
for any losses, debts or other obligations incurred by the
other party except as expressly set forth herein.
14.5 Entire Agreement. This Agreement constitutes and contains
the entire agreement between the parties with respect to
the subject matter hereof and supersedes any prior oral or
written agreements. This Agreement may not be amended
except in writing signed by both parties. Each party
acknowledges and agrees that the other has not made any
representations, warranties or agreements of any kind,
except as expressly set forth herein.
14.6 Audit Rights. Each party will have the right to engage an
independent third party to audit the books and records of
the other party relevant to the quantification of the
Promotions, not more than once per year during the term of
this Agreement, and upon not less than thirty (15) days
written notice and during normal business hours, and the
other party will provide reasonable cooperation in
connection with any such audit. The party requesting the
audit will pay all expenses of the auditor
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unless the audit reveals an underpayment by the other
party of more than 5%, in which case the other party will
reimburse all reasonable expenses of the auditor.
14.7 Applicable Law. This Agreement will be construed in
accordance with and governed by the laws of the State of
California, without regard to principles of conflicts of
law.
14.8 Confidentiality. In connection with the activities
contemplated by this Agreement, each party may have access
to confidential or proprietary technical or business
information of the other party, including without
limitation (a) proposals, ideas or research related to
possible new products or services; (b) financial
information; and (c) the material terms of the
relationship between the parties (collectively,
"Confidential Information"). Each party will take
reasonable precautions to protect the confidentiality of
the other party's Confidential Information, which
precautions will be at least equivalent to those taken by
such party to protect its own Confidential Information.
Except as required by law or as necessary to perform under
this Agreement, neither party will knowingly disclose the
Confidential Information of the other party or use such
Confidential Information for the benefit of any third
party. Each party's obligations in this Section with
respect to any portion of the other party's Confidential
Information shall terminate when the party seeking to
avoid its obligation under this Section can document that:
(i) it was in the public domain at or subsequent to the
time it was communicated to the receiving party
("Recipient") by the disclosing party (`Discloser")
through no fault of Recipient; (ii) it was rightfully in
Recipient's possession free of any obligation of
confidence at or subsequent to the time it was
communicated to Recipient by Discloser; (iii) it was
developed by employees or agents of Recipient
independently of and without reference to any information
communicated to Recipient by Discloser; (iv) it was
communicated by the Discloser to an unaffiliated third
party free of any obligation or confidence; or (v) the
communication was in response to a valid order by a court
or other governmental body, was otherwise required by law
or was necessary to establish the rights of either party
under this Agreement.
14.9 Press Release. Each party may issue a press release
concerning the business relationship contemplated in this
Agreement, provided that the other party has had a
reasonable opportunity to review and comment on its press
release, and agreed on the content of the release either
verbally or in writing. In addition, each party will
provide an appropriate quote from one of its senior
executive officers for use in the other party's release.
14.10 Illustrations. All Illustrations attached to the Exhibits
are for illustrative purposes only and shall not be deemed
to bind, obligate or restrict either party from making
reasonable changes in such party's discretion.
14.11 Attorney Fees. In any action or suit to enforce any right
or remedy under this Agreement or to interpret any
provision of this Agreement, the prevailing party shall be
entitled to recover its costs, including reasonable
attorneys' fees.
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14.12 Dispute Resolution. In the event that any dispute arises
hereunder, the parties agree that prior to commencing
litigation, arbitration, or any other legal proceeding,
each party shall send an officer of such party to
negotiate a resolution of the dispute in good faith at a
time and place as may be mutually agreed. Each officer
shall have the power to bind its respective party in all
material respects related to the dispute.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first written above.
SNAP, LLC iVILLAGE, INC.
By: /s/ Edmund Sanctis By: /s/ Steve Elkes
--------------------------- ------------------------------
Name: Edmund Sanctis Name: Steve Elkes
--------------------------- ------------------------------
Title: C.O.O. Title: V.P. Business Affairs
--------------------------- ------------------------------
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Exhibit A
Keywords
babies
baby
baby products
baby store
babyname
babynames
birth
breast feeding
car seat
exercise
expecting
fitness
health
healthcare
healthy
maternity
menopause
mother
name
names
osteoporosis
parenting
parents
pregnant
pregnancy
pregnant
prevention
stroller
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Exhibit B
Snap Editorial Guidelines for Partner Content
(as of September 1998)
Editorial Suggestions
- ---------------------
Provide content that is inherently informative or useful in itself, rather
than strictly a promotion for content on your site. Feel free to include as
many links to your site as you want, but they should be related to the
content you are providing. An exception would be your logo link, which
should link to your site's main home page.
Editorial Requirements
- ----------------------
All content or other materials provided to Snap must adhere to Snap's
editorial guidelines. These guidelines include, without limitation, a
prohibition on direct links from the applicable site to pornographic or
illegal material, and a prohibition on the advertising of firearms or
pornographic products or services from within Snap. Snap prohibits any
obscene, indecent, or profane language. Snap requires that all content
should be factually correct.
Links in your content must only point to the site from which the content was
harvested. Links must take the user directly to the content which they
describe. For example, links must not lead users through advertisements on
the way to the content. No interstitial advertisements. No pop-up
advertisements.
Content must be relevant to the Topic. It must also be relevant to the point
and time. This does not mean that content must be updated at a particular
rate. However, whatever content is live at any given time must be completely
relevant. The content must include your brand, either as text or a graphic.
A logo graphic should contain the brand name and the ALT text for the
graphic must give the brand name.
The content linked to from your page must be free to Snap users, and initial
registration or subscription must not be required. However, you are free to
use content pages on your own site (not hosted by Snap) to up sell
subscription or registration-required content. (example: "For more
headlines, click here to subscribe.")
Advertisements within your content are not allowed. Your information must be
content, not an advertisement for your site or brand or any other
site/brand.
General Notes & Standards
- -------------------------
Snap is willing to discuss modifications to the policies stated in these
documents; however, all exceptions must be approved by the Snap Executive
Producer. Snap may change these Content Page specifications and requirements
at any time, with reasonable notice given to the Provider.
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* Confidential treatment has been requested for certain portions of this
exhibit.
12/19/97 iVillage
ONLINE SERVICES AGREEMENT
This ONLINE SERVICES AGREEMENT, is made as of December 19, 1997, (the
"Effective Date"), with a launch date of February 1, 1998, or another date as
mutually agreed upon in good faith by the parties ("Launch Date") by and
between iVillage, Inc., a Delaware corporation having its principal offices at
170 Fifth Avenue, New York, New York 10010 ("iVillage"), and CHARLES SCHWAB &
CO., INC., a California corporation having its principal offices at 101
Montgomery Street, San Francisco, California 94104 ("Schwab").
WHEREAS, iVillage owns and operates a Web site on the Internet under
the name "Armchair Millionaire" or as such other name as iVillage may determine
(uniform resource locator http://www.armchairmillionaire.com) (the "Armchair
Site"), which is a financial community directed to the long-term investor, or
those seeking basic information on investing, and which is comprised of a
variety of areas dedicated to providing investment-related information.
WHEREAS, Schwab is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and desires to promote
its securities brokerage business by having certain promotions,
advertisements, and hyperlinks placed on the Armchair Site, and by sponsoring
the Brokerage and Mutual Fund areas on the Armchair Site during the term of
the Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and premises hereinafter provided, iVillage and Schwab agree as
follows:
1. Publication of Promotions and Advertisements and Establishment of
Sponsored Areas and Hyperlinks.
(a) During the term of the Agreement, Schwab shall be the exclusive
sponsor of the Brokerage and Mutual Fund areas on the Armchair Site
("Sponsorship Activities"). The Sponsorship Activities are more fully
described in Paragraphs l(a) and l(b) of Exhibit A to this Agreement.
(b) iVillage will publish promotions and advertisements detailed in
Exhibit A and establish one or more hyperlinks (the "Schwab Hyperlinks")
described in Exhibit A, pointing to Schwab's Web site or pages thereon
described on Exhibit A ("Schwab Site") where Schwab offers various products
and services relating to its securities brokerage and financial services
business.
(c) Subject to Section 3, iVillage may also disseminate or post on
any of its Web sites or otherwise, promotional, sales, marketing, advertising,
or other material or information (including, but not limited to, news
releases, press releases, advertising
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scripts, direct mail and E-mail correspondence, and display and online
advertising) referring to Schwab, its affiliates, or their respective products
or services (collectively, "Informational Material"). Informational Material
does not include editorial content prepared by, or at the direction of,
iVillage.
(d) iVillage will publish the Schwab Content described in Exhibit A
within the Armchair Site as mutually agreed upon in good faith by the
parties.
(e) Other than by engaging in the activities described in Sections 1
(a) and (b) above, iVillage and its employees will not (1) describe the Schwab
Services, excluding editorial content prepared by, or at the direction of,
iVillage (other than disseminating or posting Informational Material approved
in each case by Schwab pursuant to Section 3 below); (2) recommend or endorse
specific securities (other than by disseminating publications or information
prepared by third parties that are responsible for such content); or, directly
or indirectly, recommend or endorse specific broker-dealers (including, but
not limited, to ranking or rating brokerage companies or providing hyperlinks
to brokerage or mutual fund companies (excluding permitted advertisements),
unless approved by in advance by Schwab).
(f) iVillage and its employees will not become involved in the
financial services offered by Schwab, including (A) opening, maintaining,
administering, or closing customer brokerage accounts with Schwab; (B)
soliciting, processing, or facilitating securities transactions relating to
customer brokerage accounts with Schwab; (C) extending credit to any customer
for the purpose of purchasing securities through, or carrying securities
with, Schwab; (D) answering customer inquiries or engaging in negotiations
involving brokerage accounts or securities transactions; (E) accepting
customer securities orders, selecting among broker-dealers or routing orders
to markets for execution; (F) handling funds or securities of Schwab
customers, or effecting clearance or settlement of customer securities
trades; or (G) resolving or attempting to resolve any problems,
discrepancies, or disputes involving Schwab customer accounts or related
transactions.
2. Trademarks.
(a) iVillage grants Schwab a revocable, royalty-free,
non-transferable, non-exclusive right to display the trade or service name and
mark "iVillage or Armchair Millionaire" and related logos (collectively, the
"iVillage Marks") solely for the purposes of identifying and promoting iVillage
Web sites through which certain Schwab services may be made available;
provided, however, that (1) Schwab will not modify the iVillage Marks or use
them for any purpose other than as set forth above; (2) Schwab will not engage
in any action that adversely affects the good name, good will, image or
reputation of iVillage or its Web sites or associated with the iVillage Marks;
(3) Schwab will at all times use the appropriate trade or service mark notice
((TM), (SM) or (R), whichever is applicable) or such other notice as iVillage
may from time to time specify on any item or material bearing the iVillage
Marks; and (4) iVillage will have the right to review and
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approve in advance all materials to be disseminated electronically or
otherwise by Schwab, referring to iVillage, its affiliates, or their
respective products or services or containing the iVillage Marks, which
approval may be withheld by iVillage in its reasonable business discretion.
Except as otherwise provided by this Agreement, Schwab makes no representation
or warranty as to the extent or degree, if any, to which it will market,
advertise or promote the availability of certain of its services through
iVillage's Web sites.
(b) Notwithstanding the foregoing, iVillage does not have the right
to review and approve Schwab marketing materials or message content other than
the use of the iVillage Marks within such materials or messages.
(c) Schwab grants iVillage a revocable, royalty-free,
non-transferable, non-exclusive right to display the trade or service names and
marks "Schwab" and "Charles Schwab & Co., Inc." and related logos
(collectively, the "Schwab Marks") solely for the purposes of creating and
maintaining the Sponsorship Activities, the Schwab Hyperlinks and for
identifying and promoting those Schwab Services that may be made available
through iVillage Web sites; provided, however, that (1) iVillage will not
modify the Schwab Marks or use them for any purpose other than as set forth
above; (2) iVillage will not engage in any action that adversely affects the
good name, good will, image or reputation of Schwab or associated with the
Schwab Marks; (3) iVillage will at all times use the appropriate trade or
service mark notice ((TM), (SM) or (R), whichever is applicable) or such other
notice as Schwab may from time to time specify on any item or material bearing
the Schwab Marks; and (4) Schwab will have the right to review and approve in
advance all materials to be disseminated electronically or otherwise by
iVillage, referring to Schwab, its affiliates, or their respective products or
services or containing the Schwab Marks, which approval may be withheld by
Schwab in its reasonable business discretion. Any approval given by Schwab under
this Section 2(b) does not constitute an approval for purposes of Section 3
below.
(d) Notwithstanding the foregoing, Schwab does not have the right to
review and approve iVillage marketing materials or message content other than
the use of the Schwab Marks within such materials or messages.
3. Schwab Approval of Informational Material. iVillage acknowledges
that, as a registered broker-dealer and member of various securities
self-regulatory organizations, Schwab is subject to extensive regulation in
connection with its communications with the public. Accordingly, iVillage agrees
that, in addition to rights to approval in Sections 2(b) and 8 hereof, Schwab
will have the right to review and approve in advance, all Informational
Material. Without limiting the generality of the foregoing, this right includes
the right to review and mutually agree upon (a) any change in the placement of
Schwab's name or the Schwab Hyperlinks, (b) any Schwab sponsored content, and
(c) the placement of Schwab's name on any iVillage Web site screens or pages.
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4. Representations and Warranties. Schwab and iVillage each represent and
warrant with respect to itself as follows: (a) such party is duly organized,
validly existing, and in good standing under the laws of the state in which it
is incorporated, and has the power and authority to carry on its business as
now being conducted; (b) this Agreement has been duly executed and delivered
on behalf of such party and is a legal, valid, and binding obligation of such
party enforceable against it in accordance with the terms of this Agreement,
except (1) as the same may be limited by bankruptcy, insolvency,
reorganization, or other laws or equitable principles relating to or affecting
the enforcement of creditors' rights, and (2) that the availability of
equitable remedies including specific performance is subject to general
equitable principles applied at the discretion of a court; and (c) such party
owns full right, title and interest in or otherwise has the right to grant to
the other party the rights granted in Section 2 above, and the trade or
service names and marks subject to such grant do not, to such party's
knowledge, infringe any rights of a third party. iVillage represents, warrants
and agrees that (a) the content in the Armchair Site is and will remain lawful
and non defamatory and does and will not infringe any intellectual property or
personal right held by any person; and (b) the products and services offered
by iVillage to users are offered, sold or otherwise provided in compliance
with applicable laws in all material respects, (c) that its' entering into
this Agreement does not violate an agreement with or require the approval of
any third party. Schwab represents, warrants and agrees that (a) the content
it provides for posting in the Armchair Site is and will remain lawful and non
defamatory and does and will not infringe any intellectual property or
personal right held by any person; and (b) the products and services offered
by Schwab to users are offered, sold or otherwise provided in compliance with
applicable laws in all material respects.
5. Compensation. Subject to the terms and conditions of this Agreement,
Schwab will pay iVillage the following compensation, in equal bi-annual
installments, during the term of this Agreement:
(a) During the first year following the Launch Date [*], which is
comprised of a [*] set-up fee and a [*] sponsorship fee the first bi-annual
installment to be due and payable upon execution of this Agreement, and [*] of
which is nonrefundable under Sections 5(d) and (e) below;
(b) During the second year following the Launch Date, [*], which is
comprised of a [*] exclusivity fee, which is due and payable on the first
anniversary of the Launch Date, and a [*] sponsorship fee, [*] of which is
nonrefundable under Sections 5(d) and (e) below;
(c) During the third year following the Launch Date, [*], which is
comprised of a [*]
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exclusivity fee, which is due and payable on the second anniversary of the
Launch Date, and a [*] sponsorship fee, [*] of which is nonrefundable under
Sections 5(d) and (e) below;
(d) If Schwab's Performance Objectives, as defined in Exhibit A, are
not met during the first or second year following the Launch Date, and Schwab
does not terminate the Agreement, Schwab will be entitled to a fee reduction
in the next year of the Agreement as set forth in Exhibit A.
(e) If Schwab's Performance Objectives are not met during either
the first or second year following the Launch Date and Schwab
terminates the Agreement, or if Schwab's Performance Objectives
are not met during the third year following the Launch Date and
the Agreement expires, iVillage shall pay to Schwab a cash
amount equal to the dollar amount of the fee reduction that
Schwab would have received in the next year if Schwab did not
terminate the Agreement or the Agreement did not expire. For a
payment that is owed at the end of the first or second year,
such cash payment shall be calculated on the ninetieth (90th)
day following the effective date of termination ("Calculation
Date") and shall be reduced by any additional Performance
Objectives that are achieved between the date that Schwab gives
notice of termination and the Calculation Date. For a cash
payment that is owed at the end of the third year of the
Agreement, such cash payment shall be calculated on the one
hundred and eightieth (180th) day following the expiration of
the Agreement ("third-year Calculation Date") and shall be
reduced by any additional Performance Objectives that are
achieved up until that date.
(f) Schwab and iVillage will discuss in good faith opportunities for
Schwab to benefit from [*] of gross advertising revenue collected in areas
containing content co-developed by the parties.
6. Term of Apreement; Termination.
(a) This Agreement will be effective beginning on the date hereof and
will expire on the three-year anniversary of the Effective Date of this
Agreement unless terminated sooner pursuant to this Section 6.
(B) Schwab may terminate the agreement, upon thirty (30) days notice
to iVillage, six months after the Launch Date if Schwab's Performance
Objectives for that time period are not met.
(c) Without cause and without breach or penalty, Schwab may terminate
the Agreement by giving notice to iVillage at least ninety (90) days prior to
each one-year
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anniversary of the Effective Date of the Agreement. In addition, Schwab may
terminate the Agreement based upon not meeting its Performance Objectives in
the immediately preceding year, by giving notice to iVillage at least sixty
(60) days prior to each one-year anniversary of the Launch Date. If Schwab
terminates based upon not meeting its Performance Objectives, iVillage shall
provide cash compensation, to Schwab, if any, as indicated in Section 5(e) of
this Agreement.
(d) Notwithstanding any other provision of this Agreement to the
contrary, (1) either party will have the right to terminate this Agreement if
the other party breaches any representation, warranty, covenant or obligation
in this Agreement and fails to cure such breach within thirty (30) days after
written notice thereof from the non-breaching party; and (2) either party may
terminate this Agreement immediately, on written notice to the other party, if
(a) such other party becomes subject to a statutory disqualification under
applicable provisions of the Exchange Act or becomes subject to any proceeding
that might result in it being so disqualified; (b) such other party or any of
its affiliates registers as or acquires a broker-dealer; or (c) such other
party (i) applies for or consents to the appointment of, or the taking of
possession of its property by, a receiver, custodian, trustee or liquidator;
(ii) admits in writing its inability to pay its debts as they become due;
(iii) makes a general assignment for the benefit of creditors; (iv) is
adjudicated as bankrupt or insolvent; (v) files a voluntary petition in
bankruptcy or a petition or answer seeking reorganization, an arrangement with
creditors or to take advantage of any insolvency law or an answer admitting
the material allegations of a petition filed against it in any bankruptcy,
reorganization, arrangement or insolvency proceeding; or (vi) initiates an
action of dissolution or liquidation.
7. Indemnification.
(a) iVillage (referred to in this Section 7(a) as the "indemnifying
party") agrees to indemnify, hold harmless, reimburse and defend Schwab, and
Schwab's directors and officers (referred to in this Section 7(a) as the
"indemnified party"), from and against any claim, suit, action, or other
proceeding brought against the indemnified party arising out of or in
connection with (i) the indemnifying party's breach of any representation,
warranty, covenant or obligation in this Agreement; (ii) any grossly negligent
or wrongful act or omission of the indemnifying party with respect to the
subject matter of this Agreement; or (iii) a claim that any material, product,
information or data or service produced, distributed, offered or provided by
the indemnifying party (including, without limitation, any material presented
on any site on the Internet, produced, maintained or published by the
indemnifying party, but excluding hyperlinks to sites on the Internet
produced, maintained or published by a third party) infringes in any manner,
any copyright, patent, trademark, trade secret or any intellectual property
right of any third party. The indemnifying party will pay any and all costs,
damages, and expenses, including, but not limited to, reasonable attorneys'
fees and costs awarded against or otherwise incurred by the indemnified party
in connection with or arising from any such claim, suit, action or other
proceeding;
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(b) Schwab (referred to in this Section 7(b) as the "indemnifying
party") agrees to indemnify, hold harmless, reimburse and defend iVillage it
officers and directors (referred to in this Section 7(b) as the "indemnified
party"), from and against any claim, suit, action, or other proceeding brought
against the indemnified party arising out of or in connection with (i) the
indemnifying party's breach of any representation, warranty, covenant or
obligation in this Agreement; or (ii) a claim that any content, material,
product, information or data provided by the indemnifying party that is posted
on the Armchair Site (including any material presented on any site on the
Internet, produced, maintained or published by the indemnifying party, but
excluding hyperlinks to sites on the Internet produced, maintained or
published by a third party) infringes in any manner, any copyright, patent,
trademark, trade secret or any intellectual property right of any third party.
The indemnifying party will pay any and all costs, damages, and expenses,
including, but not limited to, reasonable attorneys' fees and costs awarded
against or otherwise incurred by the indemnified party in connection with or
arising from any such claim, suit, action or other proceeding;
(c) Whenever any claim for indemnification arises under this Section
7, the indemnified party will promptly notify indemnifying party of the
claim and, when known, the facts constituting the basis for such claim and the
amount or an estimate of the amount of the liability arising therefrom. At its
option, the indemnified party may defend itself against any claim brought
against it that is subject to indemnification under this Section 7, in which
case indemnifying party will pay all reasonable attorneys' fees and costs thus
far incurred but will no longer be obligated to defend the indemnified party
against such claim (but will still be obligated to indemnify, hold harmless,
and reimburse the indemnified party with respect to such claim as provided in
Paragraph (a) and (b) above). The indemnifying party will not be obligated to
indemnify the indemnified party with respect to any claim settled or
compromised by the indemnified party and with respect to which the indemnified
party has exercised the foregoing option to defend itself unless the
indemnifying party has consented to the settlement or compromise of such claim
in writing, which consent will not be unreasonably withheld or delayed. In
each case in which the indemnified party does not exercise the foregoing
option, the indemnified party may require the indemnifying party to defend the
former against the claim(s) and to bear all costs and fees incurred in doing
so. In such event, the indemnified party may participate in defense of the
claim(s) by retaining its own counsel, whose fees and costs it then will pay,
and whether or not the indemnified party elects to participate in the defense,
the indemnifying party may not settle or compromise such claim(s) in a manner
which adversely affects the indemnified party without the latter's written
consent beforehand, which consent will not be unreasonably withheld or
delayed.
8. Non-Solicitation of Schwab Customers; Confidentialily and Publicity.
(a) iVillage will not (1) target or solicit individual, identifiable
customers of Schwab or any group of such customers by direct mail, fax,
E-mail, online advertising, cookie or identification-based automatic routing
to non-Schwab Web sites, or by similar means on behalf of any person or entity
that may reasonably be deemed to be engaged in
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providing securities brokerage or financial information or services in
competition with Schwab (a "Schwab Competitor"); (2) sell, license, disclose,
distribute or transfer to any third party a list consisting of individuals
known to iVillage to be Schwab customers, or any aggregate financial or
demographic information about individuals known to iVillage to be Schwab
customers, that identifies the individuals as customers of Schwab, whether
expressly or by direct implication. Schwab acknowledges and agrees that
iVillage may solicit and advertise to visitors to its Web sites so long as
iVillage does not solicit or advertise to visitors selected based in whole or
in part on such visitors being customers of Schwab on behalf of any Schwab
Competitor.
(b) Neither party (as such, the "Receiving Party") shall disclose to
any third party (other than its accountants, attorneys or other agents who
have a need to know such information), or use other than as specified in this
Agreement, any confidential information disclosed by the other party (as such,
the "Disclosing Party"), including but not limited to any information relating
to the Disclosing Party's customers (including their identities or any
aggregate financial, demographic or other information about them).
(c) Neither party will, without the prior written consent of the
other party, (1) disclose to any third party (other than such party's
accountants, attorneys, or other agents who have a need to know such
information) the terms and conditions of this Agreement; or (2) make any
public announcement regarding the existence of this Agreement.
(d) The parties agree that a breach of this Section 8 would
cause irreparable injury not compensable solely in money damages.
9. Limitations on Liability. The liability of either party for damages or
alleged damages hereunder, whether in contract, tort or any other legal theory
is limited to, and will not exceed the amounts to be paid by Schwab to
iVillage hereunder; provided, however, that these limitations of liability
will not apply to claims related to either party's indemnity obligations under
Section 7 or for breaches or alleged breaches of Section 8 of this Agreement.
10. Service and Support. iVillage will regularly monitor and take
reasonable steps to maintain the operation and performance of the Armchair Site.
iVillage will use its reasonable efforts to support increasing numbers of users
on the Armchair Site including operating sufficient numbers of servers for
reasonably anticipated levels of user traffic. iVillage will make contact
persons directly available to Schwab for technical inquiries via E-mail or
telephone. In addition:
a) iVillage will make contact persons directly available to Schwab
for technical inquiries via phone and/or email, as noted in the Customer
Service Exhibit B, which is attached hereto;
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b) Any customer inquiries involving brokerage accounts or securities
transactions will not be transferred or forwarded from iVillage directly to
Schwab. iVillage will refer the customer to contact Schwab;
c) For customer email messages, iVillage shall reply to the customer
email within 24 hours, instructing the customer to send an email to Schwab or
telephone Schwab as noted in the Customer Service Exhibit;
d) For customer telephone calls, iVillage shall refer the customer to
telephone Schwab at the phone numbers noted in the Customer Service Exhibit;
e) Schwab will make contact persons directly available to iVillage for
customer support inquiries via phone, as noted in the Customer Service
Exhibit. iVillage shall not transfer any customers to Schwab on this telephone
number; it is solely for iVillage staff support;
f) Customer Service hours of operation will be as indicated in the
Customer Service Exhibit;
g) Upon request, iVillage shall make available to Schwab Training,
Training Documentation, or Technical Documentation such as Error Messages, for
Customer Support; and
h) iVillage shall provide reasonable advance notice to Schwab of any
browser compatibility changes.
11. Miscellaneous.
(a) This Agreement will be governed by and construed in accordance
with the substantive laws of the United States and the internal laws of State
of California. The headings of the sections are for convenience of reference
only and will not affect the meaning or operation of this Agreement. The terms
and conditions of this Agreement are subject to all applicable laws and
regulations which are currently in effect or which may become effective during
the term of this Agreement. If any provision of this Agreement is considered
void, voidable, illegal, or invalid for any reason, such provision will be of
no force and effect only to the extent that it is so declared void, voidable,
illegal, or invalid. All of the provisions of this Agreement not specifically
found to be so deficient will remain in full force and effect. The parties
hereto, their successors and permitted assigns consent to the jurisdiction of
the courts of the State of California in respect to any legal proceeding that
may result from a dispute as to the interpretation or breach of this
Agreement. Schwab and iVillage are each independent contractors, and this
Agreement will not be construed as creating a joint venture, partnership,
franchise, employment or agency relationship between iVillage and Schwab. Each
party acknowledges that the arrangements contemplated in this Agreement are
non-exclusive, except with respect to the subject matter of this Agreement,
and that each party may enter into arrangements
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with third parties that are similar or identical to those contemplated in this
Agreement that are not in direct conflict this Agreement.
(b) The provisions of Sections 1(f), 3, 4, 7, 8 and 11 of this
Agreement will survive the termination or expiration of this Agreement.
(c) This Agreement (together with exhibits) constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes and replaces all prior or contemporaneous understandings,
negotiations, or agreements, written or oral, regarding such subject matter.
Any amendment or other modification of this Agreement will be effective only
if in writing and signed by both parties. No term or provision of this
Agreement may be waived except by a written instrument duly executed by the
party against whom such or waiver is sought to be enforced. This Agreement may
not be assigned by either party, without the other party's prior written
consent (which will not be unreasonably withheld). Any purported assignment in
violation of this Section will be void. This Agreement will bind and inure to
the benefit of the parties and their respective successors or permitted
assigns.
(d) All notices, requests, demands and other communications under
this Agreement will be in writing and will be deemed to have been duly
delivered if delivered by hand or sent by prepaid registered or certified mail
or by telecopy or electronic mail (confirmed by concurrent written notice sent
by first class U.S. mail) addressed as follows (or to such other address as
may be designated by a party, in writing, pursuant hereto):
If to Schwab: If to iVillage:
Charles Schwab & Co., Inc. iVillage, Inc.
101 Montgomery Street 170 Fifth Avenue
San Francisco, California 94104 New York, New York 10010
Fax (415) 636-0089 Fax (212) 604-1933
Attention: Pamela Saunders Attention: Robert Levitan
with a copy to: with a copy to:
Enterprise Counsel - Electronic Brokerage Vice President Finance/Operations
Attention: Colleen McCall Attention: Steve Elkes
(e) This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
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iVILLAGE, Inc. CHARLES SCHWAB & CO., Inc.
By: /s/ Steve Elkes By: /s/ Pamela Saunders
--------------- --------------------
Its: Its: Vice President
--------------- --------------------
Electronic Brokerage
Date: Date: 12/19/97
--------------- --------------------
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EXHIBIT A
Sponsorship Activities, Promotions, Advertisements and Hyperlinks
1. Sponsorship Activities
(a) iVillage grants Schwab exclusive sponsorship of the Brokerage center and
the Mutual Fund center on the Armchair Site (the "Sponsorship Areas").
This exclusive sponsorship grants Schwab exclusive advertising for
brokerage services for the term of this Agreement and exclusive mutual
fund advertising in the first year of this Agreement. Other mutual fund
advertising will be permitted in year two and three but will be limited
to mutual fund families that participate in the Schwab Mutual Fund
OneSource offering, and other mutual fund families as mutually agreed
upon in good faith by the parties.
(b) During the term of the exclusive sponsorship, iVillage will not post
hyperlinks on the Armchair Site to other brokerage or mutual fund
companies (excluding permitted advertising) nor will it post content that
contains a rating or ranking of brokerage companies. The exclusive
sponsorship also prohibits iVillage from building any co-developed content
with, or content links to brokerage and mutual fund competitors or
competitor-branded Web sites from the Armchair Site, except as mutually
agreed upon in good faith by the parties.
(c) iVillage will provide Schwab with a prominent presence on the Armchair
Site home page in addition to providing Schwab presence in banner
advertisements and content pages.
(d) In sponsored or co-developed content, iVillage will use its best efforts
to portray Schwab as a provider of unbiased investment information
through third-party resources and/or academic investment research data
developed by Schwab. iVillage will also post information on the Armchair
Site and other iVillage Web sites about Schwab's investor education
events, such as Schwab in-branch seminars.
(e) Throughout the term of this Agreement, use its best efforts iVillage will
provide survey research results and data on user online investing
behavior and preferences and user feedback on Schwab through community
user interaction on an aggregate and/or anonymous basis.
(f) iVillage will provide ongoing consultation to Schwab throughout the term
of the Agreement on effective community building tools and activities.
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2. Content Links
At Schwab's request, iVillage will provide links from the Sponsorship Areas to
content on Schwab's Web site. The links will be accessed through Armchair Site
pages listing services available at Schwab's Web site including brief
descriptions of those services. Links discussed for the launch of the Schwab
sponsorship include, but are not limited to, the Retirement Planner, the
College Planner, the Guide to Understanding Market Cycles, Asset Allocation
Strategies and selected mutual fund content on Mutual Fund OneSource Online
including a SchwabFunds content link. Other content links from the Sponsorship
Areas mutually agreed upon by both parties may be developed throughout the
term of the Agreement.
3. Content Development, Sharing and Review
(a) iVillage and Schwab agree to jointly develop new content to reside on the
Sponsorship Areas. iVillage will assume web development responsibility for any
newly created content as summarized below. Other content mutually agreed upon
by both parties may be developed by iVillage throughout the term of this
Agreement in the Sponsorship Areas. Content jointly developed by Schwab and
iVillage may also be made available at Schwab's Web site at Schwab's
discretion.
(i) Ask the Experts Content. Schwab will provide content to
iVillage in the form of weekly answers to popular investing
questions submitted by iVillage users. Answers to these
questions will be provided by Financial Advisors selected by
Charles Schwab, Schwab's Investment Products and Research staff
and the SchwabFunds Portfolio Management group.
(ii) Advisor Source Content. At Schwab's request, iVillage will
include content on the Armchair Site describing Schwab's
Advisor Source offering along with a brief profile of the
financial advisors participating in the program. This content
area may link to Schwab for more information about this
program.
(iii) Schwab Branch Seminars. At Schwab's request, iVillage agrees
to develop and post content summarizing online investing
seminars available at Schwab branch offices and other Schwab
hosted educational events.
(iv) Schwab Investment Products and Research. At Schwab's request,
iVillage agrees to develop and post content on Schwab's mutual
fund analytical information produced by the Investment
Products and Research staff including the online posting of
their newsletter.
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(b) In addition to Schwab-branded and Schwab/iVillage co-branded content,
Schwab has the right, but not the obligation, to review and approve in
advance all content that is to be posted in the Brokerage or Mutual Fund
Centers that could reasonably be attributed to Schwab. iVillage will
deliver such content to Schwab at least two business date in advance of
its scheduled posting date. If Schwab does not provide comments within
two business days after iVillage has delivered it, iVillage may post the
content. After content is posted, Schwab has the right, but not the
obligation, to request iVillage to modify or remove such content if
Schwab believes that such content could reasonably be attributed to it.
(c) In addition, Schwab has the right, but not the obligation, to request
that any allegedly offending content posted on the Armchair Site, other
than messages from users appearing on message boards or in chat rooms and
banner advertisements, be removed.
(i) If iVillage refuses to remove the allegedly offending content
and Schwab reasonably believes that such content could cause
Schwab to be viewed as violating any law or regulation or if
Schwab reasonably believes that such content incorrectly
suggests an affiliation between, or a Schwab-endorsement of, any
third party or that party's products or services, then Schwab
may immediately terminate this Agreement without breach or
penalty;
(ii) If iVillage refuses to remove the allegedly offending content
and the content is not subject to Paragraph 3(c)(i) of this
Exhibit A, but Schwab believes such content is outside the
scope of iVillage's Mission Statement with respect to the
Armchair Site, then Schwab may terminate the Agreement without
breach or penalty by giving ninety (90) days notice to
iVillage.
4. Live Events on the Armchair Site
(a) Subject to iVillage's consent (which shall not be unreasonably withheld),
iVillage will permit Schwab to host and/or sponsor live investment forums on
the Armchair Site. For those investment forums specifically developed and
hosted by Schwab, Schwab owns the right of all forum registration information
including email addresses of users requesting future Schwab forum
information.
(b) Schwab and iVillage may also jointly develop web-based investing courses
at the Armchair Site. Any courses developed by Schwab will be specifically
Schwab branded and courses developed by iVillage will be branded according to
their preference.
(c) Any live events jointly developed by Schwab and iVillage may also be made
available at Schwab's Web site at Schwab's discretion.
14
<PAGE>
5. Armchair Content Sharing for Schwab's Web Site
Without additional cost to Schwab, the parties will mutually agree in good
faith on selected content areas within the Armchair Site that will be placed
on a custom site that Schwab may link to from its Web site at its discretion.
Advertising and branding on the custom site will be limited to Schwab except
that Armchair Millionaire branding as it exists on the Armchair Site will be
permitted.
6. Reporting Requirements
So that Schwab may monitor market performance and make program adjustments,
iVillage will provide to Schwab timely and accurate reports every thirty (30)
days as follows:
(a) Total number of page views on a Schwab sponsored area;
(b) Number of "hyperlink clickthroughs" on Schwab content;
(c) Number of clickthroughs to Schwab from a banner advertisement; and
(d) iVillage will use its best efforts to provide any user feedback on
Schwab obtained from the message boards and chat areas on the
Armchair Site.
So that iVillage may monitor new Schwab account openings, Schwab will provide
to iVillage timely and accurate reports every thirty (30) days of new account
openings related to the Armchair Site. If iVillage reasonably believes that
such reports may be inaccurate, Schwab will permit iVillage to audit such
reports.
7. Advertising Impressions and Marketing Campaigns
(a) iVillage guarantees Schwab a minimum of 18 million impressions
during each year of this Agreement on the Armchair Site delivered in
the form of promotional banner advertisements. These banner
impressions may appear in the Armchair Site or other iVillage Sites
as mutually agreed upon in good faith by the parties.
(b) iVillage will include Schwab in its print marketing campaigns and
online marketing activities as mutually agreed upon in good faith by
the parties.
8. Performance Objectives
(a) During the term of the Agreement, the parties' expect Schwab to
obtain the following number of new accounts ("Account Goals") a
result of the activities contemplated hereunder on the Armchair
Site:
15
<PAGE>
(i) [*] new accounts in the first year following the Launch Date;
(ii) [*] additional new accounts in the second year following the
Launch Date;
(iii) [*] additional new accounts in the third year following the
Launch Date;
(iv) [*] new accounts in the first six months following the Launch Date.
(b) If Schwab's Account Goals are not met Schwab shall be entitled to a fee
reduction or cash payment as follows:
<TABLE>
<CAPTION>
Unmet Account Goals Percentage Year One Year Two Year Three
- ------------------------------ -------- -------- ----------
<S> <C> <C> <C>
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
[*] percent $[*] $[*] $[*]
</TABLE>
(c) If iVillage owes Schwab a fee reduction or cash payment pursuant to
Section 5(d) or (e) of the Agreement:
(i) in excess of [*] for the first year of this Agreement, such amount may
be reduced by a maximum credit of [*] if iVillage delivers at least
30 million banner advertising impressions in the year preceding the
first-year Calculation Date;
(ii) in excess of [*] for the second year of this Agreement, such amount
may be reduced by a maximum credit of [*] if iVillage delivers at
least 30 million banner advertising impressions in the year preceding
the second-year Calculation Date;
(iii) in excess of [*] for the third year of this Agreement, such amount may
be reduced by a maximum credit of [*] if iVillage delivers at least 30
million banner advertising impressions in the year preceding the
third-year Calculation Date.
16
<PAGE>
(d) If iVillage fails to deliver [*] impressions in any year
and the fee reduction or cash refund it owes to Schwab exceeds
the amount stated in Paragraph 8(c) of this Exhibit A for that year,
then iVillage shall be entitled to a partial credit of any fee
reduction or cash payment due to Schwab for actual impressions
delivered based upon a [*] cost per thousand impressions. iVillage is
not entitled to any credit against any fee reduction or cash payment
owed to Schwab if it delivers less than 18 million impressions in the
year preceding the Calculation Date.
(e) Any fee reduction or cash payment owed to Schwab may be further
reduced by [*]%, if Schwab is unable to demonstrate to iVillage that it can
accurately track online account opening activity at its Web site resulting from
clickthroughs to Schwab's Web site from the Armchair Site.
8. Schwab Promotional Activities
During the term of the Agreement, Schwab will provide promotional support for
the Armchair Site through a variety of online and off-line marketing
activities, such as customer collateral, online banner and links from other
interactive mediums.
17
<PAGE>
Exhibit B
Customer Service Exhibit
(1) iVillage Service Support Escalation:
In the event that Schwab Customer Service needs to escalate a question or
issue to iVillage, iVillage shall provide a staffed phone number for use by
the Schwab Help Desk. The Help Desk shall use this number for such issues as
escalating customer reports of iVillage outages or other issues. iVillage
shall respond with available information, including the status of any
technical issues, so that the Help Desk can alert Schwab Customer Reps.
Phone number: (iVillage to fill in)
------------------------------------
Hours of Operation:
-------------------------------
Pager number:
------------------------------------
Hours On Call:
-----------------------------------
(2) Schwab Customer Phone Calls and Email:
If a customer calls or emails iVillage an inquiry that pertains to any Schwab
accounts or services, or if a user calls or emails iVillage with an inquiry
regarding investing or brokerage activities, iVillage will refer the customer
or user to contact Schwab directly. iVillage shall not reply to the inquiry on
Schwab's behalf refer any user to another securities brokerage firm or other
investment services provider.
o Email: iVillage shall send a reply to the customer email within 24 hours,
instructing the customer to contact Schwab directly, and will include
Schwab Contact Information as appropriate.
o Phone: iVillage shall instruct customers to contact Schwab directly via
the appropriate Schwab Contact Information.
Schwab Contact Information:
o By Telephone:
o General Inquiries: For additional information on Schwab's products
and services, or to sign up your Schwab account for web access
through Schwab's Web site at www.schwab.com, please call our 24 hour
Customer Service: 1-800-435-4000
o U.S. Technical Support: For assistance with Schwab's Web site
(www.schwab.com) or software, please call
1-800-334-4455
Hours of Operation:
Mon. - Fri. 6am - 7pm PST
Sat. - Sun. 8am - 4:30pm PST
18
<PAGE>
o e.Schwab: For more information on e.Schwab, please call
1-800-e.Schwab (1-800-367-4922)
Hours of Operation:
Mon. - Fri. 6am - 7pm PST
Sat. - Sun. 8am - 4:30pm PST
o For customers outside of the U.S.: For general inquiries and
technical support for customers outside of the U.S., please call
1-602-852-3500
Hours of Operation:
Mon. - Fri. 9am - 6pm, EST
o By email
o Schwab customers may email Schwab Customer Service by logging on
to the Customer Center on the Schwab Web site at www.schwab.com
Web site. To set up your Schwab Account for Web access, please
call the General Inquiries phone number above. Customer emails
will be responded to within approximately 24 hours.
(3) Schwab Service Support:
If iVillage Customer Service needs to contact Schwab for assistance with
Customer Service, the iVillage Customer Service Escalation Contact Person may
call the Schwab Customer Service Help desk at 1-888-362-7778. This contact is
for iVillage to Schwab Customer Service use only; no customers shall be given
the number or transferred to Schwab on this number.
Phone number: 1-888-362-7778
Hours of Operation: Mon. - Fri. 6am - 7pm PST
Sat. - Sun. 8am - 4:30 pm PST
(4) Hours of Operation:
Schwab Customer Service Hours of Operation are as noted in section (2) above.
iVillage Customer Service Hours of Operation shall be:
Phone Support (Customers):
--------------------------
Email support (Customers):
--------------------------
Email response time goal: (e.g. will reply to emails
--------------------------
within 24 hours of receipt).
19
<PAGE>
ADDENDUM
--------
THIS ADDENDUM to that certain Online Services Agreement (Agreement")
dated December 19, 1997, by and between iVillage, Inc. ("iVillage") and Charles
Schwab & Co., Inc. ("Schwab") is made as of June 29, 1998, and is incorporated
into and made a part of the Agreement.
WHEREAS, in Exhibit A, Section 4(a) of the Agreement the parties
contemplated that subject to iVillage's consent, Schwab may sponsor and/or host
live Investment Forums ("Investment Forums") on the Armchair Site;
WHEREAS, Schwab wishes to commence the Investment Forums and iVillage
has agreed to allow Schwab to hold the Investment Forums on the Armchair Site
during the term of the Agreement.
NOW THEREFORE, THE PARTIES AGREE AS FOLLOWS WITH RESPECT TO THE
INVESTMENT FORUMS ON THE ARMCHAIR SITE:
1. At least once each month, or more frequently if the parties mutually
agree to do so, iVillage shall provide to Schwab, without additional
charge, an online auditorium on the Armchair Site that will enable
Schwab to hold the Investment Forums" - -, which are live, moderated,
interactive events organized and sponsored by Schwab (the "Investment
Forums"). The online auditorium will accommodate a commercially
reasonable number of unique, concurrent attendees, subject to server
capacity and technological capabilities. Schwab shall have sole
discretion in selecting all Forum topics, guests and moderators subject
to iVillage's reasonable approval. Schwab, or a moderator selected by
Schwab, shall be entitled to host the Investment Forums. Unless
approved in advance by Schwab, iVillage will not display any
advertising in the Schwab event auditoriums. Schwab may post
promotional dynamic messages relating to its services within the Schwab
event auditorium during the Investment Forums. At the end of each
Forum, iVillage will display messages encouraging attendees to visit
the Investor Center on the Armchair Site, the Schwab site or other
sites designated by Schwab As between Schwab and iVillage, Schwab shall
own all content related to the Investment Forums, including but not
limited to, copyright or other intellectual property rights of all
prepared text, questions, answers or transcripts of the Investment
Forums ("Schwab Forum Content"), except that iVillage may make use of
reasonable excerpts of the Schwab Forum Content subject to Schwab's
reasonable approval.
2. The online auditorium technology platform supplied by iVillage to
Schwab will provide Schwab and its host the opportunity to field and
screen questions of attendees and attendees an opportunity to interact
with the host of the Investment Forums. iVillage also agrees to furnish
to online users, through download capabilities or otherwise, all
software and technical support needed to enable users to attend such
Investment Forums. iVillage will include on each user's "entry page" to
each Forum a release and disclosure, the wording of which will be
mutually agreed upon in good faith by the parties.
3. iVillage expects, but is not obligated, to promote the Investment
Forums on various areas of the Armchair Site, including, but not
limited to, the Investor Center, and on
<PAGE>
other iVillage Web sites. All such promotions will mention that the
Investment Forums are part of a series sponsored by Schwab and will
direct users to a page that describes the upcoming event(s) and
encourages users to download the software needed to enable users to
attend such Investment Forums.
4. iVillage will post and archive each Forum transcript on the Armchair
Site within two (2) business days after the transcript is provided by
Schwab and allow visitors to the Site to view the transcripts. iVillage
will also post a topical index of all Investment Forums and allow
visitors to view archived transcripts from prior Investment Forums;
5. So that Schwab may monitor market performance and make program
adjustments, iVillage will provide to Schwab timely and accurate
reports as follows:
(a) Total number of non-unique attendees at each Forum within five
(5) business days following the Forum;
(b) Total number of page views of each Forum transcript posted
after a Forum, with a breakdown by Forum event transcript
viewed;
(c) Total number of Forum "entry page" views, from the Investor
Center and any other areas where the Forum "entry page" is
linked.
6. During the term of the Agreement, iVillage will not permit any other
party to hold Investment Forums or other events on the Armchair Site if
such party is reasonably deemed to offer securities brokerage,
investing or mutual fund services in competition with Schwab. Further,
iVillage will not permit Investment Forums or events by any party on
topics related to securities brokerage, investing or financial services
during any portion of the time that Schwab is holding such an event on
the Armchair Site.
7. The terms and conditions of the Agreement remain in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first above written.
iVillage, Inc. Charles Schwab & Co., Inc.
By: /s/ Steve Elkes By: Illegible
------------------------- --------------------------------------------
Its: V.P. Finance Its: VP Electric Brokerage Business Development
------------------------- --------------------------------------------
Date: 6/30/98 Date: 6/29/98
------------------------- --------------------------------------------
<PAGE>
ADDENDUM NO. 2
--------------
THIS ADDENDUM to that certain Online Services Agreement ("Agreement')
dated December 19, 1997, by and between iVillage, Inc. ("iVillage") and Charles
Schwab & Co., Inc. ("Schwab") is made as of June 29, 1998, and is incorporated
into and made a part of the Agreement.
WHEREAS, iVillage provides information related to planning for
educational expenses to visitors to its proprietary Web sites, including but not
limited to, its ParentSoup(Registered) Site (url:http://www.parentsoup.com)
("Content Areas");
WHEREAS, Schwab has developed and owns certain content and software
related to its College Saver(Trademark) Program, including, but not limited
to, its College Saver Online Planning Tool (the "CS Tool"). The CS Tool is
comprised of two elements: the Calculations (including assumptions) and the
Presentation;
WHEREAS, iVillage wishes to license the CS Tool for use by visitors to
its Content Areas and Schwab is willing to license use of the CS Tool to
iVillage for this purpose subject to the terms and conditions set forth below.
NOW THEREFORE, the parties agree as follows with respect to use of the
CS Tool on the Content Areas:
1. During the term of the Agreement, Schwab hereby grants iVillage a
worldwide, nonexclusive, revocable, nontransferable fully-paid up and
royalty-free license to use and distribute to end users of the Content
Areas the object code version of the CS Tool and to reproduce copies of
the CS Tool only to the extent necessary to accomplish the foregoing.
2. Subject to the terms set forth in Sections 1, 2 and 3 of the Agreement,
iVillage will include Schwab Marks in each Content Area in which the CS
Tool is used. Schwab shall have the right to approve the location of
the CS Tool and the Schwab Marks within the Content Areas.
3. iVillage may, in its discretion and at its own expense, change only the
Presentation element of the CS Tool to be consistent with the Content
Areas.
4. At is own expense, iVillage will perform updates to and modifications
of the Calculations element of CS Tool on the Content Areas as they are
provided by Schwab.
5. iVillage will promote the CS Tool and the Content Areas through
hyperlinks or banner advertisements from other areas of the iVillage
Web sites.
6. Any new accounts obtained by Schwab through the use of the CS Tool in
the Content Areas will be counted towards the Account Goals set forth
in paragraph 8 of Exhibit A to the Agreement.
<PAGE>
7. iVillage's reporting obligations as set forth in Section 6 of Exhibit A
of the Agreement shall also apply to end user use of the CS Tool in the
Content Areas.
8. The CS Tool, any Informational Material or Schwab Content that appears
in the Content Areas is Schwab's exclusive property and may not be
sold, licensed, copied, distributed or divulged, except as provided in
Section 1 of this Addendum or elsewhere in the Agreement, without
Schwab's prior written permission.
9. THE CS TOOL IS PROVIDED "AS IS," WITHOUT WARRANTY OF ANY KIND. TO THE
MAXIMUM EXTENT ALLOWED BY APPLICABLE LAW, SCHWAB AND ITS SUPPLIERS
DISCLAIM ALL WARRANTIES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE OR NONINFRINGEMENT.
10. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Agreement.
11. The terms and conditions of the Agreement remain in full force and
effect.
IN )WITNESS WHEREOF, the parties have executed this Addendum as of the date
first above written.
iVillage, Inc. Charles Schwab & Co., Inc.
By: /s/ Steve Elkes By: Illegible
------------------------- --------------------------------------------
Its: V.P. Finance Its: VP Electric Brokerage Business Development
------------------------- --------------------------------------------
Date: 6/30/98 Date: 6/29/98
------------------------- --------------------------------------------
<PAGE>
Amendment Number One
to
Online Services Agreement
This First Amendment ("First Amendment") to that certain Online
Services Agreement dated December 19, 1997 ("Agreement"), by and between
iVillage, Inc. ("iVillage") and Charles Schwab & Co., Inc. ("Schwab") is made
effective as of December 19, 1997 ("Amendment Effective Date"), and is
incorporated into and made a part of the Agreement.
1. The following replaces subparagraphs 9c) and (d) of Paragraph 8
("Performance Objectives"), Exhibit A of the Agreement:
8. Performance Objectives
(c) If iVillage owes Schwab a fee reduction or cash payment pursuant to
Section 5(d) or (e) of the Agreement, a maximum rebate may apply:
(i) if iVillage delivers at least [*] banner
advertising impression in the year preceding the
first-year Calculation Date, the maximum rebate that
will be due to Schwab for unmet Account Goals is [*],
in the form of cash or credit.
(ii) If iVillage delivers at least [*] banner advertising
impressions in the year preceding the second-year
Calculation Date, the maximum rebate that will be due to
Schwab for unmet Account Goals is [*], in the form of
cash and credit.
(iii) if iVillage delivers at least [*] advertising
impressions in the year preceding the third-year
Calculation Date, the maximum rebate that will be due
to Schwab for unmet Account Goals is [*], in the form
of cash or credit.
(d) If iVillage fails to deliver [*] in any year and the fee reduction or
cash refund it owes Schwab exceeds the amount stated in Paragraph 8(c)
of this Exhibit A for that year, then iVillage shall be entitled to a
partial credit of any fee reduction or cash payment due to Schwab for
actual impressions delivered exceeding [*] based upon a [*] cost
per thousand impressions, up to a maximum fee reduction or cash payment
owed to Schwab of [*], with a limitation that the applied credit will
reduce the maximum fee reduction or cash payment owed to Schwab of [*].
iVillage is not entitled to any credit against any fee reduction or
cash payment owed to Schwab if it delivers less than [*] impressions in
the year preceding the Calculation Date.
2. Capitalized terms used but not defined herein shall having the meaning
ascribed to them in the Agreement.
<PAGE>
3. Except as amended herein, the remaining terms and conditions of the
Agreement remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed as of the Amendment Effective Date.
iVILLAGE, INC. CHARLES SCHWAB & CO., INC.
By: /s/ Steve Elkes By: /s/ [ILLEGIBLE]
--------------------------- ---------------------------
Its: Vice President Its: VP Electric Brokerage
--------------------------- ---------------------------
Date: 6/29/98 Date: 6/29/98
--------------------------- ---------------------------
<PAGE>
* Confidential treatment has been requested for certain portions of this
exhibit.
JOINT ACTIVITIES AGREEMENT
This Joint Activities Agreement (the "Agreement")is made and entered
into as of September __, 1997 (the "Effective Date") by and between Intuit
Inc., a Delaware corporation ("Intuit") and iVillage Inc., a Delaware
corporation ("iVillage").
RECITALS
A. Intuit and iVillage desire jointly to develop, launch and maintain
an interactive online financial education and planning service (such service
to be referred to herein as "Armchair Millionaire") and to conduct certain
other business related to such activities.
B. Each of Intuit and iVillage desires to provide certain services
relating to the development, launch and maintenance of Armchair Millionaire,
on the terms and subject to the conditions set forth herein.
AGREEMENT
The parties hereto agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined in
this Agreement will have the following meanings, respectively:
1.1 "Advertising Revenue" means the sum of the aggregate
amounts billed for the license or sale of any Advertising Rights, less the sum
of: (a) amounts allocable to any credits granted for unused Advertising
Rights, (b) agency, camera-ready art and other discounts actually provided,
(c) refunds, rebates, make goods and similar credits, (d) applicable taxes;
(e) a three percent (3%) reserve for bad debts; and (f) amounts billed for
production services actually performed in connection with the license or sale
of Advertising Rights; provided, that (i) the amount billed for media portion
of such license or sale must be at or above the prevailing rate and (ii)
iVillage notifies Intuit in writing of the relative amounts proposed to be
billed for production and media, respectively, and Intuit does not object to
such amounts before the end of the second business day following receipt of
such written notice.
1.2 "Advertising Rights" means any advertising, sponsorship,
linking and similar promotional rights sold or licensed in connection with the
Quicken Financial Network version of Armchair Millionaire.
1.3 "Affiliate" of any party means any entity that controls,
is controlled by or is under common control with such party. For purposes of
this definition, "control" will mean the possession, directly or indirectly,
of a majority of the voting power of such entity (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise).
1.4 "Armchair Millionaire Content" means all materials, data
or other information owned or licensed by iVillage and displayed from time to
time in Armchair Millionaire.
1.5 "Confidential Information" means any information of a
party disclosed to the other party in the course of this Agreement, which is
identified as, or should be reasonably understood to be, confidential to the
disclosing party, including, but not limited to, know-how, trade secrets, data,
technical processes and formulas, source code, product designs, sales, cost
and other unpublished
<PAGE>
financial information, product and business plans, projections, marketing
data and this Agreement and all exhibits hereto. "Confidential Information"
will not include information which: (a) is known or becomes known to the
recipient directly or indirectly from a third-Party source other than one
having an obligation of confidentiality to the providing party; (b) is or
becomes publicly available or otherwise ceases to be secret or confidential,
except through a breach of this Agreement by the recipient; or (c) is or was
independently developed by the recipient without use of or reference to the
providing party's Confidential Information, as shown by evidence in the
recipient's possession.
1.6 "Exclusive Carriage Period" means the period commencing
on the Launch Date and continuing for a period of ten (10) months thereafter,
during which Intuit will have the exclusive right to feature Armchair
Millionaire on the Quicken Financial Network.
1.7 "Financial Content" means content, channels and services
relating to personal finance, small businesses, tax, general business news and
similar topics, and includes, without limitation:
o stock and mutual fund quotes, rates and portfolio
management;
o online banking;
o online financial services;
o billpay;
o online bill Presentment;
o non-bank branded bill payment;
o tax filing and information;
o small business lending;
o payroll information or services;
o retirement planning tools;
o checkbook management (personal finance and small business
accounting);
o investments;
o account data (such as investment portfolios, bank
accounts, credit card accounts, loan accounts, insurance
accounts and frequent flyer accounts);
o credit cards and smart cards;
o electronic wallets;
o financial planning tools;
o personal finance, small business and tax news, research
and information, (including listings, databases, rates,
quotes and charts);
o financial education;
o financial chat, forums and bulletin boards;
o decision making and comparison tools (such as programs,
applets and calculators);
o financial marketspaces including insurance, mortgage,
equity and mutual fund trading and small business
lending;
o financial advice from experts; and
o reviews and listings of financial WWW sites and services.
1.8 "Guaranteed Page Views" will mean the Page Views that
either Intuit or iVillage commits to deliver during the term of this
Agreement, as set forth in Exhibit-A hereto.
1.9 "Intellectual Property Rights" means all intellectual
property rights arising under statutory or common law, whether or not
perfected, including, without limitation, all (a) United States and foreign
patents, patent applications and other patent rights, including, without
limitation,
-2-
<PAGE>
divisions, continuations, renewals, reissues and extensions of any of the
foregoing, (b) rights associated with works of authorship including
copyrights, copyright applications, copyright registrations and moral rights,
(c) Confidential Information, (d) any right analogous to those set forth in
this definition, and (e) any other proprietary rights relating to intangible
property.
1.10 "Intuit Brand Features" means Intuit's trademarks, trade
names, service marks, service names and distinct brand elements that appear in
Intuit Properties from time to time and are protected under U.S. copyright law
or as to which Intuit has established trademarks or trade dress rights and any
modifications to the foregoing that may be created during the Term.
1.11 "Intuit Brand Guidelines" means the guidelines for use
of the Intuit Brand Features, which may be prescribed by Intuit from time to
time during the Term.
1.12 "Intuit Financial Content" I means Financial Content
provided by Intuit for inclusion in Armchair Millionaire (either directly or
through Links out of Armchair Millionaire), including, without limitation, the
Intuit Online Software Applications.
1.13 "Intuit Online Software Applications" means the online
software applications and tools described in Exhibit B hereto.
1.14 "Intuit Properties" means all properties, ventures and
services worldwide marketed under the Intuit Brand Features, including,
without limitation, that service currently known as "Quicken Financial
Network," and all other properties, ventures and services in which Intuit owns
a fifty percent (50%) or greater interest during the Term.
1.15 "iVillage Brand Features" means iVillage's trademarks,
trade names, service marks, service names and distinct brand elements that
appear in the iVillage Properties from time to time and are protected under
U.S. copyright law or as to which iVillage has established trademarks or trade
dress rights and any modifications to the foregoing that may be created during
the Term.
1.16 "iVillage Brand Guidelines" means the guidelines for
use of the iVillage Brand Features, which may be prescribed by iVillage from
time to time during the Term.
1.17 "iVillage Properties" means all properties, ventures and
services worldwide marketed under the iVillage Brand Features, including,
without limitation, those services currently known as "About Work,"
"Better Health," "Parent Soup," and "Vices and Virtues," and all properties,
ventures and services in which iVillage owns a fifty percent (50%) or greater
interest during the Term.
1.18 "Launch Date" means the date on which Armchair
Millionaire becomes publicly available for general viewing on the WWW,
currently anticipated to be October 13, 1997.
1.19 "Link" means a URL hidden behind a formatting option
that may take the form of a colored item of text (such as a URL description),
logo or image, and which allows a user to automatically move to or between WWW
pages, WWW sites or within a WWW document.
1.20 "Page Views" means any page(s) on the Armchair
Millionaire site that is (are) viewed by a user(s) on which any advertisement
or promotion is contained.
1.21 "Quicken Financial Network" means the Intuit Property
located at http://www.quicken.com, as modified from time to time throughout
the Term.
-3-
<PAGE>
1.22 "Site Specification Book" means the site specification
document to be prepared by iVillage for the Quicken Financial Network version
of the Armchair Millionaire, including a complete site topology map,
functionality definitions and explanations, navigation standards and templates
and flow charts of information paths.
1.23 "Term" means the term of this Agreement as provided in
Section 7.
1.24 "URL" means Universal Resource Locator, which provides
a unique Internet protocol address for accessing a WWW page.
1.25 "WWW" means the World Wide Web, a system for accessing
and viewing text, graphics, sound and other media via the collection of
computer networks known as the Internet.
2. Funding Commitments. iVillage and Intuit will participate in the
funding of expenses associated with the development, launch and maintenance of
Armchair Millionaire, as contemplated in this Section 2.
2.1 iVillage Commitment. iVillage will fund a minimum of
[*] during the period beginning on the Effective Date and ending on the
date that is ten (10) months following the Launch Date to fund expenses
associated with the development, launch and operation of Armchair Millionaire
during that period. Except to the extent provided in Sections 2.2 and 7.5
below, iVillage will be solely responsible for the funding of all operating
costs of Armchair Millionaire (x) in excess of [*] for the period
beginning on the Effective Date and ending the date that is ten (10) months
following the Launch Date and (y) for the period following the date that is
ten (10) months following the Launch Date.
2.2 Intuit Commitment. Intuit will fund an aggregate of
[*] for expenses associated with the development, launch and operation of
Armchair Millionaire, such sum to be paid in three (3) installments of
[*] as follows: (a) ten (10) days following the approval by Intuit of the
Site Specification Book in accordance with Section 3.1 below, (b) the later of
the ten (10) days following the Launch Date or three (3) months following the
date on which the payment contemplated in clause (a) is due and (c) the later
of three (3) months following the Launch Date or six (6) mouths following the
date on which the payment contemplated in clause (a) is due.
3. Service Commitments. iVillage and Intuit will provide services
associated with the development, launch and maintenance of Armchair Millionaire
as contemplated in this Section 3. In providing these service, each of
iVillage and Intuit will use efforts at least as diligent as those used in the
provision of similar services for the iVillage Properties or the Intuit
Properties, as the case may be.
3.1 Site Development and Launch. Subject to the terms and
conditions of this Agreement, iVillage will use its best efforts (a) to develop
and deliver the Site Specification Book within five (5) business days
following the Effective Date; which Site Specification Book shall be subject
to the written approval of Intuit, which shal1 not be withheld unreasonably,
and (b) to launch the Armchair Millionaire on or before October 13, 1997. If
iVillage fails to perform as contemplated in the previous sentence, Intuit
shall provide written notice of such failure to iVillage describing in
reasonable detail the circumstances underlying such failure, and iVillage
shall have a period of fifteen (15) days following the date of such written
notice to correct the deficiencies. The failure by iVillage to perform in
accordance with the procedure set forth in this Section 3.1 shall constitute a
material breach of this Agreement as contemplated in Section 7.3. hereof.
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3.2 Content. iVillage will (a) develop and manage, and have
sole editorial authority concerning, content and programming presented in
Armchair Millionaire; (b) develop editorial concepts and "point of view," and
design the "look and feel" of Armchair Millionaire, including all templates
and icons; and (c) ensure that the content and programming presented in
Armchair Millionaire is dynamic, timely and relevant; provided, that (x)
Intuit and iVillage will cooperate to establish common technology platforms
and technical specifications and (y) Intuit and iVillage will establish
reasonable standards and practices (including design templates and content
guidelines) to be observed throughout the Quicken Financial Network version of
Armchair Millionaire.
3.3 Hosting, Personnel and Facilities. iVillage will
(a) provide and manage all servers, telecommunications, facilities maintenance
and operations related to the delivery of Armchair Millionaire over the WWW,
(b) provide appropriate software development services to construct site and
community building databases, and (c) provide all technical, support sales,
administrative and management personnel, facilities, equipment, supplies and
services as are necessary to develop, launch and maintain Armchair Millionaire
as contemplated by this Agreement. Notwithstanding the foregoing, however,
Intuit will provide and manage all servers, telecommunications, facilities
maintenance, operations and technical support related to the delivery of, or
access to, the Intuit Financial Content (other than Intuit Financial Content
provided directly on the Armchair Millionaire site).
3.4 Carriage and Promotion. Commencing on the Launch Date
and continuing throughout the Term, (a) iVillage will (i) provide prominent
placement of Links to Armchair Millionaire, and (ii) place advertising banners
promoting Armchair Millionaire on all appropriate iVillage Properties
(currently understood to include "ParentSoup" and "AboutWork"), in a manner
that is reasonably acceptable to Intuit, with the intention of increasing
traffic to Armchair Millionaire and (b) Intuit will (i) provide prominent
placement of a Link to Armchair Millionaire on the "Community" homepage of
the Quicken Financial Network and (ii) include within the Quicken Financial
Network excerpts of Armchair Millionaire Content, together with Links to
Armchair Millionaire, in a manner that is reasonably acceptable to iVillage,
with the intention of increasing traffic to Armchair Millionaire. In addition,
during the Exclusive Carriage Period, Armchair Millionaire will be
"co-branded," featuring only the Armchair Millionaire Brand Features and the
Intuit Brand Features in equal prominence throughout the site. Following the
Exclusive Carriage Period, the Intuit Brand Features will be displayed
throughout Armchair Millionaire at least as prominently as the brand features
of any third party (other than Intuit or iVillage).
3.5 Advertising Sales Representative. During the Term,
iVillage will serve as the exclusive advertising sales representative for
Advertising Rights and will use its best efforts to sell such Advertising
Rights on Armchair Millionaire and to collect amounts owed by advertisers with
respect to such sales. To the extent that Intuit sells any Advertising Right
during the Term, it will obtain the consent of, and will coordinate its
selling effort with, iVillage.
3.6 Advertising Sales Guidelines. The parties hereby agree
to mutually determine form time to time, (a) standards, policies and guidelines
with regard to the acceptance of advertisements and advertising clients on
Armchair Millionaire and (b) pricing applicable to the sale of Advertising
Rights on Armchair Millionaire. The sale by iVillage or Intuit of Advertising
Rights will be subject to such standards, policies. guidelines, price rates
and procedures, and either iVillage or Intuit may reject any proposed
advertisement or advertising client that is determined not to meet such
standards, policies and/or guidelines. Further, each sale of Advertising
Rights hereunder will be subject to the proposed advertiser's agreement to be
bound by the standard advertising sales agreement as agreed to by the parties
hereto and then in effect.
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3.7 Commission. As compensation for services under Section
3.5 above, iVillage and Intuit will be entitled to receive a commission (the
"Commission") of [*]% of the Advertising Revenue from their respective sales of
Advertising Rights on Armchair Millionaire. Such Commission will be calculated
and paid in the manner and at the time prescribed in Section 4.2 below.
3.8 Intuit Online Software Application. Subject to the
terms and conditions of this Agreement, Intuit will use its best efforts to
permit the integration of Intuit's Online Software Applications in Armchair
Millionaire, which integration is assumed to be accomplished by Linking
Armchair Millionaire to the version of such Intuit Online Software
Applications made generally available on the Quicken Financial Network.
4. Payments.
4.1 Revenue Sharing. During the Term, Intuit will be
entitled to receive [*]%, and iVillage will be entitled to receive [*]%, of all
Advertising Revenue (net of any Commission) until an aggregate of $[*] of
Advertising Revenue has been collected, and Intuit will be entitled to receive
[*]%, and iVillage will be entitled to receive [*]%, of all Advertising Revenue
(net of any Commission) in excess of $[*]. In the event that Intuit exercises
the option contemplated in Section 7.5 hereof to subsidize the operating costs
of Armchair Millionaire in any renewal term, then Intuit will be entitled to
receive [*]%, and iVillage will be entitled to receive [*]%, of all Advertising
Revenue (net of any Commission) in any Intuit fiscal quarter (October 31,
January 31, April 30, July 31) until an amount equal to the aggregate amount
contributed by iVillage in the previous Intuit fiscal quarters in such renewal
term has been recovered. Thereafter, until the end of such renewal term, Intuit
will be entitled to receive [*]%, and iVillage will be entitled to receive [*]%,
of all Advertising Revenue (net of Commission).
4.2 Payment and Reporting. The allocation of Advertising
Revenue described in the Section 4.1 will be determined at the end of each
Intuit fiscal quarter, and iVillage will make payment within thirty (30) days
after the end of such quarter. iVillage will provide to Intuit, together with
its payment (or, if no payment is due for any applicable quarter, within
thirty (30) days after the end of such quarter), a report in reasonable detail
setting forth the calculation of the amounts payable.
4.3 Audit Rights. Intuit will have the right, at its own
expense, to direct an independent certified public accounting firm to inspect
and audit all of the accounting and sales books and records of iVillage that
are relevant to either (a) the performance by iVillage of its funding
commitment, as defined in Section 2.1 above, (b) Advertising Revenue arising
out of or associated with Armchair Millionaire or, (c) the operating costs
arising out of or associated with Armchair Millionaire, but only in the event
that Intuit exercises this option contemplated in Section 7.5 hereof, provided
that (w) any such inspection and audit will be conducted during regular
business hours in such a manner as not to interfere with normal business
activities; (x) in no event will audits be made hereunder more frequently than
once each calendar year; (y) if any audit should disclose an underpayment,
iVillage will immediately provide such funding or pay such amount to Intuit,
as appropriate; and (z) the reasonable fees and expenses relating to any audit
which reveals an underpayment in excess of ten percent (10%) of thc amount
owing or an over-allocation of operating expense in excess of ten percent
(10%) of the amount actually incurred, will be borne entirely by iVillage.
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5. Additional Agreements.
5.1 Intuit Media Purchase Commitment. Intuit will purchase,
during the three (3) months following the Launch Date, an aggregate of at least
$[*] in banner advertisements relating to Armchair Millionaire on the iVillage
Properties, at a price equal to $40 per thousand Page Views.
5.2 Traffic Targets. Each of Intuit and iVillage will
deliver the number of Guaranteed Page Views set forth on Exhibit A hereto
during the ten (10) months following the Launch Date. Intuit and iVillage will
negotiate in good faith to establish Ouaranteed Page View commitments for the
twelve (12) months following the first anniversary of the Launch Date, which
commitments will be attached to this Agreement as a replacement Exhibit A. If
the number of Page Views delivered either by Intuit or iVillage is not at
least [*]% of the number of Guaranteed Page Views in any period, then the party
responsible for the deficiency will provide to Armchair Millionaire "make goods"
or similar advertising credits having a value equal to the aggregate value of
the deficiency (determined by multiplying the number of Page Views that comprise
the deficiency by S.034).
5.3 Exclusivity.
5.3.1 During the Exclusive Carriage Period, Intuit
will have the exclusive right (a) to feature Armchair Millionaire Content on
the Quicken Financial Network, and iVillage will not permit any third party to
display all or any portion of the Armchair Millionaire Content, without the
prior approval of Intuit, and (b) to provide Financial Content for Armchair
Millionaire, and iVillage will not permit any third party Financial Content, nor
Links to any third party Financial Content, to appear in Armchair Millionaire,
without the prior approval of Intuit.
5.3.2 Following the Exclusive Carriage Period and
continuing until the completion of the Term, neither iVillage nor its
Affiliates will use or display the Intuit Financial Content on any other WWW
site that may feature the Armchair Millionaire Content or any portion thereof.
5.3.3 During the Term, neither iVillage nor any of its
Affiliates will (a) provide any Armchair Millionaire Content or any personal
finance product or service to Yahoo!, Inc. or any of its Affiliates, or (b)
without the prior approval of Intuit, which will not be withheld unreasonably,
provide any Financial Content or any personal finance product or service to,
or use any Financial Content or any personal finance product or service
developed by, Microsoft Corporation or any of its Affiliates; provided, that
iVillage and its Affliates shall be permitted to distribute Financial Content
and financial products and services (x) using the "Active Desktop"
distribution functionality incorporated in the Internet Explorer WWW browser
distributed by Microsoft Corporation or (y) as a component part of the
"Women's Network" distributed on the Microsoft Network (MSN). It is understood
and agreed that it will not be deemed unreasonable for Intuit to refuse to
permit iVillage to provide any Financial Content or any personal finance
product or service to, or use any Financial Content or any personal finance
product or service developed by or for, the Microsoft Money, Microsoft
Investor and Microsoft Money Insider WWW sites, and any enhancements,
modifications, extensions, combinations or private label versions of all or
any portion thereof that may occur from time to time during the Term.
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6. Licenses and Ownership.
6.1 Grant of License by iVillage. iVillage hereby grants to
Intuit during the term of this Agreement a non-exclusive, royalty-free,
worldwide license under all of iVillage's Intellectual Property Rights to use,
modify, reproduce, publicly display, publicly perform, distribute and transmit
(a) the iVillage Brand Features in the Intuit Properties, in connection with
the distribution, marketing and promotion of Armchair Millionaire, subject in
each case to compliance with the iVillage Brand Guidelines, and (b) the
Armchair Millionaire Content, or any portion thereof, in the Intuit
Properties; provided, however, that (i) the primary purpose of this use is to
drive traffic to the Armchair Millionaire site and (ii) Intuit shall not by
this license display the Armchair Millionaire Content in such a manner as to
recreate the Armchair Millionaire site in its entirety within the Intuit
Properties.
6.2 Grant of License by Intuit. Intuit hereby grants to
iVillage a nonexclusive, royalty-free, worldwide license under all of Intuit's
Intellectual Property Rights (a) to use, modify, reproduce, publicly display,
publicly perform, distribute and transmit the Intuit Brand Features in
Armchair Millionaire (in the manner described in this Agreement), in
connection with the distribution, marketing and promotion of Armchair
Millionaire, subject in each case to compliance with the Intuit Brand
Guidelines and (b) to use, reproduce, publicly display and transmit the Intuit
Financial Content provided by Intuit for inclusion in the Armchair
Millionaire site.
6.3 Ownership.
6.3.1. Armchair Mi11ionaire Brand and Content. As
between Intuit and iVillage, (a) iVillage will have full and exclusive right,
title and ownership interest in and to the iVillage Brand Features, the
Armchair Millionaire Content (other than the Intuit Financial Content), the
Armchair Millionaire Brand Features and the Intellectual Property Rights
therein and (b) Intuit will have full and exclusive right, title and
ownership interest in and to Intuit Brand Features, the Intuit Financial
Content and the Intellectual Property Rights therein.
6.3.2 Customer Database. Intuit and iVillage will
jointly own all right, title and interest in and to the customer database for
Armchair Millionaire and all information regarding users of Armchair
Millionaire included therein. Without the prior written consent of the other
party hereto, neither party will sell, or other authorize any third party to
use, any portion of the customer database for Armchair Millionaire or any
information regarding users of Armchair Millionaire included therein. Intuit
and iVillage will collaborate to develop a mutually acceptable policy
concerning the dissemination of information from the customer database.
7. Term and Termination
7.1 Term. This Agreement will commence on the Effective Date
and, subject to earlier termination pursuant to Sections 7.2 or 7.3 below,
will continue thereafter through and including the date that is ten (10)
months following the Launch Date (the "Initial Term"), subject to automatic
extension at the sole option of Intuit for a series of one (1) year terms
thereafter. Intuit will provide written notice of its intent to exercise its
option to extend the term of this Agreement within thirty (30) days of the
expiration of the initial term or any renewal term (each, a "Renewal Notice
Date"). Notwithstanding the foregoing, however, iVillage shall not be
obligated to continue to perform its obligations under this Agreement in any
renewal term if the sum of the aggregate amounts billed for the license or
sale of any Advertising Rights during the period beginning on the Launch Date
or the first day of the applicable renewal term, as the case may be, and
ending on the date that is thirty (30) days prior to
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the applicable Renewal Notice Date (and annualized to derive a pro forma gross
revenue projection for the Initial Term or the renewal term, as the case may
be) is less than $[*]. Upon termination, all rights and obligations of
each party hereto will cease as of the date of termination and any amounts
owed hereunder (other than the funding commitments contemplated in Section 2
hereof) will be paid in full, subject to Section 7.4 below; provided, however,
that rights and obligations set forth in Sections 7, 8, 9 and 10 will survive
the termination of this Agreement.
7.2 Automatic Termination. This Agreement will also
terminate automatically and effective immediately upon the earlier to occur of:
(a) the dissolution or liquidation of Intuit or
iVillage; or
(b) the appointment of a trustee in bankruptcy for
Intuit or iVillage, an assignment of assets for the benefit of Intuit's or
iVillage's creditors or the adjudication of bankruptcy with respect to Intuit
or iVillage.
7.3 Termination for Breach. In the event that either Intuit
or iVillage commits any material breach under this Agreement and such breach is
not cured within fifteen (15) days following receipt of written notice thereof
from the other party hereto, such other party will have the right (but not the
obligation) to terminate this Agreement. If Intuit shall terminate this
Agreement pursuant to this Section 7.3, iVillage shall refund to Intuit, within
ten (10) days following the effective date of such termination, all funds
actually paid by Intuit to iVillage pursuant to Section 2.2 above, net of
Advertising Revenue actually received by Intuit pursuant to Section 4.1 above,
and such refund shall be the sole and exclusive legal remedy of Intuit for
damages resulting from or relating to this Agreement, through the date of
termination (it being understood that Intuit shall nonetheless have the right
to pursue any equitable remedy available to it with respect to a breach of
Section 8.4 or 9 hereof).
7.4 Continuing Obligations to Pay Commissions.
Notwithstanding any termination of this Agreement, the terms of Section 4
above will survive with respect to all Advertising Revenue collected by
iVillage following the effective date of termination in respect of orders
secured prior to the effective date of termination,
7.5 Intuit Option. If, pursuant to Section 7.1 above, Intuit
should exercise its option to extend the Term, and iVillage should determine
to discontinue or terminate operation of the Armchair Millionaire site rather
than commit to such extension, then iVillage shall promptly deliver written
notice of such determination to lntuit, and Intuit shall have the right,
exercisable for a period of sixty (60) days following the date of such notice
(during which period iVillage will continue to operate the Armchair
Millionaire), to obligate iVillage to continue operation of the Armchair
Millionaire site for the applicable renewal period; provided that Intuit
commits to fund up to an amount equal to the difference between
(x) seventy-five percent (75%) of the projected annual operating costs for
Armchair Millionaire (as defined in Exhibit C hereto and amended annually by
mutual consent of iVillage and Intuit) for such renewal period and (y) the
annual operating costs that iVillage determines in good faith that it will be
able to recoup during such renewal period. Such sum will be paid in cash on a
quarterly basis, within thirty (30) days following the conclusion of any
Intuit fiscal quarter in the renewal period with respect to which the option
is exercised,
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8. Limitation of Liability and Indemnity.
8.1 Representations and Warranties. Each party represents
and warrants to the other party that such party has the full corporate right,
power and authority to enter into this Agreement and to perform the acts
required of it hereunder; and the execution of this Agreement by such party,
and the performance by such party of its obligations and duties hereunder, do
not and will not violate or contravene any applicable law or regulation or any
agreement to which such party is a party or by which it is otherwise bound,
and when executed and delivered by such party, this Agreement will constitute
the legal, valid and binding obligation of such party, enforceable against
such party in accordance with its terms. In addition, (a) iVillage represents
and warrants to Intuit that it is the owner of all right, title and interest
in and to, or is the exclusive licensee with right to use, reproduce,
distribute and sell as contemplated in this Agreement, the iVillage Brand
Features, the Armchair Millionaire Brand Features and the Armchair Millionaire
Content (other than the Intuit Financial Content), and that the iVillage Brand
Features, the Armchair Millionaire Brand Features and the Armchair Millionaire
Content (other than the Intuit Financial Content), do not and will not
infringe on or violate any Intellectual Property Right of any third party, or
violate any applicable law, regulation or third party right when included in a
manner consistent with this Agreement, and (b) Intuit represents and warrants
to iVillage that it is the owner of all right, title and interest in and to, or
is the exclusive licensee with right to use, reproduce, distribute and sell as
contemplated in this Agreement, the Intuit Brand Features and the Intuit
Financial Content, and that the Intuit Brand Features and the Intuit Financial
Content do not and will not infringe on or violate any Intellectual Property
Right of any third party, or violate any applicable law, regulation or third
party right when included in a manner consistent with this Agreement. In the
event that any party becomes aware of any such infringement (or alleged
infringement) or violation, such party will promptly notify the other party
and shall provide all information relating to such matters as such other party
may reasonably request.
8.2 Limitation of Liability. EXCEPT AS PROVIDED IN THIS
SECTION 8, UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES
(EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES),
ARISING FROM ANY PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT LIMITED TO,
LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
8.3 No Additional Warranties. EXCEPT AS EXPRESSLY SET FORTH
IN SECTION 8.1 ABOVE, NEITHER PARTY MAKES, AND EACH PARTY HEREBY
SPECIFICALLY DISCLAIMS, ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, REGARDING THE PRODUCTS AND SERVICES CONTEMPLATED BY THIS AGREEMENT,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR NON-INFRINGEMENT AND IMPLIED WARRANTIES ARISING FROM COURSE OF
DEALING OR COURSE OF PERFORMANCE.
8.4 iVillage Obligation to Defend. Subject to the
limitations set forth below, iVillage, at its own expense, will defend, or at
its option settle, any claim, suit or proceeding against Intuit and pay any
final judgment entered or settlement against Intuit in any such claim, suit or
proceeding, to the extent that such claim, suit or proceeding is based upon
(a) the infringement of any trademark or service mark rights by the iVillage
Brand Features; or (b) the infringement or misappropriation of any patent,
copyright or trade secret or the violation of any third party right or any
third party claim resulting from the dissemination or use of any Armchair
Millionaire Content (other than the Intuit Financial Content) on any Intuit
Property; or (c) the failure by iVillage to comply with the
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requirements of law or regulations that are applicable to Armchair Millionaire
from time to time. iVillage will have no obligation to Intuit pursuant to this
Section 8.3 unless: (x) Intuit gives iVillage prompt written notice of the
claim, suit or proceeding and cooperates reasonably with iVillage; and (y)
iVillage is given the right to control and direct the investigation,
preparation, defense and settlement of the claim, suit or proceeding.
8.5 Intuit Obligation to Defend. Subject to the limitations
set forth below, Intuit, at its own expense, will defend, or at its option
settle, any claim, suit or proceeding against iVillage and pay any final
judgment entered or settlement against iVillage in any such claim, suit or
proceeding, to the extent that such claim, suit or proceeding is based upon
(a) the infringement of any trademark or service mark rights by the Intuit
Brand Features; or (b) the infringement or misappropriation of any patent,
copyright or trade secret or the violation of any third party right or any
third party claim resulting from the dissemination or use of the Intuit
Financial Content on Armchair Millionaire; or (c) the failure by Intuit to
comply with the requirements of law or regulations that are applicable to
Intuit Financial Content from time to time. Intuit will have no obligation to
iVillage pursuant to this Section 8.4 unless: (x) iVillage gives Intuit prompt
written notice of the claim, suit or proceeding and cooperates reasonably
with Intuit; and (y) Intuit is given the right to control and direct the
investigation, preparation, defense and settlement of the claim, suit or
proceeding.
8.6 Options. If either party receives notice of an alleged
infringement, it will have the right, at its sole option, (a) to obtain the
right for the other party to continue use of the allegedly infringing
software, system, content or brand feature, as applicable, or (b) to replace
or modify the allegedly infringing software, system, content or brand feature,
as applicable, so that it is no longer infringing but retains equivalent
functionality and value, or (c) to remove the allegedly infringing content.
8.7 EXCLUSIVE REMEDIES. THE RIGHTS AND REMEDIES SET FORTH IN
THIS SECTION 8 CONSTITUTE THE ENTIRE OBLIGATIONS AND THE EXCLUSIVE REMEDIES
OF THE PARTIES CONCERNING INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES OR THIRD PARTY CLAIMS.
9. Confidentiality.
9.1 The parties recognize that, in connection with the
performance of this Agreement each of them may disclose to the others its
Confidential Information. The party receiving any Confidential Information
agrees to maintain the confidential status of such Confidential Information
and not to use any such Confidential Information for any purpose other than the
purpose for which it was originally disclosed to the receiving party, and not
to disclose any of such Confidential Information to any third party. No party
will disclose the others' Confidential Information to its employees and agents
except on a "need-to-know" basis.
9.2 The parties acknowledge and agree that each may
disclose Confidential Information: (a) as required by law or the rules of the
National Association of Securities Dealers, Inc. or any applicable securities
exchange; (b) to their respective directors, officers, employees, attorneys,
accountants and other advisors, who are under an obligation of
confidentiality, on a "need-to-know" basis; (c) to investors or joint venture
partners, who are under an obligation of confidentiality, on a
"need-to-know" basis; or (d) in connection with disputes or litigation between
the parties involving such Confidential Information and each party will
endeavor to limit disclosure to that purpose and to ensure maximum application
of all appropriate judicial safeguards (such as placing documents under seal).
In
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the event a party is required to disclose Confidential Information as required
by law, such party will, to the extent practicable, in advance of such
disclosure, provide the disclosing party with prompt notice of such
requirement. Such party also agrees, to the extent legally permissible, to
provide the disclosing party, in advance of any such disclosure, with copies
of any information or documents such party intends to disclose (and, if
applicable, the text of the disclosure language itself) and to cooperate with
the disclosing party to the extent the disclosing party may seek to limit such
disclosure.
10. Miscellaneous.
10.1 Notices. Except as otherwise provided herein, any
notice or other communication to be given hereunder will be in writing and
will be (as elected by the party giving such notice): (a) personally
delivered; (b) transmitted by postage prepaid registered or certified
airmail, return receipt requested; (c) transmitted by electronic mail via
the Internet with receipt being acknowledged by the recipient by return
electronic mail (with a copy of such transmission concurrently transmitted by
postage prepaid registered or certified airmail, return receipt requested);
(d) transmitted by facsimile (with a copy of such transmission by postage
prepaid registered or certified airmail, return receipt requested); or (e)
deposited prepaid with a nationally recognized overnight courier service.
Unless otherwise provided herein, all notices will be deemed to have been duly
given on: (x) the date of receipt (or if delivery is refused, the date of
such refusal) if delivered personally, by electronic mail, facsimile or by
courier; or (y) three (3) days after the date of posting if transmitted by
mail. Notice hereunder will be directed to a party at the address for such party
as set forth on the signature page of this Agreement. Either party may change
its address for notice purposes hereof on written notice to the other party
pursuant to this Section 10.1.
10.2 Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had all
signed the same document. All counterparts wi1l be construed together and will
constitute one agreement.
10.3 No Assignment. Neither party will transfer or assign any
rights or delegate any obligations hereunder, in whole or in part, whether
voluntarily or by operation of law, without the prior written consent of the
other party. Any purported transfer, assignment or delegation by either party
without the appropriate prior written approval will be null and void and of no
force or effect. Notwithstanding the foregoing, each party will have the right
to assign this Agreement to any successor of such party by way of merger or
consolidation or the acquisition of all or substantially all of the business
and assets of the assigning party relating to the Agreement; provided,
however, that the trademark, logo, tradename or other identifying information
of any such successor entity shall not be included in Armchair Millionaire, or
in any advertising, marketing or promotional material of any kind relating to
Armchair Millionaire, without the prior written consent of the other party to
this Agreement.
10.4 Headings. Sections, titles or captions in no way define,
limit, extend or describe the scope of this Agreement nor the intent of any of
its provisions.
10.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
-12-
<PAGE>
10.6 Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all prior and/or contemporaneous agreements or understandings,
written or oral, between the parties with respect to the subject matter
hereof.
10.7 Governing Law. This Agreement will be governed by and
interpreted under the laws of the State of California, without giving effect
to applicable conflicts of law principles.
10.8 Amendment. This Agreement may not be amended or
modified by the parties in any manner, except by an instrument in writing
signed on behalf of each of the parties to which such amendment or
modification applies by a duly authorized officer or representative.
10.9 Waiver. Any of the provisions of this Agreement may be
waived by the party entitled to the benefit thereof. Neither party will be
deemed, by any act or omission, to have waived any of its rights or remedies
hereunder unless such waiver is in writing and signed by the waiving party,
and then only to the extent specifically set forth in such writing. A waiver
with reference to one event will not be construed as continuing or as a bar to
or waiver of any right or remedy as to a subsequent event.
10.10 Recovery of Costs and Expenses. If either party to
this Agreement brings an action against the other party to enforce its rights
under this Agreement, the prevailing party will be entitled to recover its
costs and expenses, including, without limitation, attorneys' fees and costs
incurred in connection with such action, including any appeal of such action.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers or representatives as
of the Effective Date.
Intuit Inc.
By: Jay H. O'Connor
---------------------------------
Its: Director
---------------------------------
Address: 2535 GARCIA AVE.
----------------------------
MOUNTAIN VIEW, CA 92043
--------------------------------------
--------------------------------------
Fax: (415) 944-6436
-------------------------------
email: [email protected]
-------------------------------
iVillage Inc.
By: Steve Elkes
---------------------------------
Its: Vice President
---------------------------------
Address: 170 Fifth Ave.
----------------------------
New York, NY
--------------------------------------
--------------------------------------
Fax: (212) 604-9133
-------------------------------
email: [email protected]
-------------------------------
-14-
<PAGE>
EXHIBIT A
Guaranteed Page Views
<TABLE>
<CAPTION>
Growth
Rate Month 3 Month 4 Month 5 Month 6 Month 7 Month 8
<S> <C> <C> <C> <C> <C> <C> <C>
Intuit Media Buy [*]% [*] [*]
iVillage [*]% [*] [*] [*] [*] [*] [*]
Intuit [*]% [*] [*] [*] [*] [*] [*]
From WWW links [*] [*] [*] [*] [*] [*]
subtotal [*] [*] [*] [*] [*] [*]
*Repeat traffic [*] [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*] [*] [*]
Ad Inventory-pp [*] [*] [*] [*] [*] [*] [*]
per visit
Percent Ads sold [*] [*]% [*]% [*]% [*]% [*]% [*]%
out
Averge CPM $[*] $[*] $[*] $[*] $[*] $[*] $[*]
(Gross)
Total revenue $[*] $[*] $[*] $[*] $[*] $[*]
<CAPTION>
Month 9 Month 10 Month 11 Month 12 TOTAL
<S> <C> <C> <C> <C> <C>
Intuit Media Buy [*]
iVillage [*] [*] [*] [*] [*]
Intuit [*] [*] [*] [*] [*]
From WWW links [*] [*] [*] [*] [*]
subtotal [*] [*] [*] [*] [*]
*Repeat traffic [*] [*] [*] [*] [*]
TOTAL [*] [*] [*] [*] [*]
Ad Inventory-pp [*] [*] [*] [*] [*]
per visit
Percent Ads sold [*]% [*]% [*]% [*]% [*]%
out
Averge CPM $[*] $[*] $[*] $[*] $[*]
(Gross)
Total revenue $[*] $[*] $[*] $[*] $[*]
</TABLE>
*[*]% of bought/[*]% of previous months traffic repeat
[*] Confidential treatment requested.
<PAGE>
EXHIBIT B
Intuit Online Software Applications
The Intuit Online Software Applications to be integrated into
Armchair Millionaire on the terms and subject to the conditions of Section 3.8
of the Agreement shall consist exclusively of the following:
1. retirement planning tool;
2. glossary function; and
3. introductory portfolio management tool.
<PAGE>
EXHIBIT C
Armchair Millionaire Operating Costs
TOTAL: $[*]
OVERHEAD SUBTOTAL: $[*]
- - Off-line marketing $[*]
- - Banner creation $[*]
- - Contest Administration $[*]
- - Ad trafficking $[*]
STAFF/FREELANCE SUBTOTAL: $[*]
- - Executive Producer $[*]
- - Managing Producer $[*]
- - Benefits, travel & entertainment $[*]
- - Copy editor/editorial assistant (freelance) $[*]
- - Community Manager (freelance) $[*]
- - Editorial contributions and community leaders (freelance) $[*]
SITE HOSTING SUBTOTAL: $[*]
- - Hosting/Webmastering (database and message board maintenance, site traffic
data) $[*]
- - Server/Installation $[*]
- - Database licensing (Dynamic page generation, Membership database, Ad
management) $[*]
COST OF SALES SUBTOTAL: $[*]
- - Five Percent ([*]%) of gross advertising revenue (Projected at S[*])
<PAGE>
July 14, 1998
Mr. Lewis Schiff
Executive Producer
Armchair Millionaire
iVillage
170 Fifth Avenue
New York, NY 10010
Lewis:
Pursuant to Section 7.1 of the "Joint Activities Agreement" between Intuit and
iVillage dated September, 1997, this letter serves as written notice of Intuit's
intent to exercise its option to renew the term of the Agreement.
Sincerely,
/s/ Jay O'Connor
Jay O'Connor
Director
cc: Steve Elkes, iVillage
<PAGE>
* Confidential treatment has been requested for certain portions of this
exhibit.
SPONSORSHIP AGREEMENT
This Sponsorship Agreement ("Agreement") is entered into as of December
18, 1998, by and between Ford Motor Media, a division of J. Walter Thompson
("FMM") with offices at 300 Renaissance Center, Detroit, Michigan 48243 and
iVillage, Inc., ("iVillage") with offices at 170 Fifth Avenue, New York, New
York 10010. FMM and iVillage may be referred to generically as a "Party", or
collectively as "Parties".
WHEREAS, iVillage operates a site on the World Wide Web and America
Online (the "Network"), which contains channels including Parent Soup,
ParentsPlace, Better Health and Armchair Millionaire as well as career, fitness
& beauty, relationships, work from home, travel, money and food channels.
WHEREAS, FMM seeks to promote the sale of its automotive products
across the Network.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, iVillage and FMM hereby agree as
follows:
1. Term and Termination.
A. Term. The initial production period shall be for a period of two (2)
months to commence on November 4, 1998 (the "Production Period"), and the
remaining term of this Agreement shall be for a period of twenty four (24)
months to commence on the tentative launch date of January 4, 1999, unless
terminated earlier as provided herein (the "Promotion Period"), (The Production
Period and the Promotion Period shall be collectively referred to as the
"Initial Term"). The Parties agree that prior to July 1, 2000, iVillage will
provide FMM with the opportunity to renew this Agreement (the "Renewal Term") on
terms set forth in a proposal (the "Proposal) to be presented to FMM. FMM shall
indicate its acceptance or rejection of the Proposal no later than August 31,
2000. If iVillage does not receive FMM's acceptance or rejection of the Proposal
by August 31, 2000, iVillage may interpret FMM's non response as a rejection of
the Proposal. The Proposal shall include maximum payment fees by FMM with
respect to the Renewal Term.
B. Termination. In the event of a material breach by either Party of
any term of this Agreement, the non-breaching Party may terminate this Agreement
by written notice to the breaching Party if the breaching Party fails to cure
such material breach within thirty (30) days of receipt of written notice
thereof. In addition, either Party may terminate this Agreement effective upon
written notice stating its intention to terminate in the event the other Party
(i) ceases to function as a going concern or to conduct operations in the normal
course of business, or (ii) has a petition filed by or against it under any
state or federal bankruptcy or insolvency law which petition has not been
dismissed or set aside within sixty (60) days of its filing. In addition to the
foregoing, if on or after January 31, 2000, either Party determines, based upon
reasonable and mutually agreed upon measurable standards, that (x) the other
Party has materially underperformed its obligations pursuant to this Agreement
or (y) the expectations of such Party have been materially unfulfilled, such
Party may terminate this Agreement upon ninety (90) days written notice to the
other Party. Additionally, in the event of a prolonged and/or substantial
<PAGE>
strike which materially and adversely affects Ford's ability to produce and sell
cars, the Parties will work together in good faith to amend or terminate this
Agreement.
2. Promotion.
A. During the Production Period, iVillage will design, develop,
construct and host a Ford bridge site (the "Bridge Site") which shall include
approximately [*] pages of content and other interactive material such as a
travel planner or a car design feature. During the Promotion Period, iVillage
will continue to host, maintain and update the Bridge Site. Upon receipt from
iVillage of the proposed Bridge Site design and content, FMM shall have no more
than five (5) business days in which to provide iVillage with its acceptance or
rejection of the design and content. If iVillage does not receive FMM's
acceptance or rejection of such within the allotted time, iVillage shall deem
FMM's silence as acceptance. The Parties shall work together to determine the
content mix and delivery deadlines in order to maximize the effectiveness of the
sponsorship campaign.
B. During the Initial Term, iVillage will design, create and deliver
[*] Ford-branded advertising units. The advertising units shall be subject to
FMM's final approval. iVillage will deliver approximately [*] new advertising
units each during the Promotion Period. For purposes of this Agreement, an
advertising unit can include but shall not be limited to banners in the form of
rich media, java-based, animated, daughter and/or pull-down banners, or a
combination of appropriate technologies, and which shall represent and be
defined by industry standards.
C.
(i) During the Promotion Period, iVillage will deliver a
minimum of [*] advertising impressions, in an equal proportion each
month. Subject to reasonable written notice to iVillage, FMM may
request a reasonable reallocation of impressions as determined by FMM.
The advertising units of Ford Division and other Ford Motor Company
entities shall be served by a third party advertisement server, which
shall be compliant with Net gravity, or Doubleclick or other compatible
technology.
(ii) During the Promotion Period, iVillage traffic shall be
audited by a third party traffic auditor listed on Exhibit A and
iVillage shall provide FMM with relevant reports on a biweekly basis.
iVillage will provide ongoing marketing, creative, technical and
editorial consultation to FMM.
(iii) In the event that iVillage fails to deliver the
advertising impressions during the Promotion Period, FMM shall have the
option of either (a) extending the Initial Term of this Agreement for
an additional three (3) month period to "make good" the undelivered
impressions or (b) requiring iVillage to refund to FMM an amount equal
to [*] for each [*] impressions which were not delivered.
(iv) However, if iVillage falls to deliver the advertising
impressions during the Promotion Period and FMM desires that iVillage
"make good" the undelivered impressions and extend the Initial Term
pursuant to option (a) set forth in Section 2.C.(iii), if the Parties
have decided not to renew the Initial Term and iVillage desires to
enter into an agreement with an entity whose business(es) would pose a
conflict to FMM
2
<PAGE>
or Ford Motor Credit, then iVillage, at iVillage's option, may refund
the remaining impression deficiency to FMM, and immediately upon
pavement of such, the "make good" obligation shall terminate.
D. During the Initial Term, iVillage will design and administer, (i) a
minimum of [*] online conferences which shall include live chats and the
archiving of conference transcripts (dates of such conferences shall be
determined by FMM and shall occur approximately once every two months, but not
earlier than March 1, 1999 and FMM shall provide iVillage with not less than
forty five (45) days advance notice of any conference); (ii) a minimum of [*]
online polls; (iii) a minimum of [*] sixty-second surveys; (iv) a minimum of [*]
online focus groups; and (v) a minimum of [*] customized turn-key Network
sweepstakes (iVillage shall be responsible for all aspects of the sweepstakes
other than the prize(s) which shall be provided by Ford Motor Company ("FMC")).
FMM and FMC's respective advertising agencies shall be free to provide input
with respect to the aforementioned promotional efforts set forth in this section
and shall have the opportunity to reasonably approve such efforts.
E. During the Initial Term, iVillage will develop and administer [*]
message boards pertaining to topics mutually determined by the Parties. The
first message board shall be live on or about January 4, 1999, or in conjunction
with the launch of the Bridge Site.
F. During the Promotional Period, iVillage will place special
Ford-branded text links, newsletter mentions, hotlinks and taglines throughout
the Network. FMC shall have prior approval over all iVillage uses of any, Ford
Mark, as defined below. In the event that any of the Ford-branded links and/or
mentions set forth in this Section 2.F. are, in FMC's reasonable judgment,
materially injurious to FMC. FMC shall provide written notice of such offense to
iVillage. iVillage shall then have one (1) business day in which to cure said
offense.
3. Reporting. During the Promotion Period, iVillage agrees to provide FMM
with biweekly reports in connection with the promotional obligations set forth
in this Agreement in addition to semi-annual executive reviews with iVillage
management. All traffic reports shall be audited by the third party traffic
auditor selected pursuant to Section 2.C.(ii). iVillage shall also provide, on a
timely basis, impression tracking reports from a third party tracking system,
confirming guaranteed impression delivery.
4. Exclusivity. For the Initial Term of this Agreement, iVillage agrees
that Ford shall be the exclusive automobile manufacturer sponsor and advertiser
throughout the Network, with respect to entities whose primary business is that
of an automotive manufacturer and/or retailer. For purposes of this Agreement,
the term "retailer" shall refer to an entity which sells new and/or used
vehicles. In addition, in the event that iVillage desires to form a sponsorship
relationship with an automobile rental company during the term of this
Agreement, iVillage shall notify Hertz and provide Hertz with an opportunity to
enter into such a relationship with iVillage, on not less favorable terms than
those offered to any other automobile rental company. Once presented with an
opportunity, Hertz shall have five (5) business days in which to accept or
reject such terms. If iVillage does not receive Hertz's acceptance or rejection
of such within the allotted time, iVillage shall deem Hertz's silence as
rejection. The terms of any such relationship shall be mutually determined by
the Parties. Notwithstanding the foregoing, FMC shall, on a non-exclusive basis,
3
<PAGE>
be permitted to offer Ford Motor Credit car financing products related to the
purchase of Ford vehicles.
5. Fee.
A. FMC agrees to pay iVillage, upon signing of this Agreement, an
upfront, non-refundable, non-recoupable production and set up fee in the amount
of [*]. In addition, FMM shall pay iVillage [*] in equal quarterly payments of
[*] each, within ten (10) days after the end of each calendar quarter during
1999.
B. In addition, FMM agrees to pay iVillage, [*] in equal quarterly
payments of [*] each, within ten (10) days after the end of each calendar
quarter during the year 2000.
6. Representations and Warranties. Each Party hereby represents and
warrants that: (a) it is a corporation duly organized and validly existing and
in good standing under the laws of the state of incorporation; (b) it has full
power and authority to enter into this Agreement and to perform its obligations
hereunder; (c) it has obtained all permits, licenses, and other governmental
authorizations and approvals required for its performance under this Agreement,
and (d) the services to be rendered and the materials provided by each Party
under this Agreement neither infringe nor violate any patent, copyright, trade
secret, trademark, or other proprietary right of any third party.
7. Proprietary Rights. Upon execution and delivery of this Agreement,
iVillage assigns to FMC all right, title and interest in and to the content,
design and intellectual property, rights created specifically for and unique to
the Bridge Site, advertising units, and other promotional elements set forth in
this Agreement (collectively, the "Materials"). Notwithstanding the foregoing,
iVillage expressly retains all right, title and interest in and to the programs
and software that are used in connection with the creation and operation of, but
are not created specifically, for and unique to the Materials (the "iVillage
Proprietary Materials"). FMC acknowledges and agrees that the iVillage
Proprietary Materials are used by iVillage in creating and developing Web sites
for itself and other parties. FMC further acknowledges and agrees that iVillage
will be using certain licensed programs and software owned by third parties for
portions of the development and creation of the Materials and that FMC will not
acquire any right in or to those copyrighted materials. iVillage agrees to
execute any and all necessary further documents that FMC may reasonably request
to fully vest the intellectual property rights related to the Materials in FMC
and, if requested, to reasonable assist FMC in registering such rights in the
name of FMC.
8. Publicity. iVillage, FMC and FMM agree to collaborate on a joint press
release ("Press Release") to include information regarding the subject matter of
this Agreement and quotes from iVillage, FMC and FMM sources. The distribution
list shall be approved by both Parties no less than five (5) business days prior
to the release date. The Press Release and any quotes from either Party's
sources must be approved by the other Party's public relations department, which
also must be made aware of any pre-briefings with outside parties at least five
(5) days in advance of any pre-briefing. In addition, the iVillage and FMM
public relations department, FMC and FMM must be informed, no less than five (5)
days before the release date, of any third party who expresses interest in the
Press Release.
4
<PAGE>
9. Licenses. FMM grants to iVillage, during the Initial Term of this
Agreement, a royalty-free, non-exclusive, worldwide license to use, reproduce
and display Ford's tradenames, trademarks, service marks and logos
(collectively, the "Marks") in connection with this Agreement. No right, title,
license, or interest in any Marks owned by Ford or any of its affiliates is
intended to be given to or acquired by iVillage by the execution of or the
performance of this Agreement. iVillage shall not use the Marks for any purpose
or activity except as expressly authorized or contemplated herein;
10. Confidentiality. Except as expressly set forth herein, iVillage and FMM
shall maintain in confidence the terms of this Agreement. It is expected that,
pursuant to discussions to date and to this Agreement, the Parties may disclose
to one another certain information ("Confidential Information"), as defined
herein, which is considered by the disclosing Party to be proprietary or
confidential information. Confidential Information is defined as any,
information, communication or data, in any form, including, but not limited to
oral, written, graphic or electromagnetic forms, models or samples, which the
disclosing Party desires to protect against unrestricted disclosure or use,
including without limitation, business information, financial data and marketing
data. All Confidential Information shall remain the sole property, of the
disclosing Party and its confidentiality shall be maintained and protected by
the receiving Party with the same degree of care as the receiving Party uses for
its own confidential and proprietary information and the receiving Party shall
not disclose such Confidential Information to any third party. The restrictions
of the use or disclosure of any Confidential Information shall not apply to any
Confidential Information: (i) after it has become generally available to the
public without breach of this Agreement by the receiving Party; (ii) is
rightfully in the receiving Party's possession prior to disclosure to it by the
disclosing Party; (iii) is independently developed by the receiving Party; (iv)
is rightfully received by the receiving Party from a third party, without a duty
of confidentiality; or (v) is required to be disclosed under operation of law.
11. LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE ANY LIABILITY
HEREUNDER FOR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFIT OR BUSINESS OPPORTUNITIES, WHETHER
OR NOT THE PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY, AND EACH
PARTY HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE SERVICES CONTEMPLATED BY THIS AGREEMENT, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
IMPLIED WARRANTIES AFJSING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE.
12. Indemnification.
A. iVillage agrees to indemnify, defend and hold harmless FMM and its
client Ford Motor Company and their respective parents, subsidiaries,
affiliates, successors and assigns from any and all third party losses,
liabilities, damages, actions, claims, expenses and costs (including reasonable
attorneys' fees) which result or arise out of or in connection with the breach
of this
5
<PAGE>
Agreement by iVillage or which result or arise out of or in connection with any
material supplied by iVillage pursuant to this Agreement.
B. FMM agrees to indemnify, defend and hold harmless iVillage and its
parent, subsidiaries, affiliates, successors and assigns from any and all third
party, losses, liabilities, damages, actions, claims, expenses and costs
(including reasonable attorneys' fees) which result or arise out of or in
connection with the breach of this Agreement by FMM or which result or arise out
of or in connection with any material supplied by FMM or its client Ford Motor
Company pursuant to this Agreement.
13. General Provisions.
A. Relationship of the Parties. Nothing contained herein shall imply
any partnership, joint venture or agency relationship between the Parties and
neither Party shall have the power to obligate or bind the other in any manner
whatsoever, except to the extent herein provided.
B. Severability. If any provision of this Agreement shall be declared
by any court of competent Jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
C. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
D. Notices. All notices, requests, demands, payments and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
telecopied or sent by nationally recognized overnight carrier, or mailed by
certified mail, postage prepaid, return receipt requested, as follows:
If to FMM:
Ford Motor Media
500 Woodward Avenue
Detroit, Michigan 48226-3428
Attention: Carol Wright
Tel: (313) 964-2954
Fax: (313) 964-2315
If to iVillage:
iVillage, Inc.
170 Fifth Avenue
New York, New York 10010
Attention: Vice President Business/Legal Affairs
Tel: (212) 206-3106
Fax: (212) 604-9133
6
<PAGE>
E. Force Majeur. Except as otherwise expressly provided in this Agreement,
neither Party shall be liable for any breach of this Agreement for any delay or
failure of performance resulting from any cause beyond such Party's reasonable
control, including but not limited to the weather, strikes or labor disputes
(other than as set forth in Section 1.B), war, terrorist acts, riots or civil
disturbances, government regulations, acts of civil or military authorities, or
acts of God provided the Party affected takes all reasonably necessary steps to
resume full performance. In the event that the Network or the Bridge Site are
unavailable for a substantial period of time due an event of force majeur or
otherwise, iVillage agrees to use commercially reasonable efforts to "make good"
any impressions lost as a result of such circumstance.
F. Entire Agreement. This Agreement (i) constitutes the binding agreement
between the Parties, (ii) represents the entire agreement between the Parties
and supersedes all prior agreements relating to the subject matter contained
herein and (iii) may not be modified or amended except in writing signed by the
Parties.
G. Survival. The following sections shall survive any termination or
expiration of this Agreement: 6, 7, 10, 11, 12 and 13.
H. Governing Law. Agreement shall be governed by, and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
I. Assignment. Neither Party shall sell, transfer or assign this Agreement
or the rights or obligations hereunder, without the prior written consent of the
other Party, such consent not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, upon prior written notice by Ford Motor Company
to iVillage, this Agreement may be assigned by FMM to another advertising
agency, and in such event, FMM will be released from all financial and other
obligations under this Agreement.
J. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only.
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
7
<PAGE>
FOR FORD CENTRAL MEDIA FOR iVILLAGE, INC.
/s/ Mark A. Kaline /s/ Steven Elkes
- -------------------------------------- ---------------------------------------
(Name) (Name
Media Manager Vice President Business/]Legal Affairs
- -------------------------------------- ---------------------------------------
(Title) (Title)
1/12/99 12/18/98
- -------------------------------------- ---------------------------------------
(Date) (Date)
/s/ Mark A. Kaline /s/ Steven Elkes
- -------------------------------------- ---------------------------------------
(Signature) (Signature)
8
<PAGE>
EXHIBIT A
---------
Third Party Traffic Auditors
ABC
I/PRO
PWC
DoubleClick
9
<PAGE>
* Confidential treatment has been requested for certain portions of this
exhibit.
SPONSORSHIP AGREEMENT
This Sponsorship Agreement ("Agreement") is entered into as of
October 30, 1998 (the "Effective Date") by and between Ralston Purina Company, a
Missouri corporation ("Ralston") with offices at Checkerboard Square, St. Louis,
MO 63164 and iVillage, Inc., a Delaware corporation, ("iVillage") with offices
at 170 Fifth Avenue, New York, New York 10010. Ralston and iVillage may be
referred to generically as a "Party", or collectively as "Parties".
WHEREAS, iVillage operates a site on the World Wide Web and America
OnLine (the "Network"), which contains channels including Parent Soup,
ParentsPlace, Better Health and Armchair Millionaire as well as career, fitness
& beauty, food, relationships and work from home channels and plans to develop
an area devoted to pets and to provide its users with an opportunity to purchase
pet related products.
WHEREAS, Ralston seeks to enhance the brand awareness and brand
affinity of its products to the demographic population of iVillage: The Women's
Network and to provide pet-related content to iVillage.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, iVillage and Ralston hereby agree
as follows:
1. Term and Termination.
---------------------
A. Term. The term of this Agreement shall be for a period of two (2)
years to commence on the Effective Date (the "Initial Term"), unless terminated
earlier as provided herein. Prior to the expiration of the Initial Term, the
Parties agree to discuss in good faith, an extension of the Initial Term for an
additional two (2) year period (the "Renewal Term"). If, prior to sixty (60) but
no more than ninety (90) days before the expiration of the Initial Term,
iVillage receives a bona fide offer from a third party to be the exclusive
sponsor of cat and dog foods, cat and dog treats, litter box filters and related
products on financial terms more advantageous to iVillage than those stated in
Section 4 herein and provides Ralston with notice of such offer, Ralston must
notify iVillage in writing within thirty (30) days of receiving such notice
whether it is willing to amend the Agreement to match the financial terms
offered by such third party for the Renewal Term. If Ralston does not notify
iVillage that it is willing to amend the financial terms of the Agreement for
the Renewal Term within thirty (30) days of receiving such notice, then iVillage
shall have fifteen (15) days thereafter to give Ralston written notice to
terminate this Agreement at the end of the Initial Term and may then enter into
an agreement with such third party on the amended terms offered to Ralston.
B. Termination. In the event of a material breach by either Party of
any term of this Agreement, the non-breaching Party may terminate this Agreement
by written notice to the breaching Party if the breaching Party fails to cure
such material breach within thirty (30) days of receipt of written notice
thereof. In addition, either Party may terminate this Agreement effective upon
written notice stating its intention to terminate in the event the other Party
(i) ceases to function as a going concern or to conduct operations in the normal
course of business, or (ii) has a petition filed by or against it under any
state or federal bankruptcy or insolvency law which petition has not been
dismissed or set aside within sixty (60) days of its filing. In the event that
<PAGE>
Ralston does not provide substantially all of the Ralston Content set forth in
Section 3. within sixty (60) days after the Effective Date, iVillage may
terminate this Agreement upon written notice to Ralston.
2. iVillage's Obligations.
-----------------------
A. iVillage agrees to design, develop, host and operate an area within
the Network initially to be devoted to the subject matter of cats and dogs
("Pets") which may include the following material and community tools as
provided by iVillage or licensed from a third party:
(i) Pet Name Finder
(ii) gift reminder service
(iii) gift recommender tool
(iv) Pet care taker instruction
(v) message boards on Pet related topics
(vi) daily polls on Pet related topics
(vii) Pet home pages
(viii) featured pet story of the week with possible
celebrity pet featured
(ix) Pet pictures
(x) products/Pet food reviews by iVillage members
B. iVillage will also design, develop, host and operate a free-standing
online pet store (the "Pet Store") which may provide iVillage users with an
opportunity to purchase Pet products online and which shall include the
following material and community tools as provided by iVillage or licensed from
a third party:
(i) products/Pet food reviews by iVillage members
(ii) puppy/kitten starter kits
(iii) sampling
(iv) products such as: Pet food, cat litter, Pet treats
and snacks, Pet accessories, gift packages for
holidays and events, and other products as determined
mutually by iVillage and Ralston
(v) additional marketing and communications efforts
specific to the Pet Store such as links with content
and community Web sites, manufacturers and other
commerce sites.
C. In addition, iVillage may provide the following marketing efforts:
(i) Pet related newsletters
(ii) Pet Store promotion throughout the Network
(iii) online distribution and "key word" buys
D. iVillage shall maintain full editorial control over the Pet Area and
the Pet Store, and iVillage and Ralston will mutually agree to the content and
look and feel of the Pet Area and Pet Store. iVillage agrees that it will not
take any action or display any materials or information which will, in the
reasonable judgment of Ralston, adversely affect the name, reputation or
goodwill of Ralston and/or its products in any way. In the event Ralston
reasonably determines that iVillage has violated the foregoing obligation, and
if iVillage does not remove or replace
<PAGE>
such violating material within one (1) business day of receiving notice from
Ralston of such violation, Ralston may immediately terminate this Agreement upon
written notice to iVillage.
3. Ralston's Obligations.
----------------------
A. Ralston agrees to provide all mutually agreed upon content, experts
and customer service (collectively the "Ralston Content") found within the
Ralston Web sites ("Ralston Web Sites") to iVillage, including, but not limited
to the following material for use within the Pet Area:
(i) general Pet care and feeding information
(ii) frequently asked questions regarding Pet care
(iii) puppy/kitten starter check lists
(iv) food selector based on Pet type, age, etc.
(v) veterinary/Pet health experts
(vi) Pet care technology experts
B. Marketing:
----------
(i) Ralston will provide links, in a form to be
determined by the Parties, from the Ralston Web Sites
to the Network and to other Web sites as determined
by the Parties
(ii) Ralston will make good faith efforts to communicate
information about the Pet Area and Pet Store on
iVillage to Ralston's web site guest registrants and
to Ralston associates, as mutually agreed upon with
iVillage and within Ralston's privacy guidelines with
respect to the Pet Registry on purina.com. iVillage
will make good faith efforts to communicate
information about purina.com and related sites to
iVillage's members and associates, as mutually agreed
upon with Ralston and within iVillage's privacy
guidelines for membership.
(iii) Ralston agrees to make available to iVillage, for use
on the iVillage Network, new tools and new Ralston
Content which may be developed for the purina.com and
related sites, to the extent that Ralston shall have
the rights to do so.
C. Ralston will assist iVillage in the marketing, distribution and
fulfillment of Ralston products as displayed within the Pet Store and will
assist iVillage with the overall marketing and content of the Pet Store and will
provide iVillage with the following:
(i) introduction to iVillage to Ralston's distributors
(ii) assistance to iVillage in creating additional Pet
area and Pet Commerce Site sponsorship relationships
(iii) product and Pet food reviews
(iv) puppy and kitten starter kits
<PAGE>
4. Compensation.
-------------
A. Ralston shall pay iVillage [*] ($[*]) according to the following
schedule, namely: (i) [*] ($[*]) within fifteen (15) days after signing this
Agreement; (ii) [*] ($ [*]) on March 30, 1999; and (iii) [*] ($[*]) on July 30,
1999 which shall represent the sponsorship during the first twelve (12) months
of this Agreement.
B. Ralston shall pay iVillage an additional [*] ($[*]) according to the
following schedule, namely: (i) [*] ($[*]) on November 1, 1999; (ii) [*] ($[*])
on March 30, 2000; and (iii) [*] ($[*]) on July 28, 2000 which shall represent
the sponsorship during the second twelve (12) months of this Agreement.
5. Exclusivity . During the term of this Agreement and any subsequent
renewal thereto, iVillage agrees that Ralston shall be the exclusive sponsor of
cat or dog foods, cat and dog treats, litter box filter and related products on
the Pet Area and the Pet Store with respect to entities whose business is that
of manufacturing or distributing cat and dog foods, cat and dog treats, litter
box filler and related products, and iVillage will not display any advertising,
links, promotional information or marketing materials for ' any other
individual, entity or Web site whose business is that of manufacturing or
distributing cat and dog foods, cat and dog treats, litter box filler and
related products, where such advertising, links, promotional information or
marketing materials make reference to cat or dog foods, cat and dog treats,
litter box filler or related products, except with the written permission of
Ralston.
6. Representations and Warranties. Each Party hereby represents and
warrants that: (a) it is a corporation duly organized and validly existing and
in good standing under the laws of the state of its incorporation, (b) it has
full power and authority to enter into this Agreement and to perform its
obligations hereunder; (c) it has obtained all permits, licenses, and other
governmental authorizations and approvals required for its performance under
this Agreement; and (d) to the best of its knowledge and belief, the services to
be rendered and the materials provided by each Party under this Agreement
neither infringe nor violate any patent, copyright, trade secret, trademark, or
other proprietary right of any third party.
7. Customer Data. On a quarterly basis, iVillage will use its good
faith efforts to provide Ralston with mutually agreed upon data concerning
iVillage users. Ralston shall treat such data in the same manner as it treats
its own Confidential Information and will not use it except in accordance with
reasonable guidelines to be agreed upon by the Parties. Notwithstanding anything
contained in this Section, iVillage will not be required to deliver to Ralston
any user data in violation of its policies regarding the protection of user
information.
8. Proprietary Rights. All intellectual or proprietary property and
information, supplied or developed by either Party shall be and remain the sole
and exclusive property of the Party who supplied or developed same. Upon
termination of this Agreement and upon written request, the Party in receipt of
the requesting Party's intellectual or proprietary property and/or information
pursuant to this Agreement shall return such information to the requesting
Party. Intellectual and
<PAGE>
proprietary property and information jointly developed by the Parties pursuant
to this agreement shall be the joint property of the Parties.
9. Publicity. iVillage and Ralston agree to collaborate on a joint
press release ("Press Release") to include information regarding the subject
matter of this Agreement and quotes from iVillage sources. The distribution list
shall be approved by both Parties no less than five (5) business days prior to
the release date. The Press Release and any quotes from iVillage sources must be
approved by the iVillage public relations department, which also must be made
aware of any pre-briefings with outside parties at least five (5) days in
advance of any pre-briefing. In addition, the iVillage public relations
department must be informed, no less than five (5) days before the release date,
of any third party who expresses interest in the Press Release.
10. Intentionally Omitted.
11. Confidentiality. Except as expressly set forth herein, iVillage and
Ralston shall maintain in confidence the terms of this Agreement. It is expected
that, pursuant to discussions to date and to this Agreement, the Parties may
disclose to one another certain information ("Information"), as defined herein,
which is considered by the disclosing Party to be proprietary or confidential
information. Information is defined as any information, communication or data,
in any form, including, but not limited to oral, written, graphic or
electromagnetic forms, models or samples, which the disclosing Party desires to
protect against unrestricted disclosure or use, including without limitation,
business information, financial data and marketing data. All Information shall
remain the sole property of the disclosing Party and its confidentiality shall
be maintained and protected by the receiving Party with the same degree of care
as the receiving Party uses for its own confidential and proprietary information
and the receiving Party shall not disclose such Information to any third party.
The restrictions of the use or disclosure of any Information shall not apply to
any Information: (i) after it has become generally available to the public
without breach of this Agreement by the receiving Party; (ii) is rightfully in
the receiving Party's possession prior to disclosure to it by the disclosing
Party; (iii) is independently developed by the receiving Party; (iv) is
rightfully received by the receiving Party from a third party without a duty of
confidentiality; or (v) is required to be disclosed under operation of law.
12. LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE ANY LIABILITY
HEREUNDER FOR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFIT OR BUSINESS OPPORTUNITIES, WHETHER
OR NOT THE PARTY WAS ADVISED OF THE POSSIBILITY OF SUCH.
EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY, AND EACH
PARTY HEREBY SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, REGARDING THE PRODUCTS AND SERVICES CONTEMPLATED BY TIES AGREEMENT,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
PERFORMANCE.
13. Indemnification. Both Parties agree to indemnify, defend and hold
harmless the other Party and its parent, subsidiaries, affiliates, successors
and assigns from any and all third party
<PAGE>
losses, liabilities, damages, actions, claims, expenses and costs (including
reasonable attorneys' fees) which result or arise from the breach of this
Agreement by the indemnifying Party.
14. General Provisions.
A. Relationship of the Parties. Nothing contained herein shall imply
any partnership, joint venture or agency relationship between the Parties and
neither Party shall have the power to obligate or bind the other in any manner
whatsoever, except to the extent herein provided.
B. Severability. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
C. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
D. Notices. All notices, requests, demands, payments and other
communications which are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
telecopied or sent by nationally recognized overnight carrier, or mailed by
certified mail, postage prepaid, return receipt requested, as follows:
If to Ralston:
Ralston Purina Company
Checkerboard Square
St. Louis, MO 63164-0001
Attn: Michael D. Moore-8T
cc: Patricia A. Wharton-9T
Thomas Nutter-9T
Tel: (314) 982-2847
Fax: (314) 982-4274
If to iVillage: iVillage, Inc.
170 Fifth Avenue
New York, New York 100 10
Attention: Vice President Business/Legal Affairs
Tel: (212) 206-3106
Fax: (212) 604-9133
E. Force Majeur. Except as otherwise expressly provided in this
Agreement, neither Party shall be liable for any breach of this Agreement for
any delay or failure of performance resulting from any cause beyond such Party's
reasonable control, including but not limited to the weather, strikes or labor
disputes, war, terrorist acts, riots or civil disturbances, government
regulations, acts of civil or military authorities, or acts of God provided the
Party affected takes all reasonably necessary steps to resume full performance.
<PAGE>
F. Entire Agreement. This Agreement (i) constitutes the binding
agreement between the Parties; (ii) represents the entire agreement between the
Parties and supersedes all prior agreements relating to the subject matter
contained herein and (iii) may not be modified or amended except in writing
signed by the Parties.
G. Survival. The following sections shall survive any termination or
expiration of this Agreement: 6, 8, 11, 12, 13 and 14.
H. Governing Law. This Agreement shall be governed by, and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
I. Assignment. Neither Party shall sell, transfer or assign this
Agreement or the rights or obligations hereunder, without the prior written
consent of the other Party, such consent not to be unreasonably withheld or
delayed,
J. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only.
IN WITNESS WHEREOF, the Parties hereto have executed and delivered this
Agreement as of the date first above written.
For Ralston Purina Company For iVillage, Inc.
Terrence E. Block Steven Elkes
- ----------------------------------- -------------------------------------
(Name) (Name)
Executive Vice President Vice President Business/Legal Affairs
- ----------------------------------- -------------------------------------
(Title) (Title)
/s/ Terrence E. Block /s/ Steven Elkes
- ----------------------------------- -------------------------------------
(Name) (Name)
<PAGE>
===============================================================================
AMENDED AND RESTATED
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 9, 1999
AMONG
iVILLAGE INC.,
GE INVESTMENTS SUBSIDIARY, INC.
AND
NATIONAL BROADCASTING COMPANY, INC.
===============================================================================
<PAGE>
AMENDED AND RESTATED
SERIES E PREFERRED STOCK PURCHASE
AGREEMENT dated as of March 9,
1999, among (i) iVILLAGE INC., a
Delaware corporation (the
"Company"), (ii) GE INVESTMENTS
SUBSIDIARY, INC., a Delaware
corporation (the "Investor"), and
(iii) NATIONAL BROADCASTING
COMPANY, INC. (the "NBC"), with
respect to section 14 only (this
"Agreement").
Reference is made to the Series E Preferred Stock Purchase Agreement
dated as of December 10, 1998 between the Company and NBC (the "Prior
Agreement"). This Agreement shall supercede the Prior Agreement in all
respects.
The parties agree as follows:
1. Authorization.
The Company has authorized the issuance and sale, upon the terms and
subject to the conditions set forth in this Agreement, of an aggregate of up to
6,672,912 shares of Series E Preferred Stock, $.0005 par value (the "Series E
Preferred Stock"), of the Company, with the designation, preferences and rights
set forth in the Certificate of Amendment (the "Certificate of Amendment") of
the Certificate of Incorporation of the Company, the form of which is attached
hereto as Exhibit A.
2. Purchase and Sale of the Shares and the Warrant.
On the terms and subject to the conditions hereof, the Company is
issuing and selling to the Investor, and the Investor is purchasing from the
Company, at the Closing (as defined in Section 3 below), (A) 4,889,030 shares
of Series E Preferred Stock (the "Shares"), (B), a warrant to purchase up to
970,874 shares of Series E Preferred Stock at a purchase price of $5.15 per
share substantially in the form attached hereto as Exhibit W- 1 ("Warrant One")
and (C) a warrant to purchase up to 813,008 shares of Series E Preferred Stock
at a purchase price of $6.15 per share substantially in the form attached
hereto as Exhibit W- 2 ("Warrant Two" and, collectively, with Warrant One, the
"Warrants") at a purchase price of $15,497,555.48 for the Shares being issued
and sold and the Warrant being granted to and purchased by the Investor at the
Closing. The shares of Series E Preferred Stock to be issued upon the exercise
of the Warrant shall be referred to herein as the "Warrant Shares."
Notwithstanding anything to the contrary contained herein, if the Closing
occurs after the consummation of a Qualified Public Offering (as such term is
defined in the Certificate of Amendment), all references to the issuance of
Series E Preferred Stock or Shares or Warrant Shares shall mean that number of
shares of Common Stock issuable upon conversion thereof in accordance with the
terms of the Series E Preferred Stock.
2
<PAGE>
3. Closings.
3.1 Initial Closing.
(a) The closing (the "Closing") of the sale and purchase of the
Shares and the Warrants will take place at the offices of Orrick, Herrington &
Sutcliffe LLP ("OHS"), 30 Rockefeller Plaza, New York, New York 10112, as soon
as practicable following the execution and delivery of this Agreement.
(b) At the Closing, the Company is delivering to the Investor a stock
certificate, issued in the name of the Investor, representing 4,889,030 Shares
and an executed original of each of the Warrants. Delivery is being made by the
Company against receipt by the Company of (i) $2,445.00 by check payable to the
Company and (ii) a promissory note in the principal sum of $15,497,555.48,
together with interest thereon at the rate of five percent (5%) per annum on
the unpaid principal balance from the date hereof to the date such principal
balance is paid in full. The principal amount plus interest thereon shall be
due and payable in twelve (12) equal installments of $1,398,783.20 each,
payable on each April 1, July 1, October 1 and January 1 thereafter, until
January 1, 2002.
4. Representations and Warranties of Company.
The Company hereby represents and warrants to the Investor as
follows:
4.1 Organization.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate the assets used in its
business, to carry on its business as presently conducted and as proposed to be
conducted, to enter into the Documents (as hereinafter defined), to perform its
obligations thereunder, and to consummate the transactions contemplated
thereby. "Documents" means (a) this Agreement, (b) the Certificate of Amendment
of Certificate of Incorporation, (c) the Promissory Note (the "Note") in the
form of Exhibit C hereto, (d) the Fourth Amended and Restated Stockholders'
Agreement dated as of December 4, 1998 (the "Stockholders' Agreement") in the
form of Exhibit D hereto, and (d) the Fourth Amended and Restated Registration
Rights Agreement dated as of December 4, 1998 (the "Registration Rights
Agreement"), in the form of Exhibit E hereto. The Company has made available to
the Investor copies of its Certificate of Incorporation, as amended (the
"Certificate of Incorporation") and By-laws, as amended; said copies are true,
correct and complete and contain all amendments through the date hereof.
4.2 Qualification; Good Standing.
The Company is qualified to do business as a foreign corporation in
the State of New York and is not qualified to do business as a foreign
corporation in any other jurisdiction, no other jurisdiction has demanded or
requested in writing that the Company so qualify, the Company has no knowledge
of the need to so qualify and the failure to be so qualified does not have a
material adverse effect on the Company.
3
<PAGE>
4.3 Corporate Authorization; Enforceability.
The Company has taken all corporate action (including all action
required of its Board of Directors and stockholders) necessary to authorize its
execution and delivery of the Documents, its performance of its obligations
thereunder, and its consummation of the transactions contemplated thereby. Each
Document has been executed and delivered by an officer of the Company in
accordance with such authorization. Each Document constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium, and
similar laws affecting creditors' rights generally and to general principles of
equity. The Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and in the
case of the issuance of shares of Series E Preferred Stock, will have the
rights, preferences and privileges described in the Certificate of
Incorporation (as the same may be amended from time to time); the Warrant
Shares issuable upon exercise of the Warrant, when issued in compliance with
the provisions of this Agreement and the Certificate of Incorporation, will be
validly issued, fully paid and nonassessable; the Common Stock issuable upon
conversion of any of the Shares and the Warrant Shares when issued in
compliance with the provisions of this Agreement and the Certificate of
Incorporation, will be validly issued, fully paid and nonassessable; and the
Shares and the Warrant Shares (including shares of Common Stock issuable upon
conversion of any of the Shares and the Warrant Shares) will be free of any
liens or encumbrances other than any liens or encumbrances created by the
Investor; provided, however, that the Shares , the Warrant Shares and the
Common Stock issuable upon conversion of any of the Shares and the Warrant
Shares (if applicable) are subject to the restrictions on transfer under
"blue-sky", state and/or Federal securities laws and pursuant to the
Stockholders Agreement. The Shares and the Warrant Shares shall not be subject
to any preemptive rights or rights of first refusal except as set forth herein
or in the Stockholders Agreement.
4.4 No Conflict.
The execution and delivery by the Company of the Documents, its
consummation of the transactions contemplated thereby, and its compliance with
the provisions thereof, will not in any material respect (a) violate or
conflict with its Certificate of Incorporation or By-laws, (b) violate,
conflict with, or give rise to any right of termination, cancellation,
rescission or acceleration under any material agreement, lease, security,
license, permit, or instrument to which the Company is a party, or to which it
or any of its assets is subject, (c) result in the imposition of any
Encumbrance (as hereinafter defined) on any asset of the Company, (d) violate
or conflict with any Laws (as hereinafter defined), or (e) except as set forth
on Schedule 4.4, require any consent, approval or other action of, notice to,
or filing with any entity or person (governmental or private), except for those
that have been obtained or made. "Encumbrance" means any security interest,
mortgage, lien, pledge, charge, easement, reservation, restriction, or similar
right of any third party; and "Laws" means all laws, rules, regulations,
ordinances, orders, judgments, injunctions, decrees and other legislative,
administrative or judicial restrictions.
4
<PAGE>
4.5 Capitalization.
(a) The authorized capital stock of the Company consists of
75,000,000 shares of Common Stock, $.0005 par value (the "Common Stock"), and
55,000,000 shares of Preferred Stock, $.0005 par value (the "Preferred Stock"),
of which (A) 1,000,000 shares have been designated as Series A Preferred Stock,
$.0005 par value (the "Series A Preferred Stock"), (B) 5,629,846 shares have
been designated as Series B Preferred Stock, $.0005 par value (the "Series B
Preferred Stock"), (C) 300,000 shares have been designated as Series B-1
Preferred Stock, $.0005 par value (the "Series B-1 Preferred Stock"), (D)
13,528,762 shares have been designated as Series C Preferred Stock, $.0005 par
value (the "Series C Preferred Stock"), (E) 13,000,000 shares have been
designated as Series D Preferred Stock, $.0005 par value, (the "Series D
Preferred Stock") and (F) 18,953,616 shares have been designated as Series E
Preferred Stock.
(b) The capitalization of the Company immediately prior to the
Closing and on a fully-diluted basis (including all shares of Common Stock
reserved for issuance upon exercise of options under the ESOP (as hereinafter
defined) and the ASOP (as hereinafter defined)), is set forth on Exhibit 4.5-A
to Schedule 4.5.
(c) The capitalization of the Company immediately after the Closing
and on a fully-diluted basis (including all shares of Common Stock reserved for
issuance upon exercise of options under the ESOP and the ASOP), is set forth on
Exhibit 4.5-B to Schedule 4.5.
(d) Except as set forth in paragraph (a) above and on Schedule 4.5,
immediately after the Closing, there will be no outstanding (i) securities
convertible into or exchangeable for shares of capital stock or other securities
of the Company, (ii) options, warrants, or other rights to purchase or otherwise
acquire from the Company shares of such capital stock, or securities convertible
into or exchangeable for shares of such capital stock, or (iii) contracts,
agreements or commitments relating to the issuance by the Company of any shares
of such capital stock, any such convertible or exchangeable securities, or any
such options, warrants or other rights. All voting rights in the Company are
vested in the Common Stock and the Preferred Stock to the extent specified in
the Certificate of Amendment. Except for the Stockholders' Agreement and the
Voting Trust Agreement dated September 19, 1995 (the "Voting Trust Agreement"),
among Candice Carpenter, individually and as trustee, Nancy Evans, individually
and as successor trustee, and Robert Levitan (the "Founders") and the other
parties thereto, or as set forth on Schedule 4.5, there are no voting trusts,
voting agreements, proxies or other agreements, instruments or understandings
with respect to the voting of the capital stock of the Company. Except for the
Registration Rights Agreement and as set forth in the preliminary prospectus
dated February 24, 1999 (the "Preliminary Prospectus") under "Description of
Capital Stock-Registration Rights", upon the Closing there will be no agreements
or understandings granting to any person or entity any right to cause the
Company to effect the registration under the Securities Act of any shares of its
capital stock.
(e) The Company has reserved, and at all times from and after the
date hereof will keep reserved, free from preemptive rights, out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion into shares of Common Stock of all shares of Series E
Preferred Stock, sufficient shares of Common Stock to provide for the full
conversion into shares of Common Stock of all shares of Series E Preferred
Stock.
5
<PAGE>
(f) The Company will at all times from and after the date of the
Closing, keep reserved, free from preemptive rights, out of its authorized but
unissued shares of Common Stock and Series E Preferred Stock, sufficient shares
of Series E Preferred Stock and Common Stock to be issued upon the Investor's
exercise of the Warrant.
4.6 Securities Laws.
Subject to and based in part upon the truth and accuracy of the
representations and warranties of the Investor in Section 5.3 hereof, the
offering, sale and purchase of the Shares and the Warrant Shares contemplated
hereby are exempt from registration under the Securities Act and are or
following the date hereof will be exempt from registration or will be qualified
under any applicable state securities or "blue-sky" laws. The issuance of all
other shares of capital stock of the Company on or before the date hereof has
been made in compliance with the Securities Act and all applicable state
securities or "blue-sky" laws.
4.7 Financial Statements; Liabilities; Changes.
(a) Attached hereto as Schedule 4.7 are (i) the audited balance
sheets of the Company as of December 31, 1997 and December 31, 1998, and the
audited statement of income (loss) for the twelve months ended December 31,
1997 and December 31, 1998, respectively (the "Audited Financial Statements").
The Audited Financial Statements present fairly the financial condition and the
results of operations of the Company as of the dates and for the periods
indicated, and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis ("GAAP"). The books and
accounts of the Company reflect in all material respects all of the
transactions of the Company.
(b) Except as reflected in the Audited Financial Statements or
expressly contemplated by the Documents, at December 31, 1998 the Company did
not have any material liability of any nature, whether or not accrued and
whether or not contingent, absolute, determined or determinable, or any
material loss contingency (as such term is used in the Statement of Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975). The Company is not a party to any agreement, or subject to any charter
or by-law provision, or, to its knowledge, any other corporate limitation or
any legal requirement currently in effect, which has, or in the future can,
insofar as the Company can reasonably foresee at this time, reasonably be
expected to have, a material adverse effect on the assets, liabilities,
condition (financial or otherwise), business or operations of the Company.
(c) Except as set forth on Schedule 4.7 and in the Preliminary
Prospectus under "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Recent Events," since December 31, 1998, there has
not been, occurred or arisen:
(i) any material adverse change in the assets, liabilities,
condition (financial or otherwise), business or operations of the Company;
(ii) any damage, destruction or loss to any asset of the Company
(whether or not covered by insurance) that, individually or in the
aggregate, would have a material adverse effect on the Company;
6
<PAGE>
(iii) any amendment or other change to the Certificate of
Incorporation or By-Laws of the Company (except those Amendments to the
Certificate of Incorporation filed on March 11, 1999);
(iv) any declaration, setting aside or payment of any dividend
or distribution (whether in cash, stock or property) in respect of capital
stock of the Company, or any direct or indirect redemption, purchase or
other acquisition of shares of such capital stock or any split,
combination or reclassification of such capital stock;
(v) any sale or other disposition of any right, title or
interest in or to any assets or properties of the Company or any revenues
derived therefrom, other than in the ordinary course of business and
consistent with past practice;
(vi) other than with respect to the Company's 1995 Amended and
Restated Employee Stock Option Plan (the "ESOP"), the grant as of February
15, 1999 of an aggregate of approximately 5,054,646 options under the
ESOP, the 1999 Employee Stock Option Plan (the "1999 Plan"), the 1999
Acquisition Stock Option Plan (the "Acquisition Plan") and the 1999
Employee Stock Purchase Plan (the "Purchase Plan"), (A) any approval or
action to put into effect any general increase in any compensation or
benefits payable to any class or group of employees of the Company, any
increase in the compensation or benefits payable or to become payable by
the Company to any of its directors, officers or any of its employees
whose total compensation after such increase would exceed $75,000 per
annum (collectively, "Key Employee") or any bonus, service award,
percentage compensation or other benefit paid, granted or accrued to or
for the benefit of any Key Employee or (B) the adoption or amendment in
any material respect of any employee benefit plan or compensation
commitment or any severance agreement or employment contract to which any
Key Employee is a party;
(vii) any creation, incurrence or assumption of any indebtedness
for money borrowed by the Company exceeding $150,000;
(viii) any capital expenditures by the Company in excess of
$150,000 in the aggregate;
(ix) any material change in any accounting principle or method
or election for Federal income tax purposes used by the Company; or
(x) any formal authorization, approval, agreement or commitment
to do any of the foregoing.
4.8 Agreements.
(a) The exhibit index to the Company's Form S-1 filed February 24,
1999 with the Securities and Exchange Commission (the "Exhibit Index") attached
hereto sets forth all material written and oral agreements or understandings of
the Company that:
(i) individually (or taken together with other agreements with
the same party or its affiliates) provide for the future purchase
by the Company of products
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or services in excess of $150,000 or call for expenditures of the Company
in excess of $150,000;
(ii) provide for the employment by the Company of any director,
officer, employee or consultant, including, but not limited to, any
severance agreement, confidentiality agreement, covenant not to compete,
or any agreement or arrangement associated with a change in ownership or
control of the Company;
(iii) provide for the borrowing of money or a line of credit by
the Company or a leasing transaction of a type required to be capitalized
by the Company in accordance with generally accepted accounting
principles;
(iv) provide for the sale, assignment, license, or other
disposition of any asset with a value in excess of $150,000 or any
material right of the Company;
(v) provide for the purchase, sale or lease by the Company of
any real property;
(vi) provide for the lease by the Company of any personal
property with a value, or reflecting replacement costs, in excess of
$150,000 or involving lease payments in excess of $150,000 per year;
(vii) provide for any distribution, agency, advertising or
licensing arrangement with the Company that involves payments in excess of
$150,000;
(viii) restrict the Company, or any of its officers or
employees, from engaging in any business activity anywhere in the world,
restrict any such officer or employee in the performance of his or her
obligations and responsibilities to the Company, or create any other
obligation or liability of any such officer or employee arising from his
or her prior employment;
(ix) grant to any person or entity, other than the Company, any
right, title, or interest in any invention or know-how conceived by
employees of the Company and related to the business of the Company;
(x) provide for a guaranty, surety, indemnity, or other
financial support by the Company to any person or entity;
(xi) grant to any person or entity a security interest in any
asset or right of the Company;
(xii) provide for the purchase, licensing or development of any
computer software, hardware or data bases used or to be used by the
Company;
(xiii) pertain to any material joint venture, partnership or
other arrangement involving a sharing of profits; or
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(xiv) are otherwise material to the assets, business, or
property of the Company.
(b) Each agreement or understanding set forth on the Exhibit Index is
in full force and effect and constitutes a valid and binding obligation of all
parties thereto. The Company has in all material respects performed the
obligations required to be performed by it and is not in default or alleged to
be in default in any material respect under any such agreement or
understanding. There exists no event or condition, which, after notice or lapse
of time, or both, would constitute such a default. To the knowledge of the
Company, there are no material defaults by any other party to any such
agreement or understanding. The Company has made available to the Investor
copies of all documents set forth on such Exhibit Index. Except as set forth on
Schedule 4.8(a), the Company is not currently renegotiating any of the
agreements or understandings set forth on the Exhibit Index or paying
liquidated damages in excess of $150,000 (individually or in the aggregate) in
lieu of performance thereunder.
(c) Schedule 4.8(b) hereto sets forth all written and oral agreements
or understandings of the Company that grant to any person or entity an express
right to be paid or compensated in excess of $150,000 based upon revenue or
income of the Company.
4.9 Title to Assets.
The Company has good and marketable title to all of its owned assets,
and good leasehold interests in its leased properties, free and clear of all
Encumbrances except for Permitted Liens (as hereinafter defined). Such assets
are in good operating condition and repair (ordinary wear and tear excepted),
and are adequate and suitable for their intended use in the business of the
Company. "Permitted Liens" means (a) liens arising by operation of law in the
ordinary course of business that, individually and in the aggregate, do not in
any material respect interfere with the use or value of any of the assets
subject thereto, (b) minor imperfections of title which do not materially
detract from the value of the property affected or materially impair the
operations of the Company and (c) liens for taxes not yet due and payable.
4.10 Subsidiaries; Real Property.
Except as set forth on Schedule 4.10, the Company does not own,
directly or indirectly, any capital stock or other proprietary interest in any
other corporation, partnership, or other entity. The Company does not own or
hold, directly or indirectly, any real property.
4.11 Intellectual Property Rights.
(a) Except as disclosed on Schedule 4.11 hereto, the Company owns or
is licensed to use or otherwise has sufficient rights to use, or is in the
process of acquiring sufficient rights to use, such patents, trademarks,
copyrights, service marks, and applications and registrations therefor, and
trade names, customer lists, trade secrets, proprietary processes and formulae,
inventions, know-how, other confidential and proprietary information, and other
industrial and intellectual property rights as are necessary to permit the
Company to carry on its business as presently conducted or as presently
proposed to be conducted. Schedule 4.11 sets forth a list of all patents,
trademarks, copyrights, service marks, and applications and registrations
therefor, and all trade names held or owned by the Company and all other public
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intellectual property rights of the Company. All registered patents,
copyrights, trademarks, and service marks listed on Schedule 4.11 are in full
force and effect and are not subject to any taxes or maintenance fees. Except
as set forth on Schedule 4.11, the Company (i) did not license or grant (other
than in the ordinary course of its business) to anyone rights of any nature to
use any intellectual property right that is material to its business, (ii) is
not obligated to and does not pay royalties to anyone for use of its
intellectual property rights, and (iii) has not received notice from any third
party nor is the Company otherwise aware that any product or service marketed
or sold by the Company violates any intellectual property right of a third
party. Except as set forth on Schedule 4.11, there is no pending or, to the
knowledge of the Company, threatened claim or litigation against the Company
contesting the right to use its intellectual property rights, asserting the
misuse of any thereof, or asserting the infringement or other violation of any
intellectual property rights of a third party nor is there any basis therefor.
(b) All copyrightable works, inventions and know-how conceived by
employees of the Company within the scope of their employment and related to
the business of the Company were "works for hire," and all right, title, and
interest therein were transferred and assigned to, or vested in, the Company.
Except as set forth on Schedule 4.11, the Company has taken all reasonable
security measures to protect the secrecy, confidentiality, and value of its
trade secrets, proprietary processes and formulae, inventions, know-how and
other confidential and proprietary information.
(c) Neither the current employment by or association with the Company
of any Founder (as such term is defined in the Stockholders' Agreement) or to
the knowledge of the Company, any other key employee of the Company, nor the
use of any information or techniques presently utilized or proposed to be
utilized by the Company, violates or conflicts with, or would violate or
conflict with, any agreement between such Founder, or, to the knowledge of the
Company, any other key employee and any third party, or results in, or would
result in, any unfair competition or misappropriation of any trade secrets or
confidential or proprietary information. The Company is not aware that the use
thereof by any consultant to the Company would cause any such violation,
conflict or result.
(d) The Company owns or has sufficient rights to use the material or
other work product specifically developed for the Company by any of its
consultants within the scope of their engagement by the Company.
4.12 Compliance with Laws; Governmental Authorizations.
The Company is in compliance with all Laws that, if violated, would
have a material adverse effect on its assets, business, or property. The
Company is not required to hold or maintain any material governmental
authorizations, licenses or permits in the conduct of its business as presently
conducted and as proposed to be conducted.
4.13 Litigation.
Except as set forth on Schedule 4.13 hereto, there are no (a)
actions, suits, claims, investigations or other proceedings by or before any
governmental authority or arbitrator pending
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or, to the knowledge of the Company, threaten against Company, or (b) judgments,
decrees, injunctions or orders of any governmental authority or arbitrator
against the Company.
4.14 Environmental Matters.
The Company is in compliance with all Laws relating to the protection
of the environment (the "Environmental Laws"). The Company has not knowingly
handled, stored or released, or exposed any person to, any hazardous substance,
as defined in 42 U.S.C.A. Section 9601(14) or any other applicable
Environmental Laws (a "Hazardous Substance"). The Company is not and will not
be liable or responsible for clean-up costs, remedial work or damages in
connection with the handling, storage, release, or exposure by the Company of
any Hazardous Substance. No claims for clean-up costs, remedial work or damages
have been made by any person or entity in connection with the handling,
storage, release, or exposure by the Company of any Hazardous Substance.
4.15 Tax Matters.
(a) Except as set forth on Schedule 4.15 hereto, (i) the Company is
not and never has been, a member of any "affiliated group" (as defined in
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
without regard to the limitations of Section 1504(b) of the Code) or any other
group of corporations that files, or has filed Returns (as defined below) on a
combined, consolidated or unitary basis with the Company or any predecessor or
successor to the Company; (ii) the Company has timely filed or been included in
all required returns, declarations of estimated tax, reports, and statements
relating to any Taxes payable by it (collectively, the "Returns"); (iii) all
Returns were correct and complete in all material respects and disclosed all
Taxes required to be paid by the Company; (iv) the Company has timely paid all
Taxes required to be paid by it (whether or not shown on any Return) through
the date hereof; (v) the Company has made adequate provision in accordance with
GAAP on the Balance Sheet for all Taxes payable by it for all periods prior to
the date of the Balance Sheet for which no Returns have yet been filed; (vi)
the Company has made adequate provision on its books for all Taxes payable by
it for all periods beginning on or after the date of the Balance Sheet for
which no Returns have yet been filed; (vii) the Company is not delinquent in
the payment of any Taxes; (viii) the Company has neither waived the statute of
limitations in respect to Taxes nor been requested to do so; (iv) there are no
actions, claims, liens, or assessments relating to Taxes; (x) there are no
pending audits or other examinations or reviews of any Returns; (xi) no
deficiency or addition to any Taxes or interest or penalty for any Taxes has
been assessed or proposed or asserted in writing against the Company; and (xii)
all Taxes that the Company is required by law to withhold or collect for
payment have been duly withheld and collected, and have been paid or accrued
and reserved against on the books of the Company.
(b) "Taxes" means, with respect to any person or entity, (i) all
Federal, state, local, and foreign taxes, including, without limitation, all
taxes on or based upon net income, gross income, income as specially defined,
earnings, profits or selected items of income, earnings, or profits, and all
gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, or windfall profits taxes, alternative or add- on minimum
taxes, customs duties, or other taxes, fees, assessments or charges of any
kind, together with any interest, penalties, additions to tax or
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additional amounts imposed by any taxing authority on such person or
entity, and (ii) any liability for the payment of any amount of the type
described in the preceding clause (i) as a result of being a "transferee"
(within the meaning of Section 6901 of the Code, or any other applicable Laws)
of another person or entity.
4.16 Employee Benefit Plans.
Except as set forth on Schedule 4.16, the Company does not maintain
and is not required to make any payment with respect to or provide benefits
under any plan, policy, trust or group arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, severance benefits, fringe benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation, or
other forms of incentive compensation, insurance or benefits, including,
without limitation, any "employee benefit plan," as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"). The Company has
not at any time maintained or been required to make any payment with respect to
any "employee pension benefit plan," as defined in Section 3(2) of ERISA.
4.17 Related Transactions.
Except as set forth on Schedule 4.17 and except for compensation to
regular employees of the Company paid in the ordinary course of business, since
the formation of the Company, no current or former director, officer or
affiliate of the Company (including spouses, children and relatives of any of
the foregoing) or holder of any capital stock of the Company has been (i) a
party to any transaction with the Company providing for the furnishing of
services by or to or rental of real or personal property for or to, or
otherwise requiring payments to or by any such person, or (ii) to the knowledge
of the Company, the direct or indirect owner of an interest (other than
non-affiliated holdings in publicly-held companies) in any business
organization that is or was a competitor, supplier or customer of the Company.
4.18 Brokers and Finders.
No person or entity acting on behalf or under the authority of the
Company is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the issuance of the Shares and the Warrant or the
consummation of any of the transactions contemplated by the Documents.
4.19 Disclosure.
No representation or warranty of the Company contained in this
Agreement or the Schedules hereto, when read together, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
4.20 Insurance.
The Company maintains (i) fire and casualty insurance policies, with
extended coverage, sufficient in amount to allow it to replace any of its
properties which might be
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damaged or destroyed, and liability policies in amounts reasonable
and customary for the Company's business, (ii) key person life insurance policy
on the life of Candice Carpenter in the face amount of at least $1,000,000,
(iii) Errors and Omissions Insurance and (iv) Directors and Officers Insurance.
5. Representations and Warranties of the Investor.
The Investor represents and warrants to the Company as
follows:
5.1 Organization.
The Investor is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
corporate or partnership power and authority to enter into the Documents to
which it is a party, to perform its obligations thereunder, and to consummate
the transactions contemplated thereby.
5.2 Authorization.
The Investor has taken all action necessary to authorize its
execution and delivery of the Documents to which it is a party, its performance
of its obligations thereunder, and its consummation of the transactions
contemplated thereby. Each Document to which the Investor is a party has been
executed and delivered by an officer or other authorized representative of the
Investor in accordance with such authorization. Each Document to which the
Investor is a party constitutes a valid and binding obligation of the Investor,
enforceable in accordance with its terms, subject to bankruptcy,
reorganization, insolvency, moratorium, and similar laws affecting creditors'
rights generally and to general principles of equity.
5.3 Investment Representations and Warranties.
(a) Any Shares and Warrant Shares acquired by the Investor hereunder
and any shares of Common Stock issuable upon conversion thereof will be
acquired by it hereunder for its own account, for investment and not with a
view to the distribution thereof, nor with any present intention of
distributing the same.
(b) The Investor understands that any Shares and Warrant Shares
acquired by it hereunder have not been, and any shares of Common Stock issuable
upon conversion thereof will not be, registered under the Securities Act or
registered or qualified under any state securities or "blue-sky" laws, by
reason of their issuance in a transaction exempt from the registration and/or
qualification requirements thereof, and that they must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or registered or qualified under any applicable state securities or "blue-sky"
laws or is exempt from registration and/or qualification.
(c) The Investor understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to the Investor)
promulgated under the Securities Act depends on the satisfaction of various
conditions and that, if applicable, Rule 144 may only afford the basis for
sales under certain circumstances and only in limited amounts.
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(d) Without limitation of the Investor's rights under Section 11 or
any of the representations and warranties of the Company contained herein, the
Investor acknowledges that the Investor has met with representatives of the
Company and has had the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of the Shares and the
Warrant, and to obtain any additional information which the Company possessed
or could acquire without unreasonable effort or expense, and has generally such
knowledge and experience in business and financial matters and with respect to
investments in securities of privately held companies as to enable the Investor
to understand and evaluate the risks of such investment and form an investment
decision with respect thereto.
(e) The Investor has no need for liquidity in its investment in the
Company, and is able to bear the economic risk of such investment for an
indefinite period and to afford a complete loss thereof.
(f) The Investor is an "accredited investor" as such term is defined
in Rule 501 (the provisions of which are known to the Investor) promulgated
under the Securities Act. (g) The Investor has not been formed solely for the
purpose of effecting its investment hereunder.
5.4 Brokers and Finders.
No person or entity acting on behalf or under the authority of the
Investor is or will be entitled to any broker's, finder's, or similar fee or
commission in connection with the transactions contemplated hereby.
5.5 Promissory Note.
The Promissory Note has been duly authorized, executed and delivered
by NBC to the Investor and is a validly issued and outstanding obligation of
NBC. The Promissory Note has been duly assigned by the Investor to the Company
as of the date hereof. NBC has authorized and approved the assignment of the
Promissory Note to the Company.
6. Actions Prior To, Simultaneous With or Immediately Upon the Closing.
Prior to, at or immediately upon the Closing, the following actions
have been, are being or will be taken:
6.1 Certificate of Amendment.
The Certificate of Amendment of Certificate of Incorporation has been
filed with and accepted by the Secretary of State of the State of Delaware and
has become effective.
6.2 Promissory Note.
The Promissory Note has been executed by NBC and delivered to the
Investor and the Investor has assigned and delivered to the Company the
Promissory Note.
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6.3 Stockholders' Agreement.
A counterpart signature page to the Stockholders' Agreement has been
executed and delivered by the Investor.
6.4 Registration Rights Agreement.
A counterpart signature page to the Registration Rights Agreement has
been executed and delivered by the Investor.
6.5 Supplement.
A Supplement to the Stockholders' Agreement and
Registration Rights Agreement has been executed and delivered by
all parties thereto.
6.6 Required Consents.
All consents, approvals and other actions of, and notices and filings
with, all entities and persons as may be necessary or required with respect to
the execution and delivery by the parties of the Documents, and the
consummation by the parties of the transactions contemplated thereby, have been
obtained or made.
6.7 Authorizing Actions of the Company.
The Investor is receiving certified copies of all requisite corporate
actions taken by the Company to authorize its execution and delivery of the
Documents and its consummation of the transactions contemplated thereby, and
such other corporate documents and other papers as the Investor or its counsel
may reasonably request.
6.8 Lock-Up Agreement
The Investor shall have executed and delivered to the Company a
Lock-up Agreement substantially in the form of Exhibit F hereto.
6.9 Opinion of Counsel.
The Investor is receiving the opinion dated the date hereof of
Orrick, Herrington & Sutcliffe LLP, counsel to the Company, in the form of
Exhibit G hereto.
6.10 Stock Certificates.
The Company is delivering to the Investor a certificate or
certificates, duly executed on behalf of the Company, for the Shares and the
Warrants purchased by the Investor and the Investor is delivering to the
Company the full purchase price for such Shares and Warrants in accordance with
Section 3.1(b) hereof.
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6.11 Secretary's Certificate.
The Investor has received a certificate of the Secretary of the
Company certifying as to the Certificate of Incorporation and By-laws of the
Company, the resolutions of the Board of Directors of the Company (the "Board")
and stockholders of the Company with respect to the subject matter hereof and
the incumbency of certain officers of the Company.
6.12 Compliance Certificate.
(a) The Company shall deliver a certificate of a senior authorized
officer of the Company substantially in the form of Exhibit H-1 hereto.
(b) The Investor shall deliver a certificate of a senior authorized
officer of the Investor substantially in the form of Exhibit H-2 hereto.
6.13 Hart-Scott-Rodino.
The waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR Act") with respect to the transactions
contemplated by the Documents shall have expired or been terminated.
7. Covenants.
For purposes of the following covenants, the term "Subsidiary" means
all entities formed or acquired after the date hereof of which the Company
owns, directly or indirectly, at least a majority of the capital stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of any such
entities.
7.1 Access to Records.
The Company shall, and shall cause each Subsidiary to, afford to the
Investor and its authorized employees, counsel, accountants and other
representatives, upon reasonable notice and during ordinary business hours, (i)
full access to all books, records, and properties of the Company and such
Subsidiary, and (ii) the opportunity to interview any officer of the Company
regarding its affairs.
7.2 Budget.
At least 30 days before the beginning of each fiscal year of the
Company, the Company shall deliver to the Investor an
operating plan and budget for such fiscal year (the "Budget") in
such form as shall be approved by the Board.
7.3 Financial Reporting.
Until such time as (i) the Company becomes subject to the reporting
requirements of the Securities and Exchange Act of 1934 or (ii) the Investor
ceases to hold or have the right to acquire upon conversion of Series E
Preferred Stock, at least 20% of the Common Stock issued
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or issuable to the Investor upon conversion of the Series E Preferred
Stock, the Company shall deliver to the Investor the following:
(a) within 30 days after the end of each month, (i) the unaudited
balance sheet of the Company at the end of such month, (ii) the unaudited
statements of income and cash flows of the Company for such month, together
with comparisons to the statement of income and cash flows for the previous
month, and (iii) comparative unaudited statements of income of the Company for
the year to date and the Budget for the year to date, in each case prepared by
the Company;
(b) within 45 days after the end of each fiscal quarter of the
Company, (i) the unaudited balance sheet of the Company at the end of such
quarter, together with comparisons to the balance sheet of the Company to the
corresponding quarter in the prior fiscal year and to the current Budget, and
(ii) the unaudited statements of income and cash flows of the Company for such
quarter, together with comparisons to the unaudited statements of income and
cash flows of the Company for the corresponding quarter in the prior fiscal
year and to the current Budget, in each case prepared by the Company; and
(c) within 90 days after the end of each fiscal year of the Company,
(i) the audited balance sheet of the Company at the end of such fiscal year,
together with comparisons to the audited balance sheet of the Company at the
end of the prior fiscal year and to the current Budget, (ii) the audited
statements of income and cash flows of the Company for such fiscal year,
together with comparisons to the audited statements of income and cash flows of
the Company for the prior fiscal year and to the current Budget, and (iii) an
audit report of a nationally-recognized firm of independent certified public
accountants on such balance sheets and statements.
All financial statements to be delivered under this Section shall (i)
be in accordance with the books and records of the Company, (ii) shall have
been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the absence of footnotes required by GAAP and subject
to year-end audit adjustments) and (iii) shall include management's discussion
and analysis. At any time at which the Company has any Subsidiaries, all such
financial statements shall be the consolidated financial statements of the
Company and such Subsidiaries.
7.4 Payment of Obligations.
The Company shall, and shall cause each Subsidiary to, pay or
discharge or cause to be paid or discharged all material claims or demands, and
all Taxes levied or imposed upon the Company or any Subsidiary or upon the
income, profits or property of the Company or any Subsidiary; provided,
however, that the Company or such Subsidiary shall not be required to pay or
discharge or cause to be paid or discharged any such claim, demand, or Tax the
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings and for which adequate provision has been made.
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7.5 Insurance.
(a) The Company shall, and shall cause each Subsidiary to, maintain
with financially sound and reputable insurers such insurance as may be required
by law and such other insurance, to such extent and against such hazards and
liabilities, as is customarily maintained by companies similarly situated and
exercising sound business practice.
(b) Without limiting the generality of paragraph (a) above, the
Company shall maintain a life insurance policy on the life of Candice
Carpenter, which policy shall be issued by a financially sound and reputable
insurer, be in the face amount of at least $1,000,000, and name the Company as
beneficiary.
7.6 Nondisclosure and Invention Assignment Agreement.
The Company shall, and shall cause each Subsidiary to, require each
officer and employee of the Company or such Subsidiary, as a condition to the
employment of such officer or employee, to execute and deliver a non-disclosure
and assignment of inventions agreement in such form as shall be approved by the
Board. The Company shall obtain a similar agreement (provided that appropriate
changes shall be made in such agreement to describe the appropriate nature of
such third party's relationship with the Company) from each consultant or
independent contractor to the Company who or which has access to the Company's
confidential information.
7.7 Conduct of Business; Reservation of Common Stock.
The Company shall, and shall cause each Subsidiary to, (a) take all
actions required to assure that the Company and such Subsidiary remains duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) take all actions required to assure that
the Company and such Subsidiary maintains all requisite governmental authority,
licenses, and permits to conduct its business, (c) conduct its business in
compliance with all Laws and (d) keep proper books of record and account of its
transactions in accordance with generally accepted accounting principles and
practices. The Company will, from time to time, in accordance with the laws of
the State of Delaware, increase the authorized amount of Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall be insufficient to permit conversion of all of the shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock outstanding and the
issuance of shares of Common Stock upon conversion of the Warrant Shares issued
or issuable upon the Investor's exercise of the Warrant.
7.8 Employee Stock.
As of December 31, 1998, the Company has reserved (i) 5,395,644
shares of Common Stock under the ESOP and (ii) 1,082,178 shares of Common Stock
under the 1997 Acquisition Stock Option Plan ("ASOP), in each case for future
issuance upon exercise of options or as restricted stock granted to employees,
directors, officers and consultants of the Company. The Company may grant
options or restricted stock at any time and from time to time under such
agreements, plans, or arrangements as may be recommended by the chief executive
officer of the Company and approved by a majority of the Board, except that
each such
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agreement, plan, or arrangement shall, unless otherwise approved by a
majority of the Board (excluding any member of management of the Company
serving on the Board as to whom such Board action is specifically applicable),
provide for vesting in equal annual portions of such options over a period of
four years following the date of grant. Such agreements, plans, and
arrangements may provide that any shares issued upon exercise of such options
shall be subject to the Voting Trust Agreement or substantially similar
agreement.
7.9 Preemptive Right.
(a) The following terms have the following meanings:
"Equity Securities" means (i) all shares of capital stock of the
Company, (ii) all securities convertible into or exchangeable for shares of
capital stock of the Company, and (iii) all options, warrants, or other rights
to purchase or otherwise acquire from the Company shares of such capital stock,
or securities convertible into or exchangeable for shares of such capital
stock.
"New Securities" means all Equity Securities other than:
(i) shares of Common Stock, and options therefor, granted or
issued under the ESOP, the ASOP, the 1999 Plan, the Acquisition Plan, the
Director Plan and the Purchase Plan;
(ii) shares of Common Stock issued upon conversion of Series A
Preferred Stock, Series B Preferred Stock, Series B-1 Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock;
(iii) shares of Series B Preferred Stock issued upon conversion
of shares of Series B-1 Preferred Stock;
(iv) shares of Common Stock issued upon exercise of the stock
subscription warrant issued by the Company to Bear Stearns & Co., Inc. on
May 28, 1997;
(v) shares of Series B Preferred Stock or Common Stock issued
upon exercise or exchange of the AOL 1995 Warrants or AOL 1996 Warrants
(as such terms are defined in the Series C Preferred Stock Purchase
Agreement dated as of May 28, 1997 (the "Series C Agreement") among the
Company and the investors identified therein);
(vi) shares of Series C Preferred Stock or Common Stock issued
upon exercise or exchange of the 1997 Warrants (as such term is defined in
the Series C Agreement);
(vii) Additional Shares, if any, issued pursuant to the terms of
the Common Stock Purchase Agreement dated as of February 24, 1998 between
the Company and Tenet Healthcare Corporation;
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<PAGE>
(viii) shares of capital stock of the Company issued to one or
more broadcast networks or their affiliates in exchange for in- kind
consideration (which may include by way of example and not in limitation
thereof, promotion, marketing and advertising time);
(ix) shares of any class of capital stock of the Company issued
on a pro rata basis to all holders of such class as a stock dividend or
upon any stock split or other subdivision of shares of capital stock; and
(x) shares of capital stock of the Company issued as
consideration in connection with the acquisition by the Company of all or
substantially all assets or all capital stock of any person or entity.
(b) If the Company proposes to offer New Securities to any person or
entity at any time, the Company shall, before such offer, deliver to the
Investor an offer (the "Offer") to sell, upon the terms set forth in this
Section 7.9, the Investor's Proportionate Percentage (as hereinafter defined)
of the New Securities (the "Offered Securities") (and to sell to the Investor
the Investor's Proportionate Percentage of the Offered Securities) to the
Investor. The Offer shall state that the Company proposes to issue the Offered
Securities and specify their number and terms (including purchase price). The
Offer shall remain open and irrevocable for a period of 30 days (the
"Preemptive Period") from the date of its delivery.
(c) The Investor may accept the Offer by delivering to the Company a
notice (the "Purchase Notice") within the Preemptive Period. The Purchase
Notice shall state the number of Offered Securities the Investor desires to
purchase. The sale of Offered Securities with respect to which the Investor
delivered a Purchase Notice shall be made on a business day, as designated by
the Company, after expiration of the Preemptive Period on those terms and
conditions of the Offer not inconsistent with this Section.
(d) If the Investor does not subscribe to purchase its Proportionate
Percentage of the Offered Securities, the Company may issue and sell the
remaining Offered Securities or any portion thereof not so subscribed for on
the terms and conditions of the Offer to any person or entity within 90 days
after expiration of the Preemptive Period. If such issuance is not made within
such 90-day period, the restrictions provided for in this Section shall again
become effective.
(e) Anything contained in this Section 7.9 to the contrary
notwithstanding, the rights of the Investor and the obligations
of the Company under this Section 7.9 are in each respect limited
by, and subject to, the provisions of Section 8 hereof.
(f) The obligations of the Company under this Section 7.9 shall not
apply to (i) an underwritten public offering of Common Stock of the Company
registered pursuant to the Securities Act (an "IPO") or (ii) a Corporate
Transaction (as defined in the Certificate of Amendment).
(g) As used herein, the term "Proportionate Percentage" shall mean,
as to the Investor, that percentage figure which expresses the ratio that (x)
the number of outstanding shares of Common Stock then owned by the Investor
bears to (y) the aggregate number of all
20
<PAGE>
outstanding shares of Common Stock of the Company. For purposes
solely of the computation required under the preceding clauses (x) and (y), all
of the Company's outstanding securities that are convertible into or
exercisable or exchangeable directly or indirectly for shares of Common Stock
shall be deemed to have been converted into or exercised or exchanged for
shares of Common Stock at the rate at which such securities are convertible
into or exercisable or exchangeable for shares of Common Stock in effect at the
time of receipt by the Company of the Purchase Notice.
7.10 Termination.
The obligations of the Company under Sections 7.1 through 7.3 and 7.5
through 7.9 shall terminate as to the Investor when the Investor ceases to hold
or have the right to acquire upon conversion of Series E Preferred Stock, any
shares of Common Stock, and shall in any event cease and terminate and be of no
further force or effect generally at such time as the Company shall have
consummated the first underwritten public offering for the account of the
Company of Common Stock pursuant to a registration statement filed under the
Securities Act at an offering price to the public that would reflect a price
per share of Common Stock (subject to equitable adjustment for stock splits,
stock dividends, stock combinations, recapitalization and like occurrences) of
not less than $3.93 and with aggregate proceeds (net of underwriting discounts
and commissions) to the Company of not less than $20,000,000 (the "Qualified
Public Offering").
7.11 Hart-Scott-Rodino.
The Investor and the Company shall comply promptly with the filing
requirements of the HSR Act, shall reasonably cooperate with each other with
respect to such filing requirements, and shall use reasonable efforts to obtain
all necessary or appropriate waivers, consents and approvals thereunder;
provided, that, notwithstanding anything to the contrary contained in this
Agreement, no party nor any of their affiliates shall be required to make any
disposition, including, without limitation, any disposition of, or any
agreement to hold separate, any subsidiary, asset or business, and no party
hereto shall be required to make any payments of money nor comply with any
condition or undertaking that, individually or in the aggregate, would
materially affect the economic benefits to such party of the transactions
contemplated hereby and by the Documents.
8. Confidentiality.
The Investor agrees to and shall keep strictly confidential and will
not disclose or divulge (a) the information required to be delivered by the
Company to the Investor pursuant to Sections 7.1, 7.2 and 7.3 hereof and (b)
any other confidential, proprietary or secret information which the Investor
may obtain from the Company that is, if communicated in writing, marked or
otherwise clearly indicated as being "confidential" or, if communicated orally,
is indicated at the time of communication as being confidential and the Company
within ten (10) business days thereafter confirms in writing the confidential
nature thereof, unless required to be disclosed by law or regulation or
pursuant to any judgment, order, subpoena or decree of any court having
competent jurisdiction, or unless such information is already known to the
Investor or is or becomes publicly known, or unless the Company gives its
written consent to the Investor's
21
<PAGE>
release of such information, except that no such written consent shall be
required (and Investor shall be free to release such information) if such
information is to be provided to Investor's lawyer or accountant, or to an
officer, director, partner of an Investor if such person is made aware of the
confidential nature of such information and agrees to maintain the
confidentiality of such information as required by this Section 8.
9. Waiver of Conflict.
The Investor (a) acknowledges that (i) OHS represents America Online,
Inc. ("AOL") on an on-going basis with respect to various matters unrelated to
the Company, AOL being represented by separate counsel (which may include its
in-house legal personnel) on matters involving the Company; and (ii) the
Company and AOL have consented, and the Company hereby confirms its consent, to
such representation and have waived, and the Company hereby confirms its waiver
of, any conflict-of-interest or potential conflict-of-interest arising
therefrom; and (b) waives any such conflict-of-interest or potential
conflict-of-interest arising therefrom and consents to OHS's representation of
the Company.
10. Survival of Representations and Warranties.
The representations and warranties contained in Sections 4.1, 4.3,
4.5(e) and (f), 4.18, 5.1, 5.2 and 5.4 shall survive the date hereof
indefinitely and all other representations and warranties contained herein
shall survive the date hereof until the fourth anniversary of the date hereof.
11. Indemnification.
(a) The Company shall indemnify, defend and hold the Investor
harmless against all liability, loss or damage, together with all reasonable
costs and expenses related thereto (including reasonable legal fees and
expenses), relating to or arising from the untruth, inaccuracy or breach of any
of the representations, warranties or agreements of the Company contained in
this Agreement.
(b) The Investor shall indemnify and hold the Company harmless
against all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including reasonable legal fees and expenses),
relating to or arising from the untruth, inaccuracy or breach of any of the
representations, warranties or agreements of the Investor contained in this
Agreement.
12. Fees and Expenses.
Each party hereto shall bear its own costs and expenses incurred on
its behalf in connection with the preparation, negotiation, execution, and
delivery of the Documents and the preparation for and consummation of the
transactions contemplated thereby and therein.
13. Assignment; Parties in Interest.
This Agreement and the rights and obligations of the parties
hereunder shall be assignable by the parties hereto and their respective
successors and assigns, except that the
22
<PAGE>
Investor may assign its rights hereunder only in connection with a
sale or transfer of Shares, the Warrant, the Warrant Shares or Common Stock
issuable upon conversion of the Series E Preferred Stock, to (a) any
majority-owned direct or indirect subsidiary of the Investor or General
Electric Company (provided that such rights may be exercised by such subsidiary
only for so long as such subsidiary continues to be majority-owned by the
Investor or General Electric Company) and (b) otherwise to any other person or
entity to whom at least 250,000 shares (as constituted on the date hereof) of
Series E Preferred Stock, or Common Stock issuable upon conversion thereof (or
lesser number of such shares if representing all of the shares then held by the
Investor), have been sold or otherwise transferred in accordance with the terms
of the Stockholders' Agreement, provided, however, that the Company is given
written notice at the time of such assignment stating the name and address of
the assignee and identifying the securities with respect to which the rights
and benefits hereunder are being assigned and such assignee expressly agrees in
writing with the Company to be bound by and to comply with all applicable
provisions of this Agreement. Anything contained herein to the contrary
notwithstanding, the Investor (or permitted assignee of the Investor) shall
not, without the consent of the Company, be permitted to assign any rights
and/or benefits hereunder to a person that is then actively engaged in a
business that is directly competitive with the business then primarily and
actively conducted or engaged in by the Company other than a majority-owned
subsidiary thereof. Any assignment pursuant to this Section 13 shall not
relieve, release or otherwise discharge the Investor effecting such assignment
from its obligations under this Agreement. This Agreement shall bind and inure
to the benefit of the Company, the Investor, and its respective successors and
permitted assigns.
14. Entire Agreement.
This Agreement (including the Exhibits and Schedules hereto) contains
the entire understanding of the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings among the parties
with respect to such subject matter, including, without limitation, any oral or
written communications made by an officer, employee, agent or affiliate of the
Company in connection therewith. The parties agree, in particular, that this
Agreement supercedes the Series E Stock Purchase Agreement dated December 10,
1998 between the Company and NBC.
15. Notices.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if sent by nationally-recognized
overnight courier, by telecopy, or by registered or certified mail, return
receipt requested and postage prepaid, addressed as follows:
23
<PAGE>
if to the Company:
iVillage Inc.
170 Fifth Avenue
New York, New York 10010
Fax: (212) 604-9133
Telephone: (212) 604-0963
Attention: Candice Carpenter;
with a copy to:
Orrick Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Fax: (212) 506-5151
Telephone: (212) 506-5235
Attention: Martin H. Levenglick, Esq.;
if to the Investor:
National Broadcasting Company, Inc.
30 Rockefeller Plaza
New York, New York 10112
Fax: (212) 977-7165
Telephone: (212) 664-4444
Attention: Vice President, Corporate and
Transactions Group, Law Department;
or to such other address as the party to whom notice is to be
given may have furnished to the other parties in writing in
accordance herewith. Any such notice or communication shall be
deemed to have been received (a) in the case of personal
delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day
after the date when sent, (c) in the case of telecopy
transmission, when received, and (d) in the case of mailing, on
the third business day following that on which the piece of mail
containing such communication is posted.
16. Amendments.
The terms and provisions of this Agreement may only be modified or
amended, or the performance thereof waived, pursuant to an instrument signed by
(a) the Company and the Investor or (b) the party against whom enforcement of
such modification, amendment or waiver is sought.
17. Counterparts.
This Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
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<PAGE>
18. Headings.
The section and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Governing Law.
This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New York, without giving effect to any law or
rule that would cause the laws of any jurisdiction other than the State of New
York to be applied.
25
<PAGE>
[COUNTERPART SIGNATURE PAGE TO THE SERIES E
PREFERRED STOCK PURCHASE AGREEMENT DATED AS
OF MARCH 9, 1999]
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first above written.
iVILLAGE INC.
By: /s/ Caterina A. Conti
-------------------------------------------
Name: Caterina A. Conti
Title: General Counsel
THE INVESTOR:
GE INVESTMENTS SUBSIDIARY, INC.
By: /s/ Alan M. Lewis
-------------------------------------------
Name: Alan M. Lewis
Title: Exec. V.P.
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Thomas A. Rogers
-------------------------------------------
Name: Thomas A. Rogers
Title:
<PAGE>
March 9, 1999
Candice Carpenter
Chief Executive Officer
iVillage Inc.
170 5th Avenue, 5th floor
New York, N.Y. 10010
Re: NBC/iVillage Advertising Purchases
----------------------------------
Dear Ms. Carpenter:
This letter amends and restates in its entirety the agreement between
the National Broadcasting Company, Inc. ("NBC"), and iVillage Inc.
("Advertiser") dated November 11, 1998 (the "Original Letter Agreement") with
respect to the Advertiser's purchase of certain NBC Television ("NBC TV")
advertising inventory, Exhibit A of the Original Letter Agreement is
incorporated herein by this reference and made a part of this Letter Agreement
in its entirety. The amended and restated terms and conditions shall be as
follows:
1. General Terms. NBC shall provide Advertiser with the use of fifteen
(15) and thirty (30) second advertising spots (each, a "Spot") to be telecast on
NBC TV reasonably spread over 36 months commencing on January 1, 1999. All such
Spots run by Advertiser shall be, as much as practicable, broadcast nationally
by NBC TV, and shall, at all times, be subject to NBC TV's standard terms and
conditions for such advertising which are described in the "Participating
Sponsorship Agreement" attached to the Original Letter Agreement as Exhibit A
thereto (the "Standard Terms"); provided, however, that in the case of a
conflict between the terms of this Letter Agreement and the terms of the
Standard Terms, the terms of this Letter Agreement shall govern. For purposes
of the Standard Terms, Advertiser shall be both the "Advertiser" and the
"Agency" as such terms are used therein. Advertiser acknowledges that the
commercial material previously delivered to NBC may be telecast by NBC TV on any
Spot; provided, however, that it is understood that if Advertiser supplies any
new commercial material to NBC, Advertiser instructs NBC to use such new
material in lieu of the commercial material previously delivered to NBC, and
such new material complies with the standards described in the Standard Terms,
including NBC Advertising Standards, then NBC will make reasonable commercial
efforts to telecast such new material on all Spots commencing 72 hours after
receipt of such new material by NBC.
2. Spots for Cash. (a) NBC undertakes that Advertiser's Spots telecast (i)
prior to January 1, 2000 (including all Spots telecast on or prior to the date
of this Letter Agreement) shall have an aggregate value equal to $13,500,000,
(ii) on or after January 1, 2000 and prior to January 1, 2001 shall have an
aggregate value equal to $8,500,000 and (iii) on or after January 1, 2001 and
prior to January 1, 2002 shall have an aggregate value equal to $8,500,000, in
each case with the value of each Spot calculated at 85% of the gross market
<PAGE>
rate charged and agreed by NBC at such time; provided, however, that in the
event that Advertiser does not consummate a Qualified Public Offering (as such
term is defined in Advertiser's Certificate of Incorporation) by June 30, 1999,
Advertiser's Spots telecast prior to January 1, 2000 (including all Spots
telecast on or prior to the date of this Letter Agreement) shall have an
aggregate value not exceeding $5,000,000.
(b) NBC shall provide Advertiser with a written report within 10 business
days after the end of each calendar month following the date hereof setting
forth the aggregate value of the Spots telecast by NBC in the preceding month
(each, a "Monthly Report") and, within 10 business days after the end of each
calendar quarter, a written non-binding estimate of the Spots that NBC intends
to telecast during the upcoming calendar quarter. NBC shall provide Advertiser
with a Monthly Report for the months of January and February 1999 within 10
business days after the end of February 1999. Within 30 days after receiving
each Monthly Report, absent manifest error, Advertiser shall pay NBC in cash the
amount set forth in such Monthly Report.
3. Spot Placement and Terms. (a) The Spots shall be targeted, as much as
commercially reasonable (as determined by NBC), to maximize reach and frequency
to women aged 25-49. The Spots shall be telecast on the Dates, Days and Times
determined by NBC in its sole discretion (following reasonable consultation with
Advertiser); provided, however, that (i) the Spots telecast by NBC TV shall be
teleast primarily in prime time, (ii) nothwithstanding anything to the contrary
contained herein, 10% of the value of the Spots in any calendar year may, in
NBC's sole discretion, be telecast on advertising spots primarily promoting
Advertiser or any of its brands or channels on Snap.com (provided that all such
co-branded spots shall be subject to Advertiser's consent, such consent not to
be unreasonably withheld), (iii) nothwithstanding anything to the contrary
contained herein, 2% of the value of the Spots in any calendar year may be
placed in on-line advertising or promotion on any Internet, world-wide-web or
other service delivered via interactive delivery owned or controlled by NBC
(such service subject to Advertiser's prior approval, such approval not to be
unreasonably withheld) with the value for such on-line advertising or promotion
calculated at the market rate (less any agency commission) charged by such
service at such time.
(b) The parties agree that no agency fees or other expenses may be
deducted by Advertiser in any way in connection with determining the amount of
cash to be paid to NBC pursuant hereto at any time. Advertiser acknowledges that
NBC makes no guarantee regarding what the actual rating for any particular
Program will be. The parties agree that the payment of cash pursuant hereto
constitutes full and complete payment to NBC for the transactions and
considerations contemplated hereby.
4. Distribution Arrangements. In addition to the other provisions of this
Letter Agreement, Advertiser agrees to pay NBC $1,100,000 for prominent
placement of Advertiser on NBC.com, which placement shall Commence on 1 January
1999 and terminate on 31 December 1999. The payments for such placement shall be
made in equal installments on the first business day of each calendar quarter
during 1999.
5. Representations and Warranties. NBC and Advertiser each represent and
warrant that this Letter Agreement has been duly authorized, executed and
delivered by such party and that this Letter Agreement constitutes the legal,
valid and binding obligations of such party, enforceable against it in
accordance with its terms.
6. Confidentiality. Neither party shall issue a press release or make any
statement to the general public concerning this Letter Agreement, the Spots, or
the existence thereof, without the express prior written consent of the other;
provided, however, that NBC agrees that Advertiser may file this Letter
Agreement with the Securities and Exchange Commission (the "SEC") and/or
describe this Letter Agreement in any registration statement filed with the SEC,
in each case if so required by the Securities Act of 1933 and Securities
Exchange Act of 1934, in each case, as amended, the rules and regulations
related thereto or any applicable
2
<PAGE>
state laws (the "Securities Laws") as long as Advertiser agrees to use its best
efforts to obtain confidential treatment of the economic and other material
terms hereof under the Securities Laws and to consult with NBC during the
process.
7. Termination. (a) Notwithstanding any other remedy available to NBC, in
the event that:
(i) NBC notifies Advertiser in writing (with specificity) that Advertiser has
materially breached this Letter Agreement and Advertiser has not cured such
alleged breach within ten (10) days of its receipt of such notice; or
(ii) upon the occurence of a Corporate Transaction (as hereinafter defined);
or
(iii) Advertiser admits in writing its inability to pay its debts generally;
makes a general assignment for the benefit of creditors; has any proceeding
instituted by or against it seeking to adjudicate it as bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of Advertiser or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or similar official for it or any substantial part of its property;
provided, in the case where such proceeding is involuntarily instituted
against Advertiser, such proceeding remains undismissed after thirty (30)
days,
then, in any such case, NBC shall have the right, but not the obligation, to
terminate this Letter Agreement, without prejudice to the rights of the parties
hereunder and thereunder, and require Advertiser to immediately pay NBC a cash
amount equal to the value of the advertising already telecast or
delivered by NBC as of such termination. Notwithstanding the foregoing,
the terms contained in Sections 5, 6, 7, 8 and 9 shall survive the termination
hereof. Any such termination right in connection with a Corporate Transaction
shall be exercisable no later than the later to occur of (x) twenty (20) days
prior to the consummation of such Corporate Transaction and (y) ten (10)
business days after receipt by NBC of notice (which notice shall identify the
Competitor, be in writing, explicitly state that it is being delivered in
accordance with this Section 7 and provide NBC with such additional information
as has been provided to the other stockholders of Advertiser (from Advertiser of
such Corporate Transaction (which termination shall become effective only upon
the consummation of such Corporate Transaction). For purposes of this Section 7,
the following terms shall have the following meanings:
(i) "Corporate Transaction" shall mean (A) any consolidation, reorganization
or merger of Advertiser with a Competitor, other than a transaction resulting in
the holders of the capital stock of Advertiser (prior to such consolidation,
reorganization or merger) having Control over the surviving or resulting entity,
(B) any Competitor becoming the holder of a majority of the capital stock of
Advertiser entitled to vote for the election of directors or (C) any sale,
transfer or other disposition by Advertiser of all or substantially all of its
assets to a Competitor.
(ii) "Competitor" shall mean a television broadcast network entity that
directly competes with NBC or an entity that is an Affiliate of such television
broadcast network entity.
(iii) "Affiliate" shall mean a person that directly, or indirectly through one
or more intermediates, Controls, or is Controlled by, or is under common Control
with a television broadcast network.
(iv) "Control" and "Controlled by" means (A) the director or indirect
ownership of more than 50% of the voting capital stock or other voting
securities, as the case may be, of such entity or (B) the direct or indirect
ownership of at least 30% of the voting capital stock or other voting
3
<PAGE>
securities, as the case may be of such entity and the right to vote by contract
or otherwise for a majority of the board of directors or other governing body of
such entity.
8. Miscellaneous. This Letter Agreement constitutes the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations, and
understandings between the parties, both oral and written relating to the
subject matter hereof. No waiver or modification of any provision of this Letter
Agreement shall be effective unless in writing and signed by both parties. Any
waiver by either party of any provision of this Letter Agreement shall not be
construed as a waiver of any other provision of this Letter Agreement, nor shall
such waiver operate as or be construed as a waiver of such provision respecting
any future event or cirucmstance. The terms of this Letter Agreement shall apply
to parties hereto and any of their successors or assigns. This Letter Agreement
may be executed in counterparts, each of which when executed shall be deemed to
be an original but all of which taken together shall constitute one and the same
agreement.
9. Governing Law and Jurisdiction. This Letter Agreement shall be governed
by and construed under the laws of the State of New York applicable to contracts
fuly performed in New York, without regard to New York conflicts law. The
parties hereto irrevocably consent to and submit to the exclusive jurisdiction
of the federal and state courts located in the County of New York. The parties
hereto irrevocably waive any and all rights to trial by jury in any proceeding
arising out of or relating to this Agreement.
4
<PAGE>
If you are in agreement with the above terms and conditions, please
indicate your acceptance by signing in the space provided below, and return one
original to me. This Letter Agreement shall be null and void if not signed
within two (2) days of the date set forth above.
Very truly yours,
NATIONAL BROADCASTING COMPANY, INC.
By: /s/ Thomas A. Rogers
-------------------------------
Name: Thomas A. Rogers
----------------------------
Title:
----------------------------
ACCEPTED AND AGREED:
iVILLAGE INC.
By: /s/ Caterina A. Conti
-------------------------------
Name: Caterina A. Conti, Esq.
----------------------------
Title: General Counsel and Secretary
-----------------------------
5
<PAGE>
FORM OF
PROMISSORY NOTE
New York, New York
US$15,497,555.48 March 9, 1999
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE REOFFERED
OR SOLD UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
FOR VALUE RECEIVED, NATIONAL BROADCASTING COMPANY, INC., a
Delaware corporation ("Maker"), by this promissory note (the "Note")
unconditionally promises to pay to the order of GE Investments Subsidiary,
Inc., a Delaware corporation (the "Holder"), the principal sum of Fifteen
Million Four Hundred Ninety Seven Five Hundred Fifty Five and 48/100 United
States Dollars (US$15,497,555.48), together with interest at the rate of five
percent (5%) per annum on the unpaid principal balance from the date hereof to
the date such principal balance is paid in full, as set forth in paragraph 2
below. The principal amount, plus interest thereon, shall be due and payable in
twelve (12) equal installments of $1,398,783.20 each, payable on each April 1,
July 1, October 1 and January 1 thereafter (each, a "Payment Date"), until
January 1, 2002. Any principal, interest or any other amount hereunder which is
not paid when due (whether as stated, by acceleration or otherwise) shall, to
the extent permitted by law, thereafter bear interest at the rate per annum 2%
above the rate described above.
Terms and Provisions
1. Payments. All payments to be made hereunder by the Maker shall be
made without set-off or counterclaim, in United States dollars in immediately
available funds at such place as may be designated by the Holder in writing
from time to time. Whenever any payment hereunder shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the succeeding
Business Day. "Business Day" shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
2. Interest. Interest shall be computed on the basis of a year of 365
days for actual days elapsed and shall be payable from the date hereof on each
Payment Date until maturity (whether as stated, by acceleration or otherwise),
on demand in respect of any past due amount and upon payment in full of this
Note. Interest shall accrue and be paid by the Maker in arrears on each Payment
Date until maturity. Anything in this Note to the contrary notwithstanding, the
Holder shall not be permitted to charge or receive, and the Maker shall not be
obligated to pay, interest in excess of the maximum rate from time to time
permitted by applicable law.
3. Prepayment. The Maker shall have the right to prepay this Note in
whole or in part at any time, without premium or penalty, provided such
prepayment is accompanied by the payment
Page 1
<PAGE>
of all unpaid interest accrued to the date of prepayment and any other
amounts then due under this Note.
4. Representations and Warranties. The Maker hereby represents and
warrants to the Holder that: (a) the Maker is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, has
the full power and authority, and the legal right, to make, deliver and perform
the Note and its obligations hereunder on the terms and conditions hereof and
has taken all necessary corporate action to authorize the execution, delivery
and performance of the Note and to authorize the borrowing hereunder, and this
Note has been duly executed and delivered on behalf of the Maker; (b) this Note
constitutes a legal, valid and binding obligation of the Maker enforceable
against it in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law); (c) the execution, delivery and performance of this Note,
the borrowing hereunder and the use of the proceeds thereof will not violate
any material requirement of law, any material contractual obligation of the
Maker or its subsidiaries or any of their applicable charters, bylaws or
similar documents; and (d) no Event of Default (as defined below) has occurred
and is continuing.
5. Events of Default. If (a) the Maker fails to pay when due any
principal of or interest on this Note or any other amount payable hereunder; or
(b) the Maker admits in writing its inability to pay its debts generally; makes
a general assignment for the benefit of creditors; has any proceeding
instituted by or against it seeking to adjudicate it as bankrupt or insolvent,
or seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of the Maker or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, or similar official for it or any substantial part of its property;
provided, in the case where such proceeding is involuntarily instituted against
the Maker, such proceeding remains undismissed after 30 days; or (c) any
representation or warranty made by the Maker in this Note proves to have been
incorrect in any material respect; then, and in any such event (each, an "Event
of Default"), the Holder may, by notice of default given to the Maker in
writing or by facsimile transmission, declare unpaid principal, accrued
interest and all other amounts payable under this Note to be immediately due
and payable without presentment, demand, protest or other notice of any kind,
each of which is hereby expressly waived by the Maker.
6. No Waiver. No action or omission by the Holder shall constitute a
waiver of any rights or remedies of the Holder hereunder. Such rights and
remedies are cumulative and not exclusive of any rights or remedies provided by
law. Payment of principal of and interest on this Note shall not discharge the
Maker's obligation with respect to any other amount payable hereunder.
7. Amendment; Assignment. The terms of this Note may be amended,
supplemented or modified only with the written consent of the Maker and the
Holder. This Note shall be binding upon and inure to the benefit of the Maker,
the Holder and their respective successors and
<PAGE>
assigns, except that neither the Holder nor the Maker may assign or
transfer any of its rights or obligations under this Note without the prior
written consent of the other party.
8. Governing Law; Jurisdiction. This Note is made and delivered in New
York, New York, and, pursuant to Section 5-1401 of the General Obligations Law
of the State of New York, shall be governed by and construed and interpreted in
accordance with the laws of the State of New York applicable to contracts fully
performed in New York. All judicial actions, suits or proceedings brought
against Maker or the Holder with respect to its obligations, liabilities or any
other matter under or arising out of or in connection with this Note or for
recognition or enforcement of any judgment rendered in any such proceedings
shall be brought exclusively in any state or federal court located in the
County of New York.
9. Mutilated, Destroyed or Missing Notes. If any mutilated Note is
surrendered to the Maker or the Maker receives evidence to its satisfaction of
the destruction, loss or theft of the Note, the Maker shall issue a replacement
Note. If required by the Maker, an indemnity bond must be supplied by the
Holder that is sufficient in the judgment of the maker to protect the Maker
from any loss it may suffer if the Note is replaced. The Maker may charge for
any expenses in replacing the Note.
10. Existing Promissory Note. This Note is issued as of the date
hereof by Maker to Holder pursuant to that certain Third Amendment to Note, of
even date herewith, between Maker and Holder.
NATIONAL BROADCASTING COMPANY, INC.
By: ______________________________
Name:
Title:
<PAGE>
GE Investments Subsidiary, Inc. ("GE Sub") hereby assigns this promissory note
to iVillage Inc., a Delaware corporation ("iVillage"), and iVillage hereby
accepts this promissory note from GE Sub, in accordance with Sections 3.1 and
6.2 of the Stock Purchase Agreement, dated as of March 9, 1999, between
iVillage and National Broadcasting Company, Inc. ("NBC"), pursuant to which
iVillage is selling, and GE Sub is purchasing, 4,889,030 shares of Series E
Preferred Stock of iVillage.
Dated: March 9, 1999 GE Investments Subsidiary, Inc.
By: ______________________________
Name:
Title:
iVillage Inc.
By: ______________________________
Name:
Title:
National Broadcasting Company, Inc. hereby consents to the above-referenced
assignment of this promissory note by GE Sub to iVillage.
Dated: March 9, 1999 National Broadcasting Company, Inc.
By: ______________________________
Name:
Title:
<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
March 11, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated December 23, 1998, on our audits of the financial statements of
Health ResponseAbility Systems, Inc. as of December 31, 1995 and 1996 for the
two years in the period ended December 31, 1996. We also consent to the
reference to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
New York, New York
March 11, 1999
