<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WOMEN.COM NETWORKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<CAPTION>
DELAWARE 7375 13-4059516
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CODE) IDENTIFICATION NO.)
</TABLE>
1820 GATEWAY DRIVE, SUITE 100
SAN MATEO, CALIFORNIA 94404
(650) 378-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARLEEN R. MCDANIEL
CHAIRPERSON OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
WOMEN.COM NETWORKS, INC.
1820 GATEWAY DRIVE, SUITE 100
SAN MATEO, CALIFORNIA 94404
(650) 378-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
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<S> <C>
MARK P. TANOURY DAVID J. SEGRE
VINCENT P. PANGRAZIO AMY E. REES
NICOLE C. DEIGER JAMIE W. STEWART
DAVID E. LILLEVAND WILSON SONSINI GOODRICH & ROSATI
COOLEY GODWARD LLP PROFESSIONAL CORPORATION
3000 SAND HILL ROAD 650 PAGE MILL ROAD
BUILDING 3, SUITE 230 PALO ALTO, CALIFORNIA 94304
MENLO PARK, CALIFORNIA 94025
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 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, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement number for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED PROPOSED PROPOSED
SECURITIES TO BE REGISTERED MAXIMUM MAXIMUM MAXIMUM AMOUNT OF
AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED(1) PER SHARE(2) OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------------------------------------
Common stock, $.001 par value per share............ $ $46,000,000 $12,788
- -------------------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Includes shares of common stock issuable upon exercise of the
underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
Registration Fee in accordance with Rule 457(o) of the Securities Act of
1933, as amended.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued May 13, 1999
Shares
women.comnetworks logo
COMMON STOCK
------------------------
WOMEN.COM NETWORKS, INC. IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS
OUR INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR
SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN
$ AND $ PER SHARE.
------------------------
CONCURRENT WITH THIS OFFERING, SUBJECT TO CERTAIN CONDITIONS, THE HEARST
CORPORATION HAS AGREED TO PURCHASE SHARES OF COMMON STOCK FROM THE COMPANY
IN A PRIVATE PLACEMENT AT A PRICE PER SHARE EQUAL TO THE PRICE TO THE PUBLIC.
------------------------
WE HAVE APPLIED FOR QUOTATION OF OUR COMMON STOCK ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "WOMN."
------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
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PRICE $ A SHARE
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total.............................. $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Women.com Networks, Inc. has granted the underwriters the right to purchase up
to an additional shares of common stock to cover over-allotments. Morgan
Stanley & Co. Incorporated expects to deliver the shares of common stock to
purchasers on , 1999.
------------------------
MORGAN STANLEY DEAN WITTER BT ALEX. BROWN
SALOMON SMITH BARNEY
, 1999
<PAGE> 3
[GRAPHICS]
Graphics showing the Women.com home page, a list of the topical channels
included in our network, a list of the magazine sites included in our newstand
and sample pages from our small business channel showing examples of the
services, content, community and shopping offered on that channel.
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary................... 3
Risk Factors......................... 6
Use of Proceeds...................... 17
Dividend Policy...................... 17
Capitalization....................... 18
Dilution............................. 19
Selected Financial Information....... 20
Selected Pro Forma Financial Data.... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
</TABLE>
<TABLE>
<CAPTION>
PAGE
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Business............................. 31
Management........................... 46
Certain Transactions................. 57
Principal Stockholders............... 59
Description of Capital Stock......... 62
Shares Eligible for Future Sale...... 65
Underwriters......................... 67
Legal Matters........................ 69
Experts.............................. 69
Additional Information............... 69
Index to Financial Statements........ F-1
</TABLE>
- -------------------------
We are a Delaware corporation. Our principal executive offices are located
at 1820 Gateway Drive, Suite 100, San Mateo, California 94404, and our telephone
number is (650) 378-6500. Our Internet site address is www.women.com. The
information on our Internet site is not a part of this prospectus.
In this prospectus, the terms "company," "Women.com," "we," "us," and "our"
refer to Women.com Networks, Inc., a Delaware corporation, and, unless the
context otherwise requires, "common stock" refers to the common stock, par value
$0.001 per share, of Women.com Networks, Inc.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
prospectus supplement is accurate as of any date other than the date on the
front of the document.
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE IN OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
Unless otherwise indicated, all information in this prospectus (1) reflects
the consummation of the merger between Hearst HomeArts, Inc. and Women.com
Networks prior to the consummation of this offering; (2) assumes the conversion
of all outstanding preferred stock to common stock immediately prior to the
consummation of this offering; and (3) assumes that the underwriters'
over-allotment option will not be exercised. See "Description of Capital Stock"
and "Underwriters."
Women.com, HomeArts, Astronet and their respective logos are trademarks of
Women.com Networks, Inc. All other trademarks or trade names referred to in this
prospectus are the property of their respective owners.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding Women.com and the financial statements and notes thereto
appearing elsewhere in this prospectus.
OUR BUSINESS
We are a leading Internet network dedicated to women, featuring
award-winning original content, personalized services, community and online
shopping. Our network is comprised of more than 90,000 pages of content
organized into 19 topical channels, including career, cars, entertainment,
family, fashion and beauty, fitness, food, health, home and garden, horoscopes,
money, news and trends, pregnancy, relationships, shopping, small business,
technology and Internet, travel and weddings. We also offer extensive membership
services and benefits, including personalized content, personal home pages,
e-mail, and access to community forums and clubs. In addition, our strategic
relationships with The Hearst Corporation and Rodale Press, Inc. enable us to
offer an online newsstand featuring content from 11 of the world's leading
women's magazines, including Cosmopolitan, Good Housekeeping, Prevention and
Redbook.
In January 1999, we combined our operations with Astronet, an astrology
site, and HomeArts, a women's lifestyle network, both of which were business
units of Hearst Communications Inc.'s New Media and Technology Division. Through
our agreement with Hearst, we host the web sites for 10 of Hearst's leading
women's magazines and have online distribution rights to the content of these
magazines. These magazines produce over 300 unique articles per month and have a
U.S. monthly circulation of over 15 million paid readers. The addition of
Hearst's magazines to the Women.com network has increased our ability to provide
compelling content to women of all ages. The Hearst agreement also includes
print, television and cable promotion of our online network. Hearst is a
diversified communications company engaged in a broad range of publishing,
broadcasting, cable television networks and other communications activities.
We believe our focus on original and authoritative content and our access
to a national media audience through the Hearst and Rodale relationships will
help us create the preeminent brand for women on the Internet. According to
Media Metrix, in March 1999 our network attracted more than 3.8 million unique
visitors, ranking us among the top 40 Internet sites as measured by reach.
During the same period, our users generated approximately 120 million page
views. We leverage our brand identity and increase traffic to our network
through over 30 online distribution relationships with leading Internet
companies, including America Online, CBS SportsLine, GeoCities, Infoseek, Lycos,
Microsoft, Mindspring, Netscape, WebTV, Xoom.com and Yahoo!.
We believe our network draws users who represent an attractive demographic
group for companies that advertise and conduct business over the Internet. We
provide advertisers with an audience comprised primarily of women ages 25-49, a
variety of advertising models tailored to each customer's objectives and a
powerful e-commerce platform that is well-suited to our targeted audience. In
the first quarter of 1999, we had over 130 industry-leading advertisers
including Coca-Cola, Jenny Craig, Macy's, Microsoft, Proctor & Gamble, Sears,
Strong Funds, Toyota, Visa and Volvo. Our highly contextual e-commerce
environment attracts leading e-commerce partners, including Amazon.com,
Clinique, eToys, Hooked on Phonics, J.Crew, John Hancock and PlanetRx.
OUR MARKET OPPORTUNITY
Women.com was founded to capitalize on the opportunity to provide women
with services, information and tools on the Internet. Today women represent an
increasingly significant and fast-growing segment of the online audience. They
also represent an increasingly important demographic group to advertisers and
merchants. This importance is due in part to the growth in women's income and
3
<PAGE> 6
the role women play as key consumer decision makers, both in the home and in the
workplace. Numerous traditional and online information sources are trying to
address the demand by women for timely and relevant information. While a number
of Internet sites include information for and about women, we believe only a
limited number of sites are currently providing the original content, community
and commerce offerings necessary to provide an integrated solution to meet the
objectives of women online.
OUR HISTORY
We were formed in October 1992 as Wire Networks Inc. We launched our first
site, Women's Wire, in 1995 and in February 1998 we changed our name to
Women.com Networks. In January 1999, Women.com Networks contributed
substantially all of its assets and liabilities to Women.com Networks LLC, a
Delaware limited liability company, and Hearst HomeArts, Inc., a Delaware
corporation, contributed to the LLC HomeArts and Astronet, both of which were
business units of Hearst Communications, Inc.'s New Media and Technology
Division. After the combination, the LLC was approximately 50% owned by each of
Women.com Networks and Hearst HomeArts. Concurrent with this offering, Women.com
Networks will merge into Hearst HomeArts, Inc. and Women.com Networks LLC will
be dissolved. Hearst HomeArts will be the surviving entity and will be renamed
Women.com Networks, Inc.
THE OFFERING
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Common stock offered.......... shares
Common stock to be outstanding
after the offering.......... shares
Use of proceeds............... To fund continued growth and expansion of our business,
to build our brand both online and offline and to enhance
our products. The balance of the proceeds will be used to
fund potential acquisitions and for other general
corporate purposes, including working capital. See "Use
of Proceeds."
Proposed Nasdaq National
Market symbol............... WOMN
</TABLE>
The number of shares of common stock to be outstanding after this offering
is based on the total number of shares outstanding on , 1999,
includes the shares offered hereby and in the Hearst private placement, and
excludes (1) 4,221,377 shares of common stock issuable upon exercise of
outstanding options under our 1994 Stock Option Plan and 1998 Equity Incentive
Plan, (2) 4,029,798 shares reserved for future issuance under our 1998 Equity
Incentive Plan, (3) 1,000,000 shares reserved for issuance under our Employee
Stock Purchase Plan and (4) 2,067,003 shares issuable upon exercise of
outstanding warrants.
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SUMMARY FINANCIAL INFORMATION
The following summary financial information sets forth historical
information for each of Women.com and HomeArts prior to their combination in
January 1999 as well as pro forma data. The pro forma statement of operations
data reflects the combination with HomeArts and Astronet as if such combination
had occurred on January 1, 1998. The pro forma balance sheet data as of March
31, 1999 reflects the net proceeds of $19,250,000 from the sale of 2,000,000
units of Women.com Networks LLC in May 1999, and the conversion of all
outstanding preferred stock into common stock immediately prior to the offering
made hereby. The pro forma, as adjusted balance sheet data, gives effect to the
net proceeds from the sale of common stock offered hereby and in the Hearst
private placement.
<TABLE>
<CAPTION>
WOMEN.COM HOMEARTS
--------------------------------- ----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------- ----------------------------
1996 1997 1998 1996 1997 1998
------- --------- ----------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................. $ 729 $ 2,798 $ 7,247 $ 1,279 $ 1,896 $ 2,957
------- -------- -------- ------- ------- --------
Operating expenses:
Production, product and
technology................ 1,174 2,922 5,728 4,254 4,998 8,095
Sales and marketing......... 957 3,907 12,042 3,529 5,946 8,625
General and
administrative............ 956 1,101 1,374 990 878 970
Stock-based compensation.... -- -- 1,170 -- -- --
Amortization of acquired
intangibles............... -- -- 517 -- -- --
------- -------- -------- ------- ------- --------
Total operating
expenses.............. 3,087 7,930 20,831 8,773 11,822 17,690
------- -------- -------- ------- ------- --------
Loss from operations......... (2,358) (5,132) (13,584) (7,494) (9,926) (14,733)
Other income, net............ 53 37 539 -- -- --
------- -------- -------- ------- ------- --------
Net loss..................... (2,305) (5,095) (13,045) (7,494) (9,926) (14,733)
Dividend accretion on
mandatorily redeemable
convertible preferred
stock....................... (682) (1,517) (570) -- -- --
------- -------- -------- ------- ------- --------
Net loss attributable to
common stockholders......... $(2,987) $ (6,612) $(13,615) $(7,494) $(9,926) $(14,733)
======= ======== ======== ======= ======= ========
Basic and diluted net loss
per share attributable to
common stockholders......... $ (4.26) $ (9.15) $ (10.52)
======= ======== ========
Shares used in computing
basic and diluted net loss
per share................... 702 722 1,294
======= ======== ========
Basic and diluted pro forma
net loss per share.......... $ (1.13)
========
Shares used in computing pro
forma basic and diluted net
loss per share.............. 11,548
========
<CAPTION>
WOMEN.COM
------------------------------------------
PRO FORMA
PRO FORMA ------------
------------ THREE MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, MARCH 31, MARCH 31,
1998 1999 1999
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................. $ 11,650 $ 3,413 $ 3,663
-------- -------- --------
Operating expenses:
Production, product and
technology................ 15,015 3,848 4,519
Sales and marketing......... 21,024 6,568 7,320
General and
administrative............ 2,754 1,968 1,996
Stock-based compensation.... 1,170 612 612
Amortization of acquired
intangibles............... 21,514 3,671 5,417
-------- -------- --------
Total operating
expenses.............. 61,477 16,667 19,864
-------- -------- --------
Loss from operations......... (49,827) (13,254) (16,201)
Other income, net............ 539 159 159
-------- -------- --------
Net loss..................... (49,288) (13,095) (16,042)
Dividend accretion on
mandatorily redeemable
convertible preferred
stock....................... (570) (95) (95)
-------- -------- --------
Net loss attributable to
common stockholders......... $(49,858) $(13,190) $(16,137)
======== ======== ========
Basic and diluted net loss
per share attributable to
common stockholders......... $ (.95)
========
Shares used in computing
basic and diluted net loss
per share................... 13,820
========
Basic and diluted pro forma
net loss per share.......... $ (1.70) $ (.48) $ (.49)
======== ======== ========
Shares used in computing pro
forma basic and diluted net
loss per share.............. 29,347 27,258 32,770
======== ======== ========
</TABLE>
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<CAPTION>
AS OF MARCH 31, 1999
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and cash equivalents.... $19,164 $ 38,414
Working capital.............. 16,687 35,937
Total assets................. 95,377 114,627
Mandatorily redeemable
convertible preferred stock
and warrants................ 35,515 265
Total stockholders' equity... 50,148 104,648
</TABLE>
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the following risks before deciding to invest in shares of our common stock. The
risks described below are not the only risks we face. Additional risks that we
do not yet know of or that we currently think are immaterial may also impair our
business operations. If any of the events or circumstances described in the
following risks actually occurs, our business, financial condition, or results
of operations could be materially harmed. In such case, the trading price of our
common stock could decline, and you may lose all or part of your investment. You
should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
AND OUR BUSINESS MODEL IS UNPROVEN
We first recognized a small amount of subscription revenues in January 1994
and advertising revenues in March 1996 and our revenues have become significant
only recently. It is difficult to evaluate our business and our prospects
because our revenue and income potential is unproven and our business model is
still emerging. In addition, because our combination with HomeArts and Astronet
has only been effective since the end of January 1999, we are still in the
process of integrating our operations and business activities. Our historical
financial information is of limited value in projecting our future operating
results because of our limited operating history as a combined organization with
the HomeArts and Astronet businesses and the emerging nature of our market.
We have had operating losses since we were formed. We expect to incur
significant operating losses and negative cash flows for at least the next
several years. We may never achieve profitability. As of March 31, 1999, we had
an accumulated deficit of $39.1 million. Successfully achieving our growth and
profitability plan depends on, among other things, our ability to:
- continue to develop and extend our brand recognition
- produce, enhance and distribute compelling and original content
- maintain and increase the level of traffic to our network
- continue to develop and extend relationships with content, advertising
and e-commerce partners
- enhance our e-commerce offerings
- respond to competition
- manage growth
- attract and retain motivated qualified personnel
- continue to develop and upgrade the technology supporting our online
network
- raise additional capital
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for detailed information on our limited operating
history.
OUR QUARTERLY OPERATING RESULTS FLUCTUATE SIGNIFICANTLY
Our operating results have fluctuated and are likely to continue to
fluctuate significantly from quarter to quarter as a result of several factors,
including:
- fluctuations in the demand for Internet advertising
- seasonal trends in Internet use and advertising demand
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<PAGE> 9
- the loss of existing advertisers or lack of new advertisers
- changes in the advertising budgets of our existing advertisers and of
prospective advertisers
- changes in rates paid for Internet advertising resulting from competition
or other factors
- changes in the level of traffic on our network
- introduction of new sites and products by competitors
- technical difficulties or system downtime affecting the Internet
generally or the operation of our network specifically
- fluctuations in the demand for commerce on the Internet
- fluctuations in marketing expenses and technology infrastructure costs
As a result, our operating results for any particular quarter may not be
indicative of future operating results.
WE DEPEND ON ADVERTISING REVENUES AND MARKET ACCEPTANCE OF INTERNET-BASED
ADVERTISING
We derive substantially all of our revenues from the sale of advertisements
on our network. Market acceptance of Internet-based advertising is uncertain. If
we fail to sell advertising, our revenues will be significantly reduced. Most of
our customers have limited experience with the Internet as an advertising
medium. Our ability to generate significant advertising revenues will depend
upon, among other things:
- advertisers' acceptance of the Internet as an effective and sustainable
advertising medium
- the development of a large, demographically attractive base of users on
our network
- our ability to continue to develop and update effective advertising
delivery and measurement systems
- our ability to deliver guaranteed impressions under advertising contracts
requiring minimum impressions
- our ability to maintain and increase our advertising rates given the
growing number of outlets for advertisers on the Internet
- our ability to deliver cost-effective advertising on our network
WE FACE INTENSE COMPETITION FOR ADVERTISERS AND INTERNET USERS
If we lose advertising customers to our competition or reduce advertising
rates to remain competitive, our revenues will decline substantially and our
business will be materially harmed. Many Internet content and service providers
compete with us for advertisers and Internet users, and there are few barriers
to entry. We expect this competition to increase. We compete, in particular,
with the following types of companies:
- publishers of women's print magazines, such as Conde Nast and Hachette
Filipachi, which also host Internet sites with content designed to
complement their magazines
- content aggregators, including America Online, Microsoft and Yahoo!
- Internet companies, such as iVillage and Oxygen Media, that target women
online
- Internet directories, search engines and other sites that offer original
editorial content
- companies in the print, broadcast and cable television industries
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<PAGE> 10
We compete with these companies for the time and attention of Internet
users and for advertising and e-commerce revenues. Many of our current and
potential competitors in the Internet market have significantly greater
financial, editorial, technical and marketing resources, longer operating
histories, greater name recognition and more established relationships with
advertisers and advertising agencies. These competitors may be able to undertake
more extensive marketing campaigns, adopt aggressive pricing policies and devote
substantially more resources to developing Internet content and services than we
can.
HEARST WILL CONTROL ACTIONS REQUIRING BOARD AND STOCKHOLDER APPROVAL AFTER THIS
OFFERING
Hearst representatives currently fill four of the eight seats on our board
of directors. In addition, given Hearst's share ownership, Hearst will be able
to elect additional directors after this offering. Any action taken by our board
requires the approval of at least five directors. As a result, at least one
Hearst representative must approve all actions taken by our board, which could
significantly influence our corporate direction and policies, including any
mergers, acquisitions, consolidations, strategic relationships or sales of
assets. Hearst's board representation and stock ownership may discourage or
prevent transactions involving an actual or potential change of control,
including transactions in which stockholders would otherwise receive a premium
for their shares. In addition, the interests of Hearst, which owns or has
significant investments in other businesses, including cable television
networks, newspapers, magazines and electronic media, may from time to time be
competitive with, or otherwise diverge from, our interests, particularly with
respect to new business opportunities and future acquisitions.
After this offering, an entity affiliated with Hearst will own
approximately 50% of our outstanding common stock. As a result of this share
ownership, Hearst will have effective control over all stockholder actions,
including electing directors, approving changes to our restated certificate of
incorporation or amended and restated bylaws and adopting or changing equity
incentive plans. Hearst's control over stockholder actions will also determine
the outcome of any merger, consolidation, sale of all or substantially all of
our assets or other form of change of control that we might consider. In
addition, Hearst is not subject to any restrictions on acquiring additional
shares of our common stock following this offering, and, therefore, may increase
its share ownership percentage by purchasing additional shares of common stock
in the public market.
Because Hearst controls such a significant percentage of our common stock,
trading in our common stock may be limited unless Hearst elects to sell some or
all of its shares. If Hearst elects to purchase additional shares in the future,
the market for our common stock will be even more limited. As a result of the
limited public float of our common stock, relatively small purchases or sales of
our stock may have a disproportionate effect on our market price. In addition,
if Hearst elects to sell some or all of its shares, the effect on our market
price could be negative.
WE RELY ON HEARST FOR CONTENT AND CROSS-PROMOTION
Information supplied by or developed from the Hearst magazines to which we
have online rights accounts for a significant portion of our network's content.
Our relationship with Hearst is governed by a magazine content license and
hosting agreement. While this agreement will continue to provide us with certain
benefits during its initial six-year term, we may not enjoy benefits from our
relationship with Hearst beyond the term of this agreement, including the
benefits we derive from Hearst's reputation, online content and
cross-promotional activities. If our relationship with Hearst ends, we may not
be able to enter into alternative arrangements with third parties or to
internally develop content and services to replace the benefits we receive from
our relationship with Hearst.
We depend on Hearst to effectively market and promote its 10 magazine
sites. If Hearst fails to do so, our brand identity could be negatively affected
and our business, financial condition and operating
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results would be materially harmed. We also rely on Hearst to maintain the
quality of its magazine content and to maintain and expand its magazines'
readership base. If the quality or circulation of Hearst's magazines declines,
the content of our network would suffer and our business, financial condition
and results of operations would be materially harmed.
Hearst is permitted to license the content or trademarks of the 10
magazines to any Internet site or portal that is not deemed to be our
competitor. A competitor is defined under the agreement to include any Internet
site, channel, area or online content aggregation service that provides content
primarily for women and is used primarily by women. Any content or trademark
license by Hearst to any third party could materially harm our business. We
agreed with Hearst not to enter into any agreements to produce or include as
part of our network any magazine site or content related to a print publication
other than the Hearst publications and the Prevention and New Woman magazines
without Hearst's approval. Our inability to create new relationships with print
publications could impair our ability to enhance the visibility of our brand.
We may not be able to continue to attract enough user traffic or
advertisers to our network without Hearst's name or promotional capabilities.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Content Relationships -- The Hearst Corporation" and
"Certain Transactions" for a more complete discussion of our relationship with
Hearst.
WE RELY ON ASTRONET TO GENERATE A SIGNIFICANT PORTION OF OUR PAGE VIEWS AND
ASTRONET DEPENDS ON AMERICA ONLINE FOR TRAFFIC
In March 1999, approximately 50% of our page views was generated by
Astronet and, during the same period, approximately 75% of Astronet's traffic
was generated by America Online. If the popularity of our Astronet site
declines, or if America Online stops carrying our Astronet site, our number of
visitors and page views would decrease significantly and our business could be
materially harmed. We currently do not sell advertising on the Astronet site on
America Online. Although we intend to do so in the future, we believe
advertising rates on the Astronet site on America Online will be lower than on
other areas of our network.
WE MAY FACE DIFFICULTY INTEGRATING THE HOMEARTS AND ASTRONET OPERATIONS
Because our relationship with Hearst, including our combination with
HomeArts and Astronet, occurred in January 1999, we are still in the process of
integrating our operations and business activities. This integration process
involves a significant amount of our management's time, resources and energy. If
we fail to successfully integrate these aspects of our business, we may not
recognize potential benefits of the combination and we may have significant
duplication of costs and capital expenditures. In addition, we are in the
process of integrating our databases with those of Hearst, including HomeArts,
Astronet and Hearst's magazine sites, and if we experience difficulty
integrating these databases, our costs may increase and our business, financial
condition and results of operations could be materially harmed.
We are also in the process of re-launching the 10 Hearst magazine sites,
and we are restructuring these sites to be consistent with our network's design.
This re-launching and restructuring involves a significant amount of production
resources. We expect that the re-launch of these sites will continue through at
least December 1999. If we experience difficulty re-launching these sites or if
our re-launching schedule is delayed, we will not recognize some expected
benefits of our business relationship with Hearst and our business, financial
condition and results of operations could be materially harmed.
WE MAY BE UNABLE TO SUCCESSFULLY BUILD OUR BRAND
We believe that establishing and maintaining our brand is critical to our
success and that the importance of brand recognition will increase due to the
growing number of women-oriented Internet sites. Successful promotion and
marketing of our brand will depend on providing interesting and
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compelling content, community, commerce and personalized services, and we intend
to increase our marketing and branding expenditures in our effort to increase
our brand awareness. If our brand building strategy is unsuccessful, these
expenses may never be recovered, we may be unable to increase our future
revenues and our business could be materially harmed.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO DELIVER ORIGINAL AND COMPELLING INTERNET
CONTENT, COMMUNITY, SHOPPING AND PERSONALIZED SERVICES IN ORDER TO ATTRACT USERS
Our current network or any additional channels or sites that we may add in
the future may not be attractive to a sufficient number of Internet users. We
may not be able to anticipate, monitor and successfully respond to rapidly
changing consumer tastes and preferences of women so as to attract enough users
to our network. If we are unable to develop Internet content, community,
shopping and personalized services that attract, retain and expand a loyal user
base, we will be unable to generate advertising revenues or commerce revenues
and our business, financial condition and results of operations will be
materially harmed.
WE DEPEND ON STRATEGIC CO-BRANDING AND CONTENT RELATIONSHIPS
If we fail to retain existing co-branding and content relationships or fail
to attract new ones, the total number of pages of content on our network will
shrink, traffic to our network may decrease, the quality of our content may
decline and our advertising revenues may decrease. To be successful, we need to
maintain our existing relationships and we must establish similar relationships
with new parties who have cross-media and promotional capabilities. This is
critical to our success because we believe that these relationships will enable
us to:
- generate revenue
- increase the volume of our content
- further enhance our brand awareness
- expand and broaden our reach to a wider variety of users
With the exception of our Hearst relationship, our existing co-branding and
content alliances are short-term agreements. When these agreements terminate, we
may not be able to renew them on favorable terms or to obtain similar agreements
with other parties. Additionally, our competitors may enter into agreements with
our existing partners or other parties that are integral to our prospective
content and brand development.
WE DEPEND ON ONLINE DISTRIBUTION CHANNELS FOR TRAFFIC TO OUR NETWORK
We depend on establishing and maintaining online distribution relationships
with high-traffic Internet sites and leading Internet portals to ensure the
visibility of our network and to generate additional traffic. In March 1999, a
substantial portion of our network's traffic was generated by our distribution
relationships and, in particular, America Online. Our business could be
materially harmed if we do not establish and maintain additional relationships
on commercially reasonable terms or if any of our relationships do not result in
increased network traffic and visibility. All of our distribution relationships
are based on short-term agreements. There is intense competition for online
distribution relationships among Internet sites. We may not be able to enter
into new or renewed relationships on commercially reasonable terms or at all. In
addition, our existing online distribution relationships or any relationships
that we enter into in the future may not generate enough additional traffic to
our network or create sufficient brand visibility to justify the costs we incur
for such relationships.
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WE PLAN TO LAUNCH A DIRECT E-COMMERCE MODEL AND OUR BUSINESS AND FINANCIAL
CONDITION COULD BE HARMED IF THIS MODEL IS NOT SUCCESSFUL
We currently operate an affiliate-based e-commerce model in which we link
shoppers on our network to the sites of our e-commerce partners to complete
their online purchases. In this affiliate-based model, our e-commerce partners
pay us for product placement on our network, which is recognized as advertising
revenue. In addition, we intend to develop a direct e-commerce model in which we
may buy inventory and sell products and services directly to consumers. We have
no experience in implementing or operating a direct e-commerce business, and if
we are not successful in implementing it, our business could be materially
harmed. In addition, unlike our current affiliate-based commerce model, we will
assume liability for any inventory that we acquire and will bear the risk of
inventory damage or loss as well as product returns. Our success in this direct
e-commerce model will depend upon our ability to:
- manage inventory and fulfillment operations
- attract shoppers to our network
- implement and update a flexible and scalable direct e-commerce
infrastructure
- establish a secure, reliable and efficient shopping network
- identify and offer attractive products at competitive prices
- establish a responsive and efficient customer service department
- establish relationships with vendors to ensure acquisition of merchandise
in a timely and efficient manner and on acceptable commercial terms
We may not be able to achieve any or all of these necessary components of a
successful e-commerce operation.
WE INTEND TO PURSUE STRATEGIC ACQUISITIONS AND OUR BUSINESS COULD BE MATERIALLY
HARMED IF WE FAIL TO SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES
We often evaluate acquisition opportunities that could provide us with
additional product or content offerings or additional industry expertise. Any
future acquisition could result in difficulties assimilating acquired operations
and products, diversion of management's attention away from other business
issues and amortization of acquired intangible assets. Our management has had
limited experience in assimilating acquired organizations and products into our
operations. We may not successfully integrate any operations, personnel or
products that we may acquire in the future. If we fail to successfully integrate
acquisitions, our business would be materially harmed. See "Use of Proceeds."
WE MAY EXPERIENCE DIFFICULTY MANAGING OUR GROWTH
We have recently experienced significant growth and are planning to further
expand our business and operations. If we are unable to successfully manage this
growth our business could be materially harmed. As of April 30, 1998, we had 62
employees, compared to 206 employees as of April 30, 1999. This growth places a
significant strain on our management and other resources. As part of this
growth, we expect to implement new operational and financial systems, procedures
and controls. Any problems in implementing these systems or controls could harm
our operations. In addition, several members of our senior management joined us
during the last year, including our Vice President of Strategic Partnerships and
our Chief Financial Officer. As a result, our management team may have
difficulty working together to successfully manage our anticipated growth.
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OUR BUSINESS IS DEPENDENT ON KEY PERSONNEL
Our success depends substantially on the performance of our senior
management and key creative, technical and marketing personnel, some of whom
were hired recently. The loss of the services of Marleen McDaniel, our
President, Chief Executive Officer and Chairperson, or Ellen Pack, our Senior
Vice President and General Manager, or any of our other executive officers or
other key employees could have a material adverse effect on our business,
financial condition and results of operations. Our future success also depends
on our continuing ability to attract and retain highly qualified creative,
technical and managerial personnel. In particular, we are in the process of
recruiting a Chief Technical Officer and a Vice President of Engineering.
Competition for such personnel is intense and there are a limited number of
people with knowledge of and experience in the Internet medium. Our employees
may voluntarily terminate their employment at any time. If we fail to attract
and retain key managerial, technical and creative employees, our business would
be materially harmed.
OUR SYSTEMS MAY FAIL OR BE INTERRUPTED
We rely on third parties for proper functioning of our computer
infrastructure and delivery of our product. Our systems and operations could be
damaged or interrupted by fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. In addition, we are currently in the
process of moving our hosting services from Icon CMT Corporation to Exodus
Communications, which may result in disruption of our service or system failure.
If our network fails for any reason, even for only a short period, our business
and reputation would be materially harmed.
Furthermore, a key element of our strategy is to generate a high volume of
traffic to our network. Accordingly, the satisfactory performance, reliability
and availability of our network and our computer infrastructure is critical to
our reputation and our ability to attract and retain users, advertisers,
e-commerce partners and members. We cannot accurately project the rate or timing
of any increases in traffic to our network and, therefore, the integration and
timing of any upgrades or enhancements required to facilitate any significant
traffic increase to our network are uncertain.
We also depend on the receipt of timely feeds and computer downloads from
our content providers, and any failure or delay in the transmission or receipt
of such feeds or downloads from our content providers, the public network or
otherwise, could disrupt our operations. We also use third party software to
manage and deliver advertisements by contract and to provide our advertisers
with performance data. The failure of these systems to function properly could
discourage advertisers from placing advertisements on our network or e-commerce
partners from selling their products on our network. Failure of these systems
could cause us to incur additional costs or cause interruptions in our business
during the time spent replacing these systems. Our network infrastructure may
not perform properly and may not provide advertisers or e-commerce partners with
accurate data. The failure to expand and upgrade our network or any system error
or failure could materially harm our business, reputation, financial condition
or results of operations.
WE DEPEND ON THE CONTINUED GROWTH OF THE INTERNET
Our market is new and rapidly evolving. Our business would be significantly
harmed if Internet usage does not continue to grow. Internet usage may not grow
for a number of reasons such as:
- security concerns
- inconsistent quality of service
- inadequate network infrastructure
- consumers returning to traditional or alternative sources for
information, shopping and services
- lack of cost-effective, high-speed connectivity
- the failure of the Internet as a viable commercial marketplace
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THE SUCCESS OF OUR BUSINESS WILL DEPEND ON CONTINUED GROWTH IN INTERNET COMMERCE
The market for the purchase of products and services over the Internet is
new and emerging. Our future revenues and profits will depend in part upon the
widespread acceptance and the use of the Internet and other online services as a
medium for commerce by consumers and merchants. If acceptance and growth of the
Internet does not occur, our business and financial performance will materially
suffer. A sufficiently broad base of consumers may not adopt, or continue to
use, the Internet as a medium for commerce. Demand for and market acceptance of
recently introduced products and services over the Internet are subject to a
high level of uncertainty, and there are few proven products and services.
In addition, the ability to securely transmit confidential information is a
significant criterion for successful e-commerce. Any well-publicized compromise
of security could deter people from using the Internet or from using the
Internet for transactions that involve transmitting confidential information,
such as credit card numbers. Because many of our advertisers seek to advertise
on our network to encourage people to use the Internet to purchase goods or
services, the failure of the Internet as a medium for commerce would seriously
harm our business, financial condition or results of operations.
WE MAY BE SUED FOR OUR SERVICES AND USER-GENERATED CONTENT
We host a wide variety of information, community, communications and
commerce services that enable our users to exchange information, conduct
business and engage in various online activities. The laws relating to the
liability of providers of these online services for the activities of their
users is currently unsettled. Claims could be made against us for negligence,
defamation, libel, copyright or trademark infringement, personal injury or other
legal claims based on the nature and content of information that may be posted
online by our users. In addition, we could be exposed to liability with respect
to the selection of listings that may be accessible through our
Women.com-branded products and properties, or through content and materials that
may be posted by users on message boards or in clubs, chat rooms or other
interactive community-building services. It is also possible that if any
information provided through our services, such as financial information,
contains errors, third parties could make claims against us for losses incurred
in reliance on such information. We offer Internet-based e-mail services, which
expose 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. Investigating and
defending such claims is expensive, even to the extent these claims do not
result in liability. Although we carry general liability insurance, this
insurance may not be available to cover a particular claim or may be
insufficient.
In addition, we could be exposed to liability arising from the activities
of users of our content or services or with respect to the unauthorized
duplication or insertion of material (such as material deemed obscene or
inappropriate for children) accessed directly or indirectly through our
services. Several private lawsuits seeking to impose such liability upon content
providers, online services companies and Internet access providers are currently
pending. In addition, legislation has been enacted that imposes, and further
legislation may impose, liability for or prohibit the transmission over the
Internet of certain types of information. Any such legislation or regulation, or
the application or interpretation of existing laws, could expose us to
significant liabilities associated with our content or services. Our activities
could be or become subject to various forms of taxation, including but not
limited to sales and use taxes, the imposition of which could materially harm
our business, financial condition or results of operations.
The imposition of potential liability for our content or services could
require us to implement measures to reduce our exposure to such liability, which
may require the expenditure of substantial resources, or to discontinue certain
content or service offerings. The increased attention focused upon liability
issues as a result of these lawsuits and legislative proposals could affect the
growth of Internet use. While we carry general liability insurance, it may not
be adequate to compensate us in the event we
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become liable for our content or services. Any liability in excess of such
insurance could materially harm our business, financial condition or results of
operations.
CONSUMER PROTECTION PRIVACY REGULATIONS COULD IMPAIR OUR ABILITY TO OBTAIN
INFORMATION ABOUT OUR USERS
Our network captures information regarding our registered members in order
to tailor content to them. Typically, we capture such information when users
visit our network and voluntarily enter the information in the process of
registering with the network. We use this information to assist advertisers in
targeting their online advertising campaigns to users with particular
demographic characteristics. However, privacy concerns may cause users to resist
providing the personal data necessary to support this tailoring capability. Even
the perception of security and privacy concerns, whether or not valid, may
indirectly inhibit market acceptance of our network. In addition, legislative or
regulatory requirements may heighten these concerns if businesses must notify
Internet users that the data may be used by marketing entities to direct product
promotion and advertising to the user. Other countries and political entities,
such as the European Economic Community, have adopted such legislation or
regulatory requirements. The United States may adopt similar legislation or
regulatory requirements. If consumer privacy concerns are not adequately
addressed, our business, financial condition and results of operations could be
materially harmed.
Our network currently uses cookies to track demographic information and
user preferences. A cookie is information keyed to a specific server, file
pathway or directory location that is stored on a user's hard drive, possibly
without the user's knowledge, but is generally removable by the user. Germany
has imposed laws limiting the use of cookies, and a number of Internet
commentators, advocates and governmental bodies in the United States and other
countries have urged the passage of laws limiting or abolishing the use of
cookies. If such laws are passed, our business, financial condition and results
of operations could be materially harmed.
WE DEPEND ON OUR INTELLECTUAL PROPERTY RIGHTS
Our success depends on the protection of our original interactive content
and on the goodwill associated with our trademarks and other proprietary
intellectual property rights. A substantial amount of uncertainty exists
concerning the application of copyright and trademark laws to the Internet and
other digital media, and there can be no assurance that existing laws provide
adequate protection of our content or our Internet addresses, commonly referred
to as domain names. We have filed applications to register a number of our
trademarks, trade names and service marks, but registrations have only been
granted in selected cases, and we may not be able to secure additional
registrations.
We have also invested resources in acquiring domain names for existing and
potential future use. We cannot assure you, however, that we will be entitled to
use such names under applicable trademarks and similar laws or that other
desired domain names will be available. Furthermore, enforcing our intellectual
property rights could entail significant expenses and could prove difficult or
impossible. In addition, we cannot assure you that third parties will not bring
claims of copyright or trademark infringement, patent violation or
misappropriation of creative ideas or formats against us with respect to our
content or any third-party content carried by us. Any such claims, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using important technologies, ideas or
formats, any of which could materially harm our business, financial condition or
results of operations.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET
We are not currently subject to meaningful direct regulation applicable to
access to, or commerce on, the Internet by any government agency. It is possible
that in the future a number of laws and
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regulations may be adopted with respect to the Internet and other digital media,
covering issues such as user privacy, electronic commerce, and the pricing,
characteristics and quality of products and services. Our distribution
arrangements on the Internet could subject us to the laws of a distant
jurisdiction in an unpredictable manner. Several telecommunications companies
have petitioned the Federal Communications Commission to regulate Internet
service providers and providers of online services in a manner similar to long
distance telephone carriers and to impose access fees on these companies. This
could increase the cost of transmitting data over the Internet. Any new laws or
regulations relating to the Internet could materially harm our business.
TRADING IN OUR SHARES COULD BE SUBJECT TO EXTREME PRICE FLUCTUATIONS AND YOU
COULD HAVE DIFFICULTY TRADING YOUR SHARES
You may not be able to resell your shares at or above the initial public
offering price due to a number of factors such as:
- actual or anticipated quarterly variations in our operating results
- changes in market expectations of our future financial performance or
changes in the estimates of securities analysts
- a limited public float, especially due to Hearst's share ownership
- announcements by our competitors
- conditions affecting the market for Internet stocks or the stock market
in general
The trading price of our common stock may be volatile. The stock market in
general and the market for technology and Internet-related companies, in
particular, has experienced extreme volatility that often has been unrelated to
the operating performance of particular companies. These broad market and
industry fluctuations may adversely affect the trading price of our common
stock, regardless of our actual operating performance.
In the past, following periods of volatility in the market price of a
company's securities, class action litigation has often been filed. If this were
to happen to us, litigation would be expensive and would divert management's
attention from the operation of the business.
WE MAY HAVE YEAR 2000 READINESS ISSUES
We may discover year 2000 readiness problems in our internally developed
systems that will require substantial revision. In addition, third-party
software, hardware or services incorporated into our systems may need to be
revised or replaced, all of which could be time-consuming and expensive. If we
cannot fix or replace our internally developed or third-party software, hardware
or services before January 1, 2000, our operating costs could be increased and
we could experience business interruptions that could harm our business.
Additionally, if we cannot adequately address year 2000 readiness issues in our
internally developed proprietary software, we could be subject to claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time consuming to defend.
In addition, the software and systems of governmental agencies, utility
companies, Internet service providers companies, third-party service companies
and others outside of our control may not be year 2000 ready. If these entities
are not year 2000 ready, a systemic failure beyond our control could result,
including a prolonged Internet, telecommunications or general electrical
failure. This type of failure would make it difficult or impossible to use the
Internet or access our network and would prevent us from publishing our content.
If a prolonged failure of this type occurred, our business would be severely
harmed. If our advertisers and sponsors are not year 2000 ready, they may defer
or cancel advertising scheduled to appear on our network, which could harm our
business.
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YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
You should not rely on forward-looking statements in this prospectus. We
use words such as "anticipates," "believes," "plans," "expects," "future,"
"intends" and similar expressions to identify such forward-looking statements.
Each of these forward-looking statements involves risks and uncertainties. In
addition to forward-looking statements made by us, this prospectus also contains
forward-looking statements attributed to certain third parties regarding
estimates of the growth of the use of the Internet by women, electronic-commerce
over the Internet and spending by advertisers on the Internet. You should not
place undue reliance on these forward-looking statements. Actual results could
differ materially from those anticipated in these forward-looking statements for
many reasons, including the risks faced by us described above in "Risk Factors"
and elsewhere in this prospectus. We undertake 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.
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USE OF PROCEEDS
The net proceeds we will receive from the sale of shares of common stock in
this offering are estimated to be $ million, after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us. If the underwriters' over-allotment option is exercised in full, we
estimate that the net proceeds will be $ million. Concurrent with this
offering, we plan to sell directly to Hearst shares of our common
stock at the initial public offering price for an aggregate purchase price of
approximately $ million. The total net proceeds from this offering and the
Hearst private placement are estimated to be approximately $ million.
We will use the net proceeds from this offering for growth and expansion of
our business, to build our brand both online and offline and to enhance our
products. We will also use a portion of the net proceeds of this offering for
general corporate purposes, including working capital. In addition, we may use a
portion of the proceeds for the acquisition of complementary businesses, content
and technologies. We are not currently a party to any contracts or letters of
intent with respect to any material acquisitions, and there can be no assurance
that any of our expansion plans will be realized or, if realized, will prove
profitable for us. We have not identified specific uses for all of the proceeds
and management will have discretion over their use and investment. We intend to
invest the net proceeds from this offering in short-term, investment grade,
interest-bearing securities until they are used. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain future earnings, if any, to finance the expansion of
our business and we do not expect to pay any cash dividends in the foreseeable
future.
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CAPITALIZATION
The following table sets forth our total capitalization as of March 31,
1999 (1) on an actual basis; (2) on a pro forma basis to reflect (a) the net
proceeds of $19,250,000 from the sale of 2,000,000 units in Women.com Networks
LLC in May 1999, (b) the increase in the authorized number of shares of common
stock and (c) the conversion of all outstanding preferred stock into common
stock prior to the consummation of this offering and (3) on a pro forma basis,
as adjusted, to give effect to the issuance and sale by Women.com of the common
stock offered hereby and in the Hearst private placement at an assumed initial
public offering price of $ per share, after deducting estimated underwriting
discounts, commissions and offering expenses. See "Use of Proceeds." This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the combined financial
statements and related notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Mandatory redeemable convertible preferred stock and
warrants:
Series A Convertible Preferred Stock; 2,707,403 shares
authorized; 2,685,181 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. $ 4,913 --
Series B Convertible Preferred Stock; 579,407 shares
authorized; 579,407 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 1,644 --
Series C Convertible Preferred Stock; 7,000,000 shares
authorized; 3,626,922 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 8,620 --
Series D Convertible Preferred Stock; 8,000,000 shares
authorized; 6,546,369 shares issued and outstanding
(actual); no shares authorized, issued or outstanding
(pro forma and pro forma as adjusted).................. 19,823 --
Convertible preferred stock warrants...................... 515 265
-------- ---------
Total mandatorily redeemable convertible preferred
stock and warrants............................... 35,515 265
-------- ---------
Stockholders' equity
Preferred Stock, $0.001 par value: 5,000,000 shares
authorized (pro forma and pro forma as adjusted)
Common Stock, $0.001 par value: 60,000,000 shares
authorized (actual; 195,000,000 pro forma and pro forma
as adjusted); 19,616,000 shares issued and outstanding
(actual); 35,053,879 shares, issued and outstanding
(pro forma); and shares issued and outstanding
(pro forma as adjusted)................................ $ 21 $ 34
Additional paid-in capital.................................. 92,563 147,050
Notes receivable from stockholders.......................... (44) (44)
Unearned compensation....................................... (3,248) (3,248)
Accumulated deficit......................................... (39,144) (39,144)
-------- ---------
Total stockholders' equity........................ 50,148 104,648
-------- ---------
Total capitalization.............................. $ 85,663 $ 104,913
======== =========
</TABLE>
The above information excludes (1) 4,203,218 shares of common stock
issuable on exercise of options outstanding as of March 31, 1999 under the 1994
Stock Option Plan and the 1998 Equity Incentive Plan, with a weighted average
exercise price of $2.34 per share, (2) 4,169,757 shares reserved for future
issuance under the 1998 Equity Incentive Plan (3) 1,000,000 shares reserved for
future issuance under the Employee Stock Purchase Plan and (4) 2,067,003 shares
of common stock issuable upon exercise of warrants outstanding as of March 31,
1999, with a weighted average exercise price of $3.06 per share.
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DILUTION
The pro forma net tangible book value of Women.com Networks, Inc. at March
31, 1999 was approximately $45.0 million, or $1.29 per share. Pro forma net
tangible book value per share is determined by dividing our pro forma tangible
net worth (total tangible assets less total liabilities) by the number of shares
of outstanding common stock, after giving effect to (a) the net proceeds of
$19,250,000 from the sale of 2,000,000 units in Women.com Networks LLC in May
1999, (b) the consummation of the merger between Hearst HomeArts, Inc. and
Women.com Networks and (c) the conversion of all outstanding shares of our
mandatorily redeemable convertible preferred stock into shares of common stock.
Assuming the sale of the shares of common stock offered hereby and
shares sold in the Hearst private placement at an assumed offering
price of $ per share after deducting estimated underwriting discounts,
commissions and offering expenses payable by us, the pro forma, as adjusted, net
tangible book value of Women.com Networks, Inc. as of March 31, 1999 would have
been approximately $ , or $ per share. This represents an immediate
increase in the pro forma net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors
purchasing shares at the initial public offering price. If the initial public
offering price is higher or lower, the dilution to new investors will be greater
or less, respectively. The following table illustrates this dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of March
31, 1999............................................... $1.29
Increase in pro forma tangible book value per share
attributable to new investors (including the Hearst
private placement).....................................
-----
Pro forma, as adjusted, net tangible book value per share
after the offering and the Hearst private placement.......
-----
Dilution per share to new investors (including the Hearst
private placement)........................................ $
=====
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1999,
the number of shares of common stock purchased from Women.com, the total
consideration provided to Women.com and the average price per share provided by
existing stockholders after giving effect to:
- the sale of 2,000,000 units of Women.com Networks LLC in May 1999
- the merger between Hearst HomeArts, Inc. and Women.com Networks
- the conversion of all outstanding shares of mandatorily redeemable
convertible preferred stock into common stock
- the sale of shares to investors in the offering and in the Hearst private
placement
The calculation is based on an assumed initial public offering price of
$ per share, before deducting estimated underwriting discounts, commissions
and offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 35,053,879 % $104,913,000 % $2.99
New investors (including the Hearst
private placement)...............
---------- ----- ------------ ----- -----
Total.................... 100.0% $ 100.0%
========== ===== ============ =====
</TABLE>
This discussion and table assumes no exercise of options outstanding under
our 1994 Stock Option Plan and the 1998 Equity Incentive Plan and no issuance of
shares reserved for future issuance under our Employee Stock Purchase Plan. As
of March 31, 1999, there were options outstanding to purchase a total of
4,203,218 shares of common stock at a weighted average price of $2.34 per share
and 2,067,003 shares issuable upon exercise of outstanding warrants with a
weighted average exercise price of $3.06 per share. To the extent that any of
these options or warrants are exercised, there will be further dilution to new
investors. Please see "Capitalization," and "Management -- Stock Based
Plans -- 1998 Equity Incentive Plan," "-- 1994 Stock Option Plan" and
"-- Employee Stock Purchase Plan."
19
<PAGE> 22
SELECTED FINANCIAL INFORMATION
The following selected Women.com statement of operations data for the years
ended December 31, 1996, 1997 and 1998 and the balance sheet data at December
31, 1997 and 1998 are derived from the financial statements of Women.com which
have been audited by PricewaterhouseCoopers LLP, independent accountants, and
are included herein. The Women.com statement of operations data for the year
ended December 31, 1995 and the balance sheet data at December 31, 1996 are
derived from the financial statements of Women.com which have been audited by
PricewaterhouseCoopers LLP, independent accountants, and are not included
herein. The Women.com statement of operations data for the year ended December
31, 1994 are derived from the unaudited financial statements of Women.com and
are not included herein. The Women.com statement of operations for the three
months ended March 31, 1999 and the balance sheet data as of March 31, 1999 and
1998 are derived from our unaudited financial statements that include, in our
opinion, all adjustments, consisting of only normal recurring adjustments,
necessary for the fair presentation of the financial condition and results of
operations for such period. The results of operations for the three months ended
March 31, 1999 and 1998 or any other period are not necessarily indicative of
our future results. The selected financial data should be read in conjunction
with our Financial Statements and the Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus.
The following selected HomeArts statement of operations data for the years
ended December 31, 1996, 1997 and 1998 and the balance sheet data as of December
31, 1997 and 1998 are derived from the consolidated financial statements of
Certain Operations of the New Media and Technology Division of The Hearst
Corporation which have been audited by Deloitte & Touche LLP, independent
auditors, and are included herein.
<TABLE>
<CAPTION>
WOMEN.COM HOMEARTS
-------------------------------------------------------------------- ----------------------------
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------------------------- ------------------ ----------------------------
1994 1995 1996 1997 1998 1998 1999 1996 1997 1998
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues................ $ 120 $ 128 $ 729 $ 2,798 $ 7,247 $ 1,113 $ 3,413 $ 1,279 $ 1,896 $ 2,957
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Operating expenses:
Production, product and
technology.............. 123 797 1,174 2,922 5,728 1,027 3,848 4,254 4,998 8,095
Sales and marketing....... 305 368 957 3,907 12,042 1,298 6,568 3,529 5,946 8,625
General and
administrative.......... 245 673 956 1,101 1,374 310 1,968 990 878 970
Stock-based
compensation............ -- -- -- -- 1,170 157 612 -- -- --
Amortization of acquired
intangibles............. -- -- -- -- 517 -- 3,671 -- -- --
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Total operating
expenses............ 673 1,838 3,087 7,930 20,831 2,792 16,667 8,773 11,822 17,690
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Loss from operations........ (553) (1,710) (2,358) (5,132) (13,584) (1,679) (13,254) (7,494) (9,926) (14,733)
Other income, net........... 2 4 53 37 539 38 159 -- -- --
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Net loss.................... (551) (1,706) (2,305) (5,095) (13,045) (1,641) (13,095) (7,494) (9,926) (14,733)
Dividend accretion on
mandatorily redeemable
convertible preferred
stock..................... (34) (236) (682) (1,517) (570) (95) (95) -- -- --
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Net loss attributable to
common
stockholders.............. $ (585) $(1,942) $(2,987) $(6,612) $(13,615) $(1,736) $(13,190) $(7,494) $(9,926) $(14,733)
====== ======= ======= ======= ======== ======= ======== ======= ======= ========
Basic and diluted net loss
per share attributable to
common stockholders....... $(2.04) $ (2.81) $ (4.26) $ (9.15) $ (10.52) $ (2.30) $ (.95)
====== ======= ======= ======= ======== ======= ========
Shares used in computing
basic and diluted net loss
per share................. 287 692 702 722 1,294 754 13,820
====== ======= ======= ======= ======== ======= ========
Basic and diluted pro forma
net loss per share........ $ (1.13) $ (.48)
======== ========
Shares used in computing pro
forma basic and diluted
net loss per share........ 11,548 27,258
======== ========
</TABLE>
<TABLE>
<CAPTION>
WOMEN.COM HOMEARTS
------------------------------------------------------------ ------------------
AS OF DECEMBER 31, AS OF AS OF DECEMBER 31,
------------------------------------------------ MARCH 31, ------------------
1994 1995 1996 1997 1998 1999 1997 1998
------ ------- ------- -------- -------- --------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 587 $ 564 $ 1,761 $ 4,885 $ 12,235 $19,164 $ -- $ 24
Working capital............................... 530 153 83 2,874 9,856 16,687 (830) (989)
Total assets.................................. 801 719 2,208 6,430 18,062 95,377 2,504 8,218
Mandatorily redeemable convertible preferred
stock and
warrants.................................... 1,342 2,839 5,817 15,012 35,420 35,515 -- --
Total stockholders' equity (deficit).......... (748) (2,663) (5,650) (12,256) (22,705) 50,148 -- --
</TABLE>
20
<PAGE> 23
SELECTED PRO FORMA FINANCIAL DATA
The pro forma statement of operations data for the year ended December 31,
1998 and the three months ended March 31, 1999 are derived from the unaudited
pro forma combined financial information, which reflect the combination with
HomeArts and Astronet as if such combination had occurred on January 1, 1998,
and are included herein. The pro forma statement of operations data are
presented for informational purposes only and may not be indicative of the
operating results that would have been achieved had the transactions been in
effect as of the beginning of the periods presented and should not be construed
as being representative of future operating results.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 11,650 $ 3,663
-------- --------
Operating expenses:
Production, product and technology........................ 15,015 4,519
Sales and marketing....................................... 21,024 7,320
General and administrative................................ 2,754 1,996
Stock-based compensation.................................. 1,170 612
Amortization of acquired intangibles...................... 21,514 5,417
-------- --------
Total operating expenses.......................... 61,477 19,864
-------- --------
Loss from operations........................................ (49,827) (16,201)
Other income, net........................................... 539 159
-------- --------
Net loss.................................................... (49,288) (16,042)
Dividend accretion on mandatorily redeemable convertible
preferred stock........................................... (570) (95)
-------- --------
Net loss attributable to common stockholders................ (49,858) (16,137)
======== ========
Basic and diluted pro forma net loss per share.............. $ (1.70) $ (.49)
======== ========
Shares used in computing pro forma basic and diluted net
loss per share............................................ 29,347 32,851
======== ========
</TABLE>
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with Women.com's
financial statements and the notes thereto 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 statements that involve risks and uncertainties. Women.com's actual
results could differ materially from those anticipated by this forward-looking
information due to factors discussed in "Risk Factors," "Business" and elsewhere
in this prospectus.
OVERVIEW
Women.com is a leading Internet network dedicated to women, featuring
award-winning original content, personalized services, community and online
shopping. Women.com's network contains more than 90,000 pages of content
organized into 19 topical channels, and offers content from 11 of the world's
leading women's magazines, including Cosmopolitan, Good Housekeeping, Prevention
and Redbook.
Women.com Networks was formed in October 1992 and launched its first
Internet site, Women's Wire, in 1995. In January 1999, Women.com Networks and
Hearst HomeArts, Inc., a subsidiary of The Hearst Corporation, contributed their
businesses to Women.com Networks LLC, which is jointly owned by Women.com and
HomeArts. Upon the closing of this offering, Women.com and HomeArts will merge
and the business previously conducted by Women.com Networks LLC will be
continued by Women.com. The creation of Women.com Networks LLC was accounted for
as an acquisition using the purchase method of accounting. The operations of
HomeArts have been included in Women.com since the formation of Women.com
Networks LLC on January 29, 1999.
Women.com has incurred significant net losses and negative cash flow from
operations since its inception. As of March 31, 1999, Women.com had an
accumulated deficit of $39.1 million. Women.com intends to continue to make
significant financial investments in its business, including product,
technology, infrastructure development and personnel. As a result, Women.com
believes it will incur significant operating losses and negative cash flows from
operations for at least the next several years.
Women.com currently derives revenues primarily from three sources:
advertising (including sponsorships and barter transactions), web site
production and e-commerce.
Advertising revenues consist primarily of sales of banner advertisements
and sponsorships. Advertising contracts are generally short-term, although
several long-term contracts and sponsorships have been signed. Women.com
typically guarantees a minimum number of impressions or page views to be
delivered to users over a specified period of time for a fixed fee. Advertising
revenues are generally recognized ratably over the period in which the
advertising is displayed. To the extent that minimum guaranteed page deliveries
are not met, Women.com defers recognition of the corresponding revenues until
the guaranteed page deliveries are achieved.
Sponsorship revenues are derived from contracts that generally range from
six to 24 months in length. Sponsorship agreements typically include the
delivery of impressions, market research, preferred status within relevant
content areas and the design and development of co-branded sites intended to
enhance the promotional objective of the sponsor. Women.com recognizes
sponsorship revenues as earned, which is generally ratably over the contract
period. To the extent that committed obligations under sponsorship agreements
are not met, revenue recognition is deferred until the obligations are met.
Advertising revenues also include barter revenues, which represent the
exchange of advertising space on Women.com's network for reciprocal advertising
space on third party Web sites as well as other advertising and promotional
vehicles. Revenues from these barter transactions are recorded as advertising
revenues at the lower of estimated fair value of the advertisements received or
delivered and are recognized upon publication of the advertisements on
Women.com's network. Barter expenses are an
22
<PAGE> 25
equal and offsetting charge and are recorded at the lower of estimated fair
value of the advertisements received or delivered and are recognized when
Women.com's advertisements run on the reciprocal media property, which is
typically in the same period in which the advertisements run on Women.com's
network.
Production revenues are derived from short-term contracts in which
Women.com designs and develops web sites for third parties for use on the
Women.com network or their own sites. Women.com recognizes production revenues
as earned, which is generally as services are performed over the contract
period. To the extent that committed obligations under production agreements are
not met, revenue recognition is deferred until the obligations are met.
To date, e-commerce revenues have consisted primarily of commissions from
the sale of magazine subscriptions, sales of services on Astronet, and to a
lesser extent payments from affiliate sales programs. Women.com records a
portion of the revenue from each magazine subscription sold on our co-branded
magazine sites. We derive our Astronet e-commerce revenues from services offered
on our network. E-commerce revenues are recognized upon notification from the
affiliate of revenues earned by Women.com. In the future, Women.com intends to
directly sell inventory over its network, resulting in revenue recognition of
the full amount of the sales transaction, net of normal reserves, with a charge
to cost of goods sold for the cost of the inventory sold.
Operating expenses consist of production, product and technology expenses,
sales and marketing expenses and general and administrative expenses.
Production, product and technology expenses consist primarily of
personnel-related costs for technical operations, editorial and design
activities and content acquisition costs. In connection with the combination
with HomeArts and Astronet, Women.com agreed to pay Hearst a royalty on the
advertising revenues generated from the Hearst magazine sites on the Women.com
network or from other proprietary Hearst content. The royalty percentage will be
reduced when Hearst has recouped its site production costs and will be further
reduced when the revenues from the Hearst content exceed fixed minimum amounts
in any 12-month period. These royalty charges are included in production,
product and technology expenses. See "Business -- Content Relationships -- The
Hearst Corporation."
Sales and marketing expenses consist primarily of personnel-related costs,
and advertising, distribution and public relations expenses. General and
administrative expenses consist primarily of personnel-related costs and legal
and accounting fees.
Stock-based compensation consists primarily of charges related to the
difference between employee stock option grant prices and deemed fair market
values on the date of grant amortized over the vesting period of the options. At
March 31, 1999, Women.com had recorded $5.0 million of unearned stock-based
compensation, which is being amortized over the vesting periods of the options,
generally four years.
Amortization of acquired intangibles consists of the amortization of
goodwill and intangible assets acquired. The acquisition of Wild Wild Web and
the combination with HomeArts and Astronet were accounted for using the purchase
method of accounting and, accordingly, the purchase prices have been allocated
to the tangible and intangible assets acquired and liabilities assumed on the
basis of their respective fair values on the acquisition dates. Substantially
all of the purchase price of these transactions is attributable to the acquired
intangible assets. As a result, the aggregate excess purchase price over net
tangible assets is approximately $64.1 million, $4.4 million of which will be
amortized over two years, $57.5 million of which will be amortized over three
years and $2.2 million of which will be amortized over five years, the expected
estimated average useful life of these assets. These non-cash charges will
significantly affect Women.com's reported operating results over the next
several years.
23
<PAGE> 26
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Results of operations for the first quarter of 1999 include the combined
results of Women.com and HomeArts for the period subsequent to the combination
with HomeArts and Astronet on January 29, 1999.
Net Revenues. Net revenues increased to $3.4 million in the first quarter
of 1999 from $1.1 million in the first quarter of 1998. The increase was
primarily due to an increase in advertising revenues. In the first quarter of
1999, barter revenues accounted for 3.6% of total revenues.
Production, product and technology expenses. Production, product and
technology expenses increased to $3.8 million in the first quarter of 1999 from
$1.0 million in the first quarter of 1998. This increase was primarily due to
expenses associated with increased production costs related to the combination
with HomeArts and Astronet, the hiring of additional production and product
development personnel and increased content acquisition costs. Production,
product and technology expenses are expected to increase as Women.com increases
the amount of content and number of services offered on its network and
relaunches the Hearst magazine sites.
Sales and marketing expenses. Sales and marketing expenses increased to
$6.6 million in the first quarter of 1999 from $1.3 million in the first quarter
of 1998. This increase was primarily due to a $2.5 million increase in online
distribution expenses as a result of agreements with America Online, Microsoft
Network and Netscape, and a $1.0 million increase in advertising expenses and
expenses related to the combination with HomeArts and Astronet. Sales and
marketing expenses are expected to increase as Women.com expands its sales and
marketing efforts.
General and administrative expenses. General and administrative expenses
increased to $2.0 million in the first quarter of 1999 from $310,000 in the
first quarter of 1998. The increase was primarily due to additional
administrative staffing to support the overall growth in the business, and
expenses related to the combination with HomeArts and Astronet. General and
administrative expenses are expected to increase as Women.com adds additional
administrative personnel and as a result of costs associated with being a public
company.
Stock-based compensation. Stock-based compensation expense increased to
$612,000 in the first quarter of 1999 from $157,000 in the first quarter of
1998. The increase was primarily due to an increased level of stock option
grants and increases in the deemed fair market value of the underlying common
stock. See Note 11 of Notes to Financial Statements.
Amortization of acquired intangibles. Amortization of acquired intangibles
was $3.7 million in the first quarter of 1999. This amount was due to the
acquisition of Wild Wild Web in April 1998 and the combination with HomeArts and
Astronet in January 1999. No amortization was recorded in the first quarter of
1998.
Other Income, net. Other income, net consists of interest income net of
interest expense. Other income, net increased to $159,000 in the first quarter
of 1999 from $38,000 in the first quarter of 1998. The increase was primarily
due to higher cash balances as a result of a private sale of equity securities.
Income Taxes. Women.com elected to be taxed as a partnership for the period
beginning on January 29, 1999, the date of formation of Women.com Networks, LLC,
and ending on the date of the merger of Women.com Networks and HomeArts, which
will occur immediately prior to the completion of this offering. As a
consequence, for this period the federal and state tax effects of the Women.com
losses were recorded by the members of the LLC on their respective income tax
returns.
No provision for federal and state income taxes has been recorded as
Women.com incurred net operating losses through December 31, 1998. As of
December 31, 1998, Women.com had approximately
24
<PAGE> 27
$19.0 million and $9.0 million of net operating loss carryforwards for federal
and state income tax purposes, respectively, which are available to offset
future regular and alternative minimum taxable income. Women.com's federal net
operating loss carryforwards will expire in the years 2011 and 2013. For state
tax purposes, the net operating loss carryforwards will expire in the years 2001
and 2003. Women.com has taken a valuation allowance on the full amount of the
net operating loss carryforwards since it is likely the benefit will not be
realized in the future. See Note 12 of Notes to Financial Statements.
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Results of operations for the years ended December 31, 1998, 1997 and 1996
include the results of Women.com only as the combination with HomeArts and
Astronet did not occur until January 29, 1999
Net Revenues. Net revenues increased to $7.2 million in 1998 from $2.8
million in 1997. This increase was primarily due to higher advertising banner
sales, a full year of production revenues from MediaOne and Hallmark, and new
revenues from the initiation of e-commerce affiliate and barter programs. Barter
revenue accounted for 9.1% of net revenues in 1998. Net revenues increased to
$2.8 million in 1997 from $729,000 in 1996. This increase was primarily due to
an increase in advertising revenues and, to a lesser extent, the initiation of
production activities.
Production, product and technology expenses. Production, product and
technology expenses increased to $5.7 million in 1998 from $2.9 million in 1997.
This increase was primarily due to the hiring of additional production and
product development personnel in 1998, and a $359,000, or 93%, increase in
content creation and development costs. These additional resources were required
to develop and support the network's increased content, features and overall
functionality. Production, product and technology expenses increased to $2.9
million in 1997 from $1.2 million in 1996. This increase was primarily due to
the creation, launch and ongoing development costs associated with Beatrice's
Internet Guide and the HealthyIdeas.com site.
Sales and marketing expenses. Sales and marketing expenses increased to
$12.0 million in 1998 from $3.9 million in 1997. The increase was primarily due
to increased sales and marketing staffing and accelerated sales and marketing
activities. Advertising expenses increased $2.4 million in 1998 to $4.0 million
from $1.6 million in 1997. In addition, Women.com incurred approximately $2.1
million in online distribution expenses in connection with its distribution
contracts with major online service providers. Also included in sales and
marketing expenses for 1998 was $656,000 of barter expense. No such expenses
were recorded in 1997. Sales and marketing expenses increased to $3.9 million in
1997 from $957,000 in 1996. This increase was primarily due to increased
staffing of Women.com's direct sales force and marketing organization, and a
$1.3 million increase in online advertising expenses.
General and administrative expenses. General and administrative expenses
increased to $1.4 million in 1998 from $1.1 million in 1997. This increase was
primarily due to increased administrative staffing to support Women.com's
growth. Bad debt expense increased by $201,000 to provide additional bad debt
reserves related to the growth in revenues. General and administrative expenses
increased to $1.1 million in 1997 from $956,000 in 1996. This increase was
primarily due to higher personnel costs and legal fees associated with financing
activities.
Stock-based compensation. Stock-based compensation expense was $1.2 million
in 1998. This expense resulted from an increased level of stock option grants
and increases in the deemed fair market value of the underlying common stock.
Women.com had no stock-based compensation charges in 1997 or 1996.
Amortization of acquired intangibles. Amortization of acquired intangibles
was $517,000 in 1998. This amount was due to the acquisition of Wild Wild Web in
April 1998. No amortization expense was recorded in 1997 or 1996.
25
<PAGE> 28
Other Income, net. Other income, net increased to $539,000 in 1998 from
$37,000 in 1997. The increase was primarily due to higher cash balances in
connection with the private sale of equity securities.
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
The following are the results of operations for HomeArts only and have been
derived from the consolidated financial statements of Certain Operations of the
New Media and Technology Division of The Hearst Corporation.
Net Revenues. Net revenues increased to $3.0 million in 1998 from $1.9
million in 1997. This increase was primarily due to increases in banner
advertising and sponsorship revenue, offset in part by a decrease in production
revenue. Net revenues increased to $1.9 million in 1997 from $1.3 million in
1996. This increase was primarily due to an increase in banner advertising,
sponsorship and production revenue.
Production, product and technology expenses. Production, product and
technology expenses consist primarily of software development and web hosting
infrastructure services provided by Hearst, personnel-related costs, and content
creation and development costs. Production, product and technology expenses
increased to $8.1 million in 1998 from $5.0 million in 1997. This increase was
primarily due to the development of the web hosting infrastructure and
membership information database, expansion of the content offered, the re-launch
of certain channels, and further development of the magazine sites. Production,
product and technology expenses increased to $5.0 million in 1997 from $4.3
million in 1996. This increase was primarily due to an increase in creative,
production and editorial staffing, expansion of the content offered, development
of the magazine sites and fees for software development services provided by
Hearst which were not incurred in 1996.
Sales and marketing expenses. Sales and marketing expenses increased to
$8.6 million in 1998 from $5.9 million in 1997. This increase was primarily due
to increased sales and marketing efforts to acquire additional users. Sales and
marketing expenses increased to $5.9 million in 1997 from $3.5 million in 1996.
This increase was primarily due to increased advertising expense.
General and administrative expenses. General and administrative expenses
increased to $1.0 million in 1998 from $878,000 in 1997. This increase was
primarily due to personnel-related costs. General and administrative expenses
decreased to $878,000 in 1997 from $990,000 in 1996. This decrease was primarily
due to non-recurring expenses in 1996 consisting of a recruitment expense and a
pension accrual adjustment.
SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth quarterly pro forma net revenue information
for Women.com for each of the five quarters in the period ended March 31, 1999,
assuming the combination with HomeArts and Astronet occurred on January 1, 1998.
The information for each of these quarters has been prepared on substantially
the same basis as the audited financial statements included elsewhere in this
prospectus, and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods. Historical results
are not necessarily indicative of the results to be expected in the future, and
results of interim periods are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31,
1998 1998 1998 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NET REVENUES........... $1,829 $2,486 $3,064 $4,271 $3,663
====== ====== ====== ====== ======
</TABLE>
26
<PAGE> 29
The significant increase in net revenues during the quarter ended December
31, 1998 was due to the growth of the Internet as an advertising medium and
seasonal promotions related to holiday shopping and planning. In addition, the
fourth quarter is seasonally strong for most kinds of advertising.
The decline in revenues for the quarter ended March 31, 1999 was primarily
because the size of the HomeArts sales force and sales management team had
declined due to attrition by the end of 1998, and had little selling momentum
entering the first quarter. Also, the HomeArts and Women.com sales forces were
combined at the beginning of February, and much of that month was devoted to
assigning new sales territories, and otherwise integrating the selling
operations. Finally, the first quarter is a seasonally weak period for
advertising sales.
Women.com's revenues and operating results are likely to vary significantly
from quarter to quarter in the future due to a number of factors, many of which
are outside of its control. These factors include:
- the ability to attract and retain advertisers
- the ability to offer compelling, original content, community and services
- the ability to attract and retain users
- the ability to attract and retain e-commerce customers
- new sites, services or products introduced by Women.com or its
competitors
- the timing and uncertainty of sales cycles
- the mix of online advertisements sold
- seasonal weakness in advertising sales; which typically occur in the
first and third calendar quarters
- the level of web and online services usage
- the ability to attract, integrate and retain qualified personnel
- the ability to successfully integrate operations and technologies from
acquisitions or other business combinations
- technical difficulties or system downtime affecting the Internet
generally or the operation of the Women.com network
- general economic conditions, as well as economic conditions specific to
Internet companies
Women.com's revenues for the foreseeable future will be substantially
dependent on advertising and sponsorships, many of which are short term and
subject to cancellation without penalty until shortly before publication. In
addition, Women.com derives a significant portion of its revenues from sales of
advertising to a limited number of customers. Accordingly, the loss of a key
advertising relationship, or the cancellation or deferral of advertising orders
could harm Women.com's results in any one quarter. As a result of these and
other factors, quarter-to-quarter comparisons of Women.com's operating results
should not be relied upon as an indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
Women.com has funded its operations to date primarily through private sales
of equity securities, which have resulted in aggregate net proceeds of
approximately $34.9 million, and to a lesser extent from $14.9 million in cash
contributed by HomeArts in connection with the formation of Women.com Networks
LLC. Women.com had approximately $19.2 million in cash and cash equivalents at
March 31, 1999 as compared to $12.2 million at December 31, 1998. The increase
in cash and cash equivalents was primarily due to cash received in connection
with the combination of Women.com with HomeArts and
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Astronet. In May 1999, Women.com raised an additional $20.0 million of gross
proceeds through the private sale of equity securities.
Net cash used in operating activities increased to $7.7 million in the
first quarter of 1999 from $1.6 million in the first quarter of 1998. Net cash
used in operating activities increased to $11.7 million in 1998 from $2.6
million in 1997. These increases were primarily due to an increased net loss,
offset in part by increased non-cash charges including stock based compensation
charges in 1998 and the first quarter of 1999, as well as amortization of
intangibles in the first quarter of 1999.
Net cash provided from investing activities was $14.6 million in the first
quarter of 1999 as compared to net cash used in investing activities of $116,000
in the first quarter of 1998. The increase was due to the $14.9 million in cash
received from HomeArts in connection with the combination with HomeArts and
Astronet. Net cash used in investing activities increased to $1.1 million in
1998 from $506,000 in 1997. The increase was due to increased purchases of
property and capital equipment.
Net cash provided by financing activities was $73,000 in the first quarter
of 1999 as compared to net cash used in financing activities of $14,000 in the
first quarter of 1998. The difference is due to interest income from higher cash
balances. Net cash provided by financing activities increased to $20.1 million
in 1998 from $6.2 million in 1997. The increase in net cash provided by
financing activities for 1998 was primarily due to the proceeds received from
the sale of preferred stock and warrants by Women.com.
We expect to increase our staffing, make significant capital expenditures,
make acquisitions of complementary businesses, products and technologies, and
expand our sales and marketing programs. We currently expect that the net
proceeds from this offering, together with available funds, will be sufficient
to meet our anticipated needs for working capital and capital expenditures for
at least the next 12 months. There can be no assurance, however, that the
underlying assumed levels of revenues and expenses will prove to be accurate. We
may seek additional funding through public or private financings or other
arrangements prior to such time. Adequate funds may not be available when needed
or may not be available on favorable terms. If additional funds are raised
through the issuance of equity securities, dilution to existing stockholders may
result. If insufficient funds are available, we may be unable to enhance our
network and brand, make acquisitions of complementary businesses or respond to
actions by competitors, any of which could materially harm our business,
financial condition and results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained 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 adoption of SOP No. 98-1 will not
have a material impact on its financial statements. See Note 2 of Notes to
Financial Statements.
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organization costs. It requires the costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 31, 1998. The
adoption of SOP No. 98-5 will not have a material impact on its financial
statements. See Note 2 of Notes to Financial Statements.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contract (collectively referred to as
derivatives), and for hedging activities. SFAS No. 133 is effective for all
fiscal quarters for fiscal years beginning after June 15, 1999. Women.com is
assessing the potential impact of this pronouncement on
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the financial statements but does not anticipate any significant impact as
Women.com does not have any derivative instruments and does not anticipate
acquiring any derivative instruments. See Note 2 of Notes to Financial
Statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Women.com maintains its cash equivalents in a money market fund. As of
December 31, 1998, all of Women.com's cash equivalent investments will mature in
one year or less. See Note 1 of Notes to Financial Statements. Women.com did not
hold derivative financial instruments as of December 31, 1998, and has never
held any such instruments. Currently all of Women.com's sales and expenses are
denominated in U.S. dollars and as a result Women.com has experienced no foreign
exchange gains and losses to date. Women.com does not expect to effect
transactions in foreign currencies during 1999. Women.com has not engaged in
foreign currency hedging to date.
YEAR 2000 READINESS
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 software used by many companies and governmental agencies may need
to be upgraded to comply with such "Year 2000" or "Y2K" requirements or risk
system failure or miscalculations causing disruptions of normal business
activities.
STATE OF READINESS
We made a preliminary assessment of the Y2K readiness of its operating
financial and administrative systems, including the hardware and software that
support our systems.
Our Y2K task force is currently developing testing procedures for all
software and other systems that it believes might be affected by Y2K issues. We
plan to complete this process by the third quarter of 1999. At that time, we
will be able to evaluate whether any of our systems need to be revised or
replaced.
COSTS
We have spent an immaterial amount on Y2K compliance to date but expect to
incur an additional $200,000 to $300,000 in connection with identifying,
evaluating and addressing Y2K compliance issues. Most of these expenses are
operating costs associated with time spent by employees and consultants
evaluating Y2K compliance matters. Such expenses, if higher than anticipated,
could have a material adverse effect on our business, results of operations and
financial condition.
RISKS
We are not currently aware of any Y2K compliance problems relating to its
systems that would have a material adverse effect on our business, results of
operations and financial condition. There can be no assurance that we will not
discover Y2K compliance problems in its systems that will require substantial
revision. There can also be no assurance that third-party software, hardware or
services incorporated into our systems will not to be revised or replaced. Any
revision or replacement of our systems could be time consuming and costly.
Our failure to replace our 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 our business. In addition, the failure to adequately address Y2K
compliance issues could result in claims of mismanagement, misrepresentation or
breach of contract. The resulting litigation could affect our financial and time
resources.
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We are dependent on vendors to provide significant network services and
equipment. A Y2K disruption of the network services and equipment provided by
vendors could cause our members and visitors to consider seeking alternate
providers or cause an unmanageable burden on our technical support staff. Either
of these reactions could have a material adverse effect on our business, results
of operations and financial condition.
CONTINGENCY PLAN
Y2K contingency plans are being developed as part of our Y2K assessment.
Our Y2K assessment, including a contingency plan, will be complete by the third
quarter of 1999.
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BUSINESS
OVERVIEW
We are a leading Internet network dedicated to women, featuring
award-winning original content, personalized services, community and online
shopping. Our network is comprised of more than 90,000 pages of content
organized into 19 topical channels. Our strategic relationships with Hearst and
Rodale enable us to offer an online newstand featuring content from 11 of the
world's leading magazines, including Cosmopolitan, Good Housekeeping, Prevention
and Redbook. Through our agreement with Hearst, we host the Internet sites of 10
of Hearst's leading women's magazines and have online distribution rights to the
content of these magazines. According to Media Metrix, in March 1999 our network
attracted more than 3.8 million unique visitors, ranking us among the top 40
Internet sites as measured by reach. During the same period, our users generated
approximately 120 million page views. In the first quarter of 1999, we had over
130 industry-leading advertisers including Coca-Cola, Jenny Craig, Macy's,
Microsoft, Proctor & Gamble, Sears, Strong Funds, Toyota, Visa and Volvo. Our e-
commerce partners include Amazon.com, Clinique, eToys, Hooked on Phonics,
J.Crew, John Hancock and PlanetRx. We leverage our brand identity and increase
traffic to our network through over 30 online distribution relationships with
leading Internet companies, including America Online, CBS SportsLine, GeoCities,
Infoseek, Lycos, Microsoft Network, Mindspring, Netscape, WebTV, Xoom.com and
Yahoo!.
INDUSTRY BACKGROUND
THE INTERNET CONTINUES TO GROW AS A GLOBAL MEDIUM FOR CONTENT, COMMERCE,
COMMUNITY AND ADVERTISING
The Internet has become a significant global medium for obtaining news and
information, communicating and conducting commerce. Both the number of Internet
users and the amount of time they spend online are growing. Jupiter
Communications, a market research firm specializing in online research and
analysis, estimates that the number of Internet users worldwide will grow from
83 million at the end of 1998 to approximately 320 million by the end of 2002.
This growth is the result of a number of factors, including a growing number of
computers in the home and workplace, improvements in network infrastructure,
more convenient, faster and less expensive Internet access, advances in computer
and modem technology, an increased public awareness of the benefits of using the
Internet and the development of easy to use interfaces.
A growing number of advertisers and businesses are capitalizing on the
Internet's interactive nature to market their products to highly targeted
audiences. The Internet offers these advertisers a flexible way to target their
message and measure their results. Internet advertisers can tailor their
messages to specific groups of consumers and can change ad content frequently in
response to market factors, current events and consumer feedback. Moreover,
advertisers can more accurately track the effectiveness of their advertising
messages based on the response rate or "click throughs" that their
advertisements receive. As the online community of users has broadened and
become more diverse, the types of advertisers have also broadened to reflect
this new more "mainstream" audience. Jupiter Communications estimates that
Internet advertising in the U.S. will grow from $1.8 billion in 1998 to more
than $7.6 billion in 2002.
The interactive nature of the Internet as well as the growing online
community has also resulted in dramatic growth in the amount of e-commerce that
is being transacted on the Internet. Jupiter Communications estimates that the
business-to-consumer market will grow from $3 billion in 1997 to $41 billion by
the year 2002. Growth in e-commerce can be attributed to a number of factors,
including consumer confidence in Internet technology and security, improved ease
of use and the validation of e-commerce resulting from the participation of
nationally recognized companies.
The Internet provides an efficient medium for the delivery of continually
updated original content. In contrast to print media, the Internet's technology
and interactive nature allow content providers to
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update information without interrupting the user's experience. As a result,
providers of high-quality, original and well-organized content can promote
increased Internet usage and create an attractive marketing environment for
advertisers and merchants. In addition, leading content providers can develop a
loyal following of repeat users who register with their sites by providing
personal information and preferences. Registration benefits both the user and
the site. Registered users are often eligible for additional services from a
site, such as customization options or access to premium content. As a content
provider learns more about its users as they register and spend more time
online, it can tailor content to meet the needs and preferences of its users.
This user information also provides advertisers and merchants with more focused
demographic and psychographic information, which is used to maximize direct
marketing opportunities.
WOMEN ONLINE ARE AN INCREASINGLY IMPORTANT AUDIENCE TO ADVERTISERS AND MERCHANTS
Until recently, the online community was a technologically oriented and
predominately male audience, and available online media and commerce offerings
were often directed at this audience. Over time the Internet has evolved and is
expected to continue to develop a more mainstream audience of men and women
whose range of interests are virtually unlimited.
Today women represent an increasingly significant and fast-growing segment
of the online audience. They also represent an increasingly important
demographic group to advertisers and merchants. This importance is due in part
to the growth in women's income and the role women play as key consumer decision
makers, both in the home and in the workplace.
- According to Jupiter Communications, women represented 39.6 million
Internet users in 1998 and this number is expected to grow to 72.4
million or 50.2% of the all Internet users by the end of 2002.
- According to the October 1998 survey of active Internet users conducted
by the Georgia Tech Graphics, Visualization and Usability Center, 87.3%
of women Internet users access the Internet one or more times per day,
compared to only 45% in October 1996. In addition, the percentage of
women Internet users spending 10 or more hours on the Internet per week
increased from 26% in 1996 to 68% in October 1998.
- According to Advertising Age, women controlled or influenced over $2.4
trillion, or 80%, of the $3.0 trillion spent in 1998 by U.S. consumers.
In addition, women are involved in 80% of all consumer purchase decisions
and currently manage the finances in 72% of the nation's households.
The demonstrated buying power of women, coupled with the growth of the
number of women on the Internet, presents a significant opportunity to provide
content developed specifically for women and to attract advertisers and
merchants that target this audience. Internet sites offering the right mix of
content, community and commerce are well positioned to take advantage of this
opportunity.
WOMEN SEEK A FOCUSED AND INTEGRATED INTERNET SOLUTION TO ACCOMPLISH THEIR
OBJECTIVES
Numerous traditional and online information sources are trying to address
the demand by women for timely and relevant information. While a number of
Internet sites include information for and about women, we believe only a
limited number of sites are currently providing the original content, community
and commerce offerings necessary to provide an integrated solution for the
objectives of women online. According to Media Metrix, in March 1999, we were
one of only three of the top 50 web sites whose audience was comprised of at
least 60% women. We believe most women are seeking rather than exploring on the
Internet and are more interested in finding sites that enable them to achieve
their objectives efficiently. The increased time constraints women face as they
balance family, work and social
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lives are driving women to seek ways to be more productive. We believe that a
significant opportunity exists to provide a comprehensive and convenient
Internet solution.
THE WOMEN.COM SOLUTION
We are one of the most well-known and widely visited women's networks on
the Internet. By delivering quality content, community services, personalized
tools and an extensive shopping selection, we have achieved a leading position
among women Internet users. Key components of our solution include:
DELIVERING VALUE TO WOMEN
We provide women with original content, community, personalized tools and
services and online shopping.
Content. We are dedicated to helping women be more productive. To achieve
this objective, we deliver high-quality programming on topics such as finance,
health, shopping and travel to help our users get things done. We employ 25
full-time experienced editors and a team of freelance writers, artists and
personalities to help us provide content that distinguishes us from other
women's networks and online services. Through our magazine relationships with
Hearst and Rodale, we believe we have access to the largest collection of
magazine content targeted at women, including the articles in Cosmopolitan, Good
Housekeeping, Prevention and Redbook. We have developed partnerships with
companies such as Bloomberg and Crayola which enable us to supplement our
network with branded and trusted content. We believe our editorial independence
builds our credibility and trustworthiness and increases users' loyalty to our
brand. By combining our extensive content relationships with our network's
powerful functionality, we have created a unique Internet experience for our
users. For example, our health channel is supplemented by a complete range of
monthly Prevention magazine content with features such as topical searches,
calorie counters, vitamin dispensers and menu planners.
Community. We provide women with the opportunity to interact with experts
and other women online. Our members share experiences, solutions and
opportunities, gain support and exchange information. Our network maintains
dozens of thriving online communities formed around interests such as book
clubs, entrepreneurs' forums, investment clubs and recipe exchanges as well as
member-to-member programs such as Mentor Moms, Fitness Buddies and Health
Support Groups. Our high-quality content provides topics to discuss on message
boards and in chat rooms in which visitors can interact with editors, resident
experts and community hosts.
Personalized Tools and Services. We also provide convenient personalized
services and more than 150 tools to help women manage their lives. For instance,
women can use the Mortgage Calculator, Recipe Finder or Weather Center to get
relevant information quickly and efficiently. We also offer free membership to
users, which provides them with access to additional services such as e-mail,
home pages, message boards and chat rooms. My.Women.com, introduced in October
1998, is one of the fastest growing areas of our network and provides members
with news, information, shopping and time and life management tools all
customized by the individual user. From this service, we can accumulate
substantial preferences and behavioral information that will allow us to provide
increasingly targeted services to our customers. We believe membership creates
user loyalty, repeat site visits, referrals and user-generated content. This
also creates opportunities for advertisers and merchants to develop a more
focused and interactive relationship with our users.
Online Shopping. We designed our shopping channel around our visitors
preferences, including easy navigation, brand names and staff recommendations.
We believe that our original content combined with our strategic product
placement allows women to make educated and value-oriented purchase decisions.
Our highly contextual e-commerce environment has attracted over 35 leading
commerce partners, including Amazon.com, Clinique, eToys, Hooked on Phonics,
J.Crew, John Hancock and
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PlanetRx. The contextual nature of our e-commerce environment would, for
example, enable a visitor to our health channel interested in fitness to click
through to one of our shopping centers and purchase the latest exercise video.
DELIVERING VALUE TO ADVERTISERS
Our advertising partners have access to our large and loyal user base
demonstrated by the approximately 120 million page views delivered to over 3.8
million unique visitors in March 1999. In addition, we believe our users
constitute a valuable demographic due to their high income, spending and
education levels. We offer advertisers a broad range of high-quality content
within which to contextually place their messages. For example, visitors to the
pregnancy channel are delivered advertisements for Pampers.
We offer a variety of programs to support advertisers' specific objectives.
We deliver comprehensive advertising packages, including any combination of
simple banners, sponsored content, e-commerce placement, directories and a
number of minisites customized to the advertiser. We also enter into
consultative relationships with our advertisers that allow for customized and
targeted advertising campaigns. As with the model prevalent in print and
television media, Internet advertising fees are based primarily on the
attractiveness of the audience demographics and the volume of ad impressions
delivered. In order to help optimize these measures, we provide research
services to help advertisers understand the objectives of women online and learn
more about the effectiveness of their online ad campaign.
These features and services and our attractive demographics have attracted
leading advertisers to our network. Our magazine sites, which already benefit
from their well-recognized magazine brands, offer advertisers additional
well-defined audience and advertising options. During the first quarter of 1999,
we had over 130 advertising customers, including Coca-Cola, Jenny Craig, John
Hancock, Microsoft, Proctor & Gamble, Sears, Toyota, Unilever, Union Bank of
California and Visa.
DELIVERING VALUE TO MERCHANTS
Our online shopping centers are designed to appeal to our core audience of
busy, professional and educated women and are built around convenience and
value. Online merchants benefit from the highly contextual e-commerce
environment that is created through the structure of our site and our highly
relevant and complementary content. We believe that our original content
combined with product placement and e-commerce channels allow women to make more
educated and value-oriented purchase decisions. This helps us to attract leading
commerce partners such as Amazon.com, Clinique, eToys, Hooked on Phonics,
J.Crew, John Hancock and PlanetRx. Our channels match advertisers and merchants
with the most relevant user base. We believe that because of our more targeted
advertising demographics, our users are more likely to purchase products and
services while shopping on our network. According to @Plan Spring 1999, in the
first quarter of 1999, 51.3% of our audience made purchases on the Internet in
the previous six months, while only 43.5% of all Internet shoppers made
purchases during the same period.
STRATEGY
Our objective is to be the leading network for women on the Internet. We
believe that our high-quality content and network approach will create strong
brand recognition and a large and loyal audience that will be attractive to
advertisers and merchants. Key elements of our strategy include:
Produce, Enhance and Distribute Compelling and Original Content. We believe
that the high quality of our content is a cornerstone of our online network. We
will continue to produce compelling content in order to attract and retain
visitors to our network. In addition, we intend to add to the depth of our
content by increasing the number of features, topics, services and tools in
every channel. We have engaged over 25 journalists and editors with extensive
print and broadcast experience and expect to
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continue to expand this staff. We have also engaged personalities and experts
from a wide range of areas of interest to create content and interact directly
with users. We supplement our network's original content with articles from
leading women's magazines. These magazines are designed to appeal to women in
many different life stages and with many different interests. We believe that we
are well positioned to be a leading provider of women's content for the
high-speed broadband environment. We have been providing multi-media content
through broadband access partners such as RoadRunner and MediaOne Express.
Continue to Develop and Extend Our Relationship with Hearst and Other
Leading Content Partners. We intend to continue to leverage the branding and
cross-promotional opportunities that our relationship with Hearst provides. Our
agreement with Hearst gives us online distribution rights to the web sites of 10
of the leading women's magazines published by Hearst including Cosmopolitan,
Good Housekeeping and Redbook. In addition, it provides us with print,
television and cable promotion. We intend to continue to drive traffic to our
network by highlighting the magazines prominently throughout our network,
increasing our investment in the magazines' own sites and distributing the
magazine sites online. The magazines themselves will also act as a powerful
distribution and marketing vehicle for our network through their combined print
circulation of over 15 million. Through our relationship with Hearst, our
network will receive at least 100 pages of print promotion in Hearst magazines
over a two year period as well as $2 million of television and cable promotion.
In addition to our relationship with Hearst, we have relationships with other
leading offline content providers, including Bloomberg, Crayola and Rodale. We
believe that alliances with traditional media partners provide access to popular
content, increase our access to marketing channels, extend our brand identity
both online and offline and drive traffic to our network. Our content rights to
11 traditional print magazines published by Hearst and Rodale, provide us with a
significant amount of content produced by editorial staffs with a proven
understanding of the interests of women in a wide range of areas. We intend to
continue to forge partnerships that allow us to leverage our assets by
effectively combining our expertise in Internet content production with the
promotional and distribution capabilities of major entertainment and media
companies.
Extend Our Brand Recognition. We are a leading brand name for women on the
Internet and believe that we are benefiting from being an early provider of
content and services dedicated to women online. We believe our name,
"Women.com," is the most intuitive brand and domain name for an online network
for women, allowing for strong online branding and traffic growth. We intend to
increase our brand awareness and visibility through a variety of marketing and
promotional activities, including advertising on other leading Internet sites
and in other print and broadcast media, conducting an ongoing public relations
campaign, engaging in cross-promotion with our magazine partners and developing
business alliances and partnerships. We believe we can continue to increase our
traffic and brand-awareness by expanding our online distribution partnerships.
We currently have over 30 online distribution partners, including co-branded
areas on leading Internet portals, such as America Online, Infoseek, Microsoft
Network, Netscape and Yahoo!. We deliver over 3,000 headlines or articles each
month to our online distribution partners and deliver programming to channels
and subchannels on our distribution partners' sites. Clicking on any of these
headlines links the user back into our network. We also intend to secure
distribution alliances with international distribution partners.
Enhance the User's Experience. We believe women are seeking content,
community and shopping that is tailored to their individual needs. For this
reason, we have designed our network to offer original content and services
relevant to women's lives so that they make Women.com a part of their daily
routine. We offer services, such as e-mail, homepages and My.Women.com, to help
women more quickly achieve their information, communication and commerce
objectives. One of our goals is to encourage users to register with us and we
intend to focus on increasing this membership base. We believe that registration
information provides us with added insight into our user base, allowing us to
better respond and adapt to our users' goals thereby increasing their time spent
online.
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Partner with Advertisers to Provide Unmatched Access to Women on the
Internet. We sell a variety of advertising solutions to advertisers, including
banners, buttons, content sponsorships, e-commerce placements, links, minisites
and promotions. We also enter into consultative relationships with many of our
advertisers that allow for customized and targeted advertising campaigns. We
advise these advertising partners on how best to market their products and
services to women online. To date, 25 advertisers have engaged us in this
consultative capacity, including John Hancock, Toyota and Unilever. Some
advertisers have also taken advantage of our internal market research
capability. We believe this consultative approach:
- Provides value to advertisers through more effective advertising
campaigns
- Generates multiple ad revenue streams, including advertising, minisite
and banner production and market research
- Establishes more loyal and long-lasting advertiser relationships
- Generates useful market research which we can use to plan future content
offerings
We create customized advertising solutions for our advertising clients and
intend to further expand our existing advertiser relationships. We also plan to
continue to leverage our growing user base to capture valuable customer data.
This data, although shared anonymously with our advertising partners, can be
used by our internal market research staff to create valuable direct marketing
data. This will allow us to further refine and enhance the advertising solutions
we create for our clients as well as our future content offerings.
Enhance Our E-Commerce Offerings. We intend to continue to make e-commerce
an integrated and valuable part of our network. We currently have an
affiliate-based e-commerce model with leading commerce partners through which
merchants purchase space in our category-focused shopping centers and sell their
products to our users in a contextual selling environment. We believe that more
online merchants will want to partner with us as a result of our click-through
rates, our large user base and the demographics of our audience. We also intend
to increase the number of our shopping centers and stock these centers with
additional products and helpful information. In addition, we are developing a
direct retail business and intend to source and sell selected products designed
to appeal to our core audience.
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OUR NETWORK
We are a leading women's online resource containing a branded network of
comprehensive content, community, personalized tools and services and online
shopping which is accessed by millions of users daily. Our 19 dynamic channels
connect users to more than 90,000 pages of high-quality content. Each of these
channels focuses on a topic and loyal community and is created around a unique
editorial voice. Furthermore, our channels incorporate content from 11 of the
world's leading women's magazines for which we also produce Internet sites. The
network offers category-focused shopping centers containing popular products, in
addition to tools such as e-mail, personalized home pages and member
newsletters.
The table below provides a description of the content offered through each
of our 19 channels.
<TABLE>
<CAPTION>
CHANNEL NAME DESCRIPTION
------------ -----------
<S> <C>
Career................. Offers information on job listings, child-care centers,
resume writing and personnel management. Extends
opportunities to participate in the Entrepreneur Club or to
ask "Career Coach" about salary ranges and networking
strategies. Features news highlights, personal finance and
small business information.
Cars................... Offers tools such as the car payment calculator and provides
tips on car insurance and financing. Provides opportunity to
ask "Cash Flo" about the pros and cons of leasing vs. buying
a car and offers automotive tips in related chat rooms.
Entertainment.......... Features book and movie reviews, community chats, television
picks and celebrity interviews.
Family................. Enables visitors to find information on a wide range of
topics, including child development, college tuition
planning and parenting tips from expert columnists. Offers
online activities for parents and kids.
Fashion & Beauty....... Offers helpful suggestions on skin care, fashion and
make-up. Features fashion trends and personal style
interactive tools. Allows visitors to e-mail questions to
"Fashion Plate." Features information from Cosmopolitan and
Harper's Bazaar.
Fitness................ Offers opportunities to meet a workout buddy in the
network's fitness community, join a walking club, design a
personalized workout shop for the latest exercise videos or
use the interactive calorie counter. Features information
from Prevention, Redbook and Good Housekeeping.
Food................... Features recipe finders, cooking schools, restaurant
reviews, wine selection suggestions and a daily meal
planner. Offers information from Country Living and Good
Housekeeping.
Health................. Provides information on health news, ailments and nutrition.
Features content from Prevention, Healthy Living, Redbook
and Good Housekeeping. Offers advice from the network's
resident expert and related support groups and interactive
tools such as health assessment.
Home & Garden.......... Offers home improvement ideas and other fix-it tips where
visitors can access the Country Living Gardener and Good
Housekeeping. Provides decorating advice from experts and
features interactive tools for kitchen design provided by
House Beautiful.
Horoscopes............. Features relationship compatibility tools, birthday
reminders and personalized daily horoscopes where visitors
can ask "Genie" questions and find horoscopes from related
magazines sites. Features information from Cosmopolitan.
</TABLE>
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<TABLE>
<CAPTION>
CHANNEL NAME DESCRIPTION
------------ -----------
<S> <C>
Money.................. Features content from Bloomberg, including business news,
portfolio tools, currency conversion rates, stock quotes and
company profiles. Provides interactive tools such as
personal budget planning, home-buying calculators and other
financial planning information.
News & Trends.......... Updates viewers on the financial industry, technology, world
news headlines and other current events. Offers an
opportunity to post comments, participate in various polls
and e-mail politicians regarding public policy.
Pregnancy.............. Features a large selection of body, health, pregnancy,
childbirth and parenting reference materials. Offers advice
from our resident obstetrics nurse and the opportunity to
share experiences in the chat rooms.
Relationships.......... Offers advice on relationships through content from
Cosmopolitan and Redbook. Features "Emale" which provides
advice from the male perspective.
Shopping............... Offers visitors online shopping opportunities and an
extensive selection from our over 35 e-commerce partners
offering 18 product categories. Features "Deal of the Week"
and "Staff Picks" that highlight savings and recommended
products.
Small Business......... Offers resources for starting a business, helpful hints from
the Entrepreneur's Club or the "Biz Shrink" and content from
Victoria and Good Housekeeping. Features interactive tools
such as a start-up cost calculator and interactive business
plan.
Technology & Provides visitors the opportunity to build their own
Internet............. Internet site and offers the latest technology news.
Highlights women in the technology field through video
interviews with well-known journalists such as NBC's Soledad
O'Brien.
Travel................. Offers visitors the opportunity to plan a weekend getaway,
read about tips for business travel and find weather
information for any city and provides postings of
destination picks on the travel message board.
Weddings............... Features tools for brides and grooms such as the wedding
checklist from Town & Country, information on finding a
wedding dress and wedding gift suggestions.
</TABLE>
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Our channels link to related content on 11 magazine sites to which we have
online distribution rights. We produce, maintain and host these branded sites.
The content from these sites links to various channels within our network. The
following table describes each magazine site. In addition, the table states for
the six months ended December 31, 1998 print circulation data, as provided by
Audit Bureau of Circulations, and demographic information for each of the 10
Hearst magazines and for Rodale's Prevention magazine, as reported by the Fall
1998 Mediamark Research Inc. Report.
<TABLE>
<CAPTION>
PRINT MEDIA DATA
----------------------------------------
PAID
CIRCULATION AVERAGE AVERAGE
MAGAZINE RELATED WEB SITE DESCRIPTION (MILLIONS) AGE HOUSEHOLD INCOME
- -------------------------- ---------------------------- ----------- ------- ----------------
<S> <C> <C> <C> <C>
Cosmopolitan.............. Features fashion and 2.5 32 $ 44,000
relationship advice aimed at
the "fun, fearless female."
Country Living............ Profiles lifestyle and home 1.7 45 $ 47,000
design ideas.
Country Living Gardener... Features seasonal gardening 0.5 44 $ 52,000
practices, beautiful gardens
and tips for the avid
gardener.
Country Living's Healthy
Living.................. Features topics relating to 0.3 42 $ 56,000
illness and disease
prevention and offers advice
on following a healthy and
spiritual lifestyle.
Good Housekeeping......... Features topics relating to 4.5 47 $ 42,000
food and recipes, home,
family and consumer reports.
Harper's Bazaar........... Profiles upscale fashion and 0.7 43 $121,000
beauty trends.
House Beautiful........... Features topics relating to 0.9 45 $ 54,000
designing, improving or
remodeling one's home.
Prevention................ Offers articles, resources, 3.1 49 $ 48,000
guidance and expertise on a
variety of health-related
topics.
Redbook................... Focuses on family, health 2.8 43 $ 43,000
and marriage.
Town & Country............ Focuses mainly on upscale 0.4 43 $124,000
weddings.
Victoria.................. Offers support and advice 1.0 42 $ 47,000
for women entrepreneurs,
including stories and
lifestyle tips.
</TABLE>
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<PAGE> 42
ADVERTISING SALES
As of May 10, 1999 we had a direct sales force comprised of 36 sales
people, sales managers and support staff. This group is located primarily in New
York, with offices in Chicago, Los Angeles and San Mateo, California. Our sales
and marketing divisions have partnered to create a variety of advertising
packages from banner advertisements to minisite production.
We currently derive, and expect to continue to derive, a substantial
portion of our revenue from advertising sales. We offer advertisers the
following advertising options:
Banners, Buttons, Keywords and Links. These units may be purchased on a
broad "Run of Network" basis or on a specific channel basis or commerce area.
Generally, higher rates are charged for banners displayed to a more targeted
audience.
Content Sponsorship. Content areas may be sponsored by advertisers on an
exclusive basis such as Toyota's sponsorship of "In the Pink," a page which is
devoted to providing women with valuable information on breast cancer
prevention, self-examination, diet and medical treatment.
Production Services. We produce minisites, banner ads and special
advertising units that may hyperlink to an advertiser's site or programs within
our network. For example, we produced a site titled "Full Load" for Unilever's
Wisk detergent.
Commerce. We are able to create a variety of commerce-related programs for
clients. A current example includes our sponsorship relationship with GreenTree
Vitamins, which includes preferred placement of hyperlinks in the Women.com
store health area, special merchandising such as featuring their products as a
"Hot Deal of the Week," co-branded promotional banners and sponsorship
exclusivity of "The Vitamin Dispenser" on HealthyIdeas.com.
Promotions. We offer customized promotions for clients allowing for
branding, database collection, product sampling and surveys. We also run several
advertising promotions per year, such as the "Holiday Survival Guide," which
includes gift ideas, holiday recipes and decorating tips.
Research. We believe that one of our core competencies is performing market
research for our advertising clients. We offer a variety of products ranging
from online surveys to in-home studies to "pre and post awareness studies" of an
advertiser's message within our network.
Programs with Strategic Partners. We partner with companies such as Hearst,
Rodale and Bloomberg to jointly sell sponsorship opportunities. For example, we
created an online minisite for Bristol Myers called "The Headache Resource
Center" which was housed within our health channel and also ran as an insert in
Prevention magazine.
Cross Media. Our network will offer offline advertising programs for
clients as part of larger deals. For example, our 1999 Toyota sponsorship
includes a co-branded sponsorship of a National Public Radio program entitled
"Tech Nation."
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<PAGE> 43
CUSTOMERS
Our sales force has been successful in attracting Fortune 500 advertising
companies by promoting the value of our audience and environment. Our sales
division is building a large and varied client base of advertising
relationships, which we believe will build the strongest base of customers for
the future. During the first quarter of 1999, we had over 130 advertising
customers. Selected customers and their respective industries who have
advertised on the network include:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS CONSUMER/
AUTOMOTIVE FINANCIAL SERVICES & TECHNOLOGY RETAIL PACKAGED GOODS
- ------------------ --------------------- ------------------ --------- ----------------
<S> <C> <C> <C> <C>
Ford Motor Company Discover Brokerage AT&T JC Penney Avon
General Motors Fidelity Investments IBM Macy's Clinique
Mercedes Benz John Hancock Microsoft Sears Kellogg
Toyota Strong Funds Sprint Internet Kraft
Union Bank of Shopping Proctor & Gamble
California Network Unilever
Visa
</TABLE>
CONTENT RELATIONSHIPS
Bloomberg L.P. The Women.com money channel was built in partnership with
Bloomberg, a leader in global business and financial news. This co-branded
channel is a financial resource, featuring over 1,000 pages of financial news,
articles and interactive tools. The channel is targeted at professional women
seeking sound financial advice and offers stock and fund quotes, newsfeeds,
calculators, online experts and community features. We are responsible for the
channel's design, some of its original content, hosting and promotion. Bloomberg
provides the co-branded channel with up-to-the minute newsfeeds, charts,
portfolio tracking tools, calculators as well as Bloomberg columnists and
features. Both parties may sell advertising inventory on the channel and retain
the sales commissions they generate. We share with Bloomberg the revenues, net
of sales commissions, generated from the respective advertisements sold on the
co-branded channel. This agreement was entered into in December 1997 and has an
initial term of three years.
Crayola. The co-branded Crayola FamilyPlay.com site was developed in
partnership with Crayola, a leading producer of children's art products.
FamilyPlay.com is designed for busy moms with children ages 2-11. The site is
filled with activities that encourage skill development and imagination through
interactive, personalized crafts and games, providing fun, easy-to-do activities
for parents to explore with their children. Activities are housed in a
searchable database that is organized by age, skill set and location. We
produce, host and create the content for the Crayola FamilyPlay.com site.
Crayola lends its expertise in children's education as well as promotional
support for the site. We have the sole right to sell advertising on the site. In
turn, we share a percentage of the revenues, net of sales commissions, generated
by the site. This agreement was entered into in April 1998 and has an initial
term of five years.
The Hearst Corporation. In January 1999, we formed a relationship with The
Hearst Corporation and 10 of its magazine titles as part of the combination with
HomeArts and Astronet. These household brand name publications include
Cosmopolitan, Country Living, Country Living Gardener, Country Living's Healthy
Living, Good Housekeeping, Harper's Bazaar, House Beautiful, Redbook, Town &
Country and Victoria.
The Hearst Corporation is a diversified communications company engaged in a
broad range of publishing, broadcasting, cable television networks and other
communications activities. Hearst is the world's largest publisher of monthly
magazines, with 16 U.S. titles and 96 international editions distributed in more
than 100 countries. Hearst magazine titles include Cosmopolitan, Good
Housekeeping, Redbook, Country Living, Esquire and Popular Mechanics. Hearst's
12 daily and seven weekly
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newspapers include The Houston Chronicle, The San Francisco Examiner, The
Seattle Post Intelligencer, The San Antonio Express-News and The Albany Times
Union. Hearst's public affiliate, Hearst Argyle Television, Inc., owns 26
network affiliated television stations that reach approximately 17.5% of U.S.
television households, making it one of the country's largest independent
(non-network owned) television station groups. Hearst was a founding partner in
Lifetime, A&E and The History Channel cable networks. Hearst and The Walt Disney
Company, through ABC, Inc., wholly own the Lifetime network as equal partners,
and are equal partners in the A&E network, in which NBC owns a 25% interest.
Hearst also owns 20% of ESPN, which includes ESPN2 and ESPNews. Hearst's book
publishing businesses include William Morrow and Avon Books and its
entertainment activities include the production of made-for-television movies
and television series, as well as the syndication and licensing of cartoon
characters and features.
Our agreement with Hearst has an initial term of six years and provides for
three automatic renewals of six years each; provided that the parties reach
agreement on the royalties or commissions to be paid during the renewal period.
Under the terms of the agreement:
- We received the non-exclusive, royalty-free license (without the right to
sublicense) to electronically reproduce, distribute and display the
Hearst content from 10 Hearst magazines on the Internet and to
incorporate the magazine sites on our network.
- Hearst agreed to provide approximately 100 pages of promotion in the
Hearst magazines over a two-year period and $2 million of cable and
television promotion.
- Hearst agreed to co-brand the 10 magazine sites with the Women.com brand.
- Hearst agreed during the term of the agreement that it would not (1)
grant Internet distribution or Internet publication rights to the Hearst
content or the magazine content to any of our competitors, (2) advertise
or promote the magazine sites on or in connection with any of our
competitors, (3) promote the magazine sites on or in connection with any
of our competitors or (4) grant a license to any of our competitors to
use any URLs incorporating the name or a derivative thereof of any of the
10 magazines.
- The Hearst Magazine Group has agreed to offer us the opportunity to
develop any online project initiated by it that is appropriate for
placement on our network.
- Hearst retains the right to conduct promotional activities with respect
to each of the magazine sites in conjunction with any party that is not a
women's portal site; provided that Hearst does not receive payments for
those promotional activities.
- Other than our agreements with Rodale regarding Prevention, we agreed,
during the term of our relationship with Hearst, to not enter into an
agreement to produce or include as part our network any magazine site or
content related to a print publication that it not a Hearst publication,
if the magazine site could be reasonably construed to be competitive with
any of the 10 Hearst magazines without Hearst's prior written consent.
- We agreed to provide the hosting for the 10 Hearst magazine sites.
- Hearst agreed to purchase at least $3 million of production services over
the 12 months ending February 2000 and at least $6 million over the two
years ending February 2001.
- Hearst is entitled to receive a quarterly royalty payment based on net
advertising revenues from the magazine sites.
- We are entitled to a commission on gross revenues from the sale of
magazine subscriptions through our network, including the magazine sites.
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- We are entitled to a commission on gross revenues from the direct sales
of goods and services on the magazine sites, where the sale is made
directly between the customer and the applicable Hearst entity.
Our relationship with Hearst gives us access to a vast amount of content
produced by editorial staffs with a proven understanding of the interests of
women in the areas of fashion, sex, health, beauty, family, design, gardening,
collecting and small business. Collectively, these magazines produce more than
300 unique articles per month and have a U.S. monthly circulation of over 15
million paid readers.
We believe this content, properly packaged, will create a significant
amount of new traffic to our network. We believe we can increase user traffic by
placing this content prominently on our network, increasing our investment in
the magazines' sites and via syndication on the Internet through our
distribution relationships. Our agreement with Hearst also provides for
promotion of our network by Hearst. See "Certain Transactions" and "Risk
Factors -- Hearst will control actions requiring board and stockholder approval
after this offering" and "-- We rely on Hearst for content and cross-promotion"
for certain risks relating to our relationship with Hearst.
Rodale Press, Inc. In May 1997, we launched a co-branded site called
HealthyIdeas.com in partnership with Rodale Press' Prevention magazine, a
leading consumer health magazine in the United States with a circulation of over
3 million. Through interactive tools, features, on-site experts, message boards
and chat, it offers visitors authoritative information on how to lead a
healthier life. Focused on health and fitness, the site delivers thousands of
pages of useful, personalized information to help readers achieve better health
for themselves and their families. We design, produce and host the site.
Prevention magazine provides a majority of the content for the site. Rodale has
agreed to devote at least one page in each edition of Prevention magazine to
promote HealthyIdeas.com. We share a percentage of the revenues, net of
commissions, generated from the ads sold on the co-branded site with Rodale. In
addition, we receive a percentage of the revenue generated from Prevention
magazine subscription sales on our site. The agreement has an initial term of
two years and is up for renewal in May 2000.
DISTRIBUTION RELATIONSHIPS
We believe that brand awareness and broad distribution are critical to our
success. Accordingly, in order to leverage our brand identity and increase
traffic to our network, we have entered into over 30 online distribution
relationships with leading Internet companies, including America Online, CBS
SportsLine, GeoCities, Infoseek, Lycos, Microsoft Network, Mindspring, Netscape,
WebTV, Xoom.com and Yahoo!.
We also have entered into partnerships to serve the high-speed broadband
environment. We agreed to develop content for MediaOne Interactive Services,
Inc. a project titled the "High Bandwidth Project," which is intended to result
in the development and customization of our product in connection with the
deployment of high bandwidth content over MediaOne's domestic cable assets.
MARKETING
Our strategy to build the Women.com brand includes a variety of online and
offline marketing initiatives, which focus on building our brand awareness,
driving traffic to our network, building our membership base, maximizing our
click through rates and minimizing our customer acquisition costs.
To increase our brand visibility online, we pay for distribution on leading
Internet portals and sites, including America Online, Infoseek, Microsoft
Network, Netscape and Yahoo!, advertise on other Internet sites and engage in
barter transactions. For example, we developed the Your New Baby site for Snyder
Communications in exchange for branding on gift bags in hospital wards. We also
intend to continue to utilize our online distribution relationships to build
brand and generate traffic, while
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maintaining a low cost of customer acquisition. We also use other audience
building strategies, including links to search engines and news groups postings.
Our offline brand-building strategy focuses on relationships with media and
advertising partners, including Hearst, Rodale and Unilever. Rodale promotes our
network in the pages of Prevention magazine. We also enjoy cross-promotion from
our advertisers, including Unilever who promotes our brand by placing
www.women.com on their Wisk products and coupons. In addition, we also promote
our network through radio broadcasts and newsletter programs.
Our marketing department is also engaged in providing support to our sales
effort. The sales marketing staff develops material, sponsorship packages and
proposals and creates minisites and other production activities on behalf of
advertising clients.
As of April 30, 1999, our marketing department consisted of 21 marketing
professionals located in San Mateo and New York.
TRADEMARKS
We own the "HomeArts" and "Women's Wire" registered trademarks. We are also
using the following trademarks for which an application in the PTO is pending:
"Astronet.com," "Beatrice's Internet Guide," "FamilyPlay," "HealthyIdeas,"
"HomeArts.com," "MoneyMode," "PlanetLunch.com" and "Women.com."
TECHNOLOGY
We rely almost exclusively on a variety of third-party products for our
hardware and software. We operate our network to ensure maximum network uptime,
to obtain, preserve and analyze customer data, and to enhance the user's
experience.
We maintain our Internet sites using redundant Internet servers and
application servers. We achieve load balancing and redundancy by utilizing
multiple front-end Internet servers with hardware and software load distribution
that connect the user to the server with the least traffic to minimize response
time. We engaged Icon CMT Corp. and Exodus Communications to provide us with
hosting centers which feature environment-controlled hosting data with redundant
communication lines, uninterrupted power and continuous support to maximize
uptime. We are currently moving all of our hosting services to Exodus.
We use a three-tiered architecture to maintain membership and registration
data, to provide searchable content and to process Internet server traffic logs.
We are currently implementing a content management and dynamic page generation
system. We utilize third party software to manage and deliver advertisements and
to provide advertisers with online access to measure performance.
COMPETITION
The market for Internet content and service providers is highly competitive
with few barriers to entry. The market segment that we target is characterized
by an increasing number of market entrants with competing content and services.
We compete, in particular, with the following types of companies:
- publishers of women's print magazines, such as Conde Nast and Hachette
Filipachi, which also host Internet sites with content designed to
complement their magazines
- content aggregators, including America Online, Microsoft and Yahoo!
- Internet companies, such as iVillage and Oxygen Media, which target women
online
- Internet directories, search engines and other sites that offer original
editorial content
- companies in the print, broadcast and television industries
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While we believe that this market segment is large enough to support
multiple companies, one or a few content and service providers could dominate
this particular market niche. We must compete with such entities for Internet
user attention, time and for advertising and commerce revenues. In order to
compete successfully, we must provide compelling Internet content to attract
Internet users within our target demographic group and support advertising
intended to reach this audience.
We believe that the principal competitive factors in attracting Internet
users include the quality of presentation and the relevance, depth of
information and name recognition of the services we offer. With respect to
securing advertisers, we believe that the principal competitive factors include
the number of users accessing our network, the demographics of the users, our
ability to deliver interactivity throughout our network and the overall
cost-effectiveness of the advertising offered. The success of our business
strategy depends in part on our ability to achieve premium rates for our
advertising products, based in part on the demographic characteristics of our
users.
EMPLOYEES
As of April 30, 1999, we had 206 full-time employees, of whom 96 are in
content development, 27 are in sales, 24 are in technical operations, 21 are in
marketing, 21 are in general and administrative functions and 17 are in
e-commerce. To support our anticipated future growth, we expect to hire
additional employees, particularly in the areas of content development and sales
and marketing. We believe that our relations with our employees are good.
FACILITIES
As of March 31, 1999, our headquarters are located in approximately 15,000
square feet of office space in San Mateo, California under a lease that expires
in December 31, 2002. We currently utilize all of this space and expect to lease
additional space as we expect to hire additional personnel to support our
anticipated growth. We also lease an aggregate of 19,648 square feet at two
locations in New York, pursuant to lease agreements expiring in December 31,
1999 and maintain offices in Chicago, Illinois, New Canaan, Connecticut, and
Santa Monica and San Rafael, California.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information regarding our directors and
executive officers as of March 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marleen McDaniel........................... 49 Chairperson, Chief Executive Officer and
President
Ellen Pack................................. 33 Founder, General Manager and Senior Vice
President
Michael Perry.............................. 52 Chief Financial Officer
Gina Garrubbo.............................. 38 Executive Vice President, Sales
Frances Maier.............................. 37 Senior Vice President, Marketing
Donna McDonald............................. 34 Vice President, E-Commerce
A. Erin Ruane.............................. 33 Vice President, Business Development
Anna Zornosa............................... 40 Senior Vice President, Strategic
Partnerships
Cathleen Black............................. 54 Director
Natalie Egleston........................... 34 Director
Nancy Lindemeyer........................... 64 Director
Mark Miller................................ 51 Director
William Miller............................. 73 Director
Alfred Sikes............................... 59 Director
Barry Weinman.............................. 60 Director
</TABLE>
Marleen McDaniel has served as our President, Chief Executive Officer and
Chairperson of the board of directors since October 1994. From 1992 to 1994, Ms.
McDaniel served as Senior Vice President and General Manager of Interop Company,
a division of Ziff-Davis Publishing. In 1990, Ms. McDaniel served as Vice
President of Marketing for Crescendo Communications, Inc., a high speed
internetworking company that later merged with Cisco Systems, Inc. From 1983 to
1990, Ms. McDaniel served as Director of Sales and Marketing at Sun
Microsystems, Inc. Ms. McDaniel also serves on the board of directors for
eve.com, Inc., an online source for beauty products, and is a trustee for the
Institute for Women in Technology. Ms. McDaniel holds a B.A. in Psychology from
the University of California, Berkeley.
Ellen Pack founded Women.com in 1992 and has served as our General Manager
and Senior Vice President since inception. From 1990 to 1992, Ms. Pack served as
Chief Operating Officer of Torque Systems, Inc., a workflow software company.
Ms. Pack holds a B.A. in Economics and an M.B.A. from Columbia University.
Michael Perry has served as our Chief Financial Officer since October 1998.
From 1987 to 1998, Mr. Perry served as Chief Financial Officer for the A. H.
Belo Corporation, a television and newspaper company. Mr. Perry holds a B.A. in
Accounting and Finance and an M.B.A. from Michigan State University.
Gina Garrubbo has served as our Executive Vice President, Sales, since
October 1996. From 1992 to 1996, Ms. Garrubbo served as Vice President of
Discovery Communications, Inc, a cable programming company, where she directed
advertising sales for the Discovery and Learning Channels. From 1988 to 1992,
Ms. Garrubbo served as Vice President of Sales for Action Media Group, a company
involved in television barter syndications. Ms. Garrubbo holds a B.A. in
Government from Wells College in Aurora, New York.
Frances Maier has served as our Senior Vice President, Marketing since
March 1998. From December 1994 to December 1997, Ms. Maier served as Vice
President and General Manager for
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Match.Com, an online companionship service. In 1994, Ms. Maier served as Senior
Product Manager of Membership for Northern California's American Automobile
Association. From 1991 to 1993, Ms. Maier served as Assistant Brand Manager for
the Clorox Company. Ms. Maier holds a B.A. in Public Policy from Stanford
University and an M.B.A. from the Stanford Graduate School of Business.
Donna McDonald has served as our Vice President, Electronic Commerce, since
January 1998. Prior to becoming Vice President, Electronic Commerce, Ms.
McDonald served as our director of Electronic Commerce. From 1995 to 1997, Ms.
McDonald served as Senior Manager, New Business Development for Ameritech, Inc.,
a communications services company. From 1993 to 1995, Ms. McDonald served as
director, new business development for Bertelsmann Music Group, a media company,
helping establish a product development and direct marketing division for the
sale of music compilation products. Ms. McDonald holds a B.A. in French
Literature and Economics from Tufts University and an M.B.A. in Marketing and
Finance from Columbia University.
A. Erin Ruane has served as our Vice President, Business Development, since
1996. From 1994 to 1996, Ms. Ruane served as Director of Corporate Play Programs
at Gymboree, Inc., a children's clothing and toy company. From 1992 to 1994, Ms.
Ruane served as a manager in the Strategic Planning Corporate Development Group
at The Walt Disney Company. Ms. Ruane holds a B.A. in Economics from Georgetown
University and an M.B.A. from the Darden School at the University of Virginia.
Anna Zornosa has served as our Senior Vice President, Strategic
Partnerships, since February 1999. From April 1998 to November 1998, Ms. Zornosa
served as President and Chief Operating Officer of SmartAge Inc., a
community-based Internet company focused on small businesses. From 1995 to 1998,
Ms. Zornosa served as Senior Vice President, Advertising Sales and Affiliate
Development with PointCast, Inc., an Internet broadcast company. From 1991 to
1995, Ms. Zornosa served in various executive positions at Ziff-Davis
Publishing, Inc. Prior to working at Ziff-Davis, Ms. Zornosa served as publisher
and editor-in-chief of Communications Week, a magazine focused on
telecommunications. Ms. Zornosa holds an M.A. in Communications from the
University of Wisconsin.
Cathleen Black has served as one of our directors since January 1999. She
has served as the President of Hearst Magazines, a division of The Hearst
Corporation, since November 1995. From 1983 to 1991, Ms. Black was the President
of USA Today. From 1991 to November 1995, Ms. Black served as the President and
Chief Executive Officer of the Newspaper Association of America. Ms. Black also
serves on the board of directors of the Coca-Cola Company, International
Business Machines and The Hearst Corporation. Ms. Black holds a B.A. in English
Literature from Trinity College in Washington, D.C.
Natalie Egleston has served as one of our directors since September 1997.
Ms. Egleston is currently the Vice President of Business Development for
MediaOne Interactive Ventures, an affiliate of the MediaOne Group. Prior to her
current position, she served as the Director of Corporate Finance in MediaOne's
Treasury Group. From 1986 to 1996, Ms. Egleston held various positions at the
Bank of New York, Barclay's Bank and Chemical Bank. Ms. Egleston also serves on
the board of directors of TheTrip.com, an Internet travel company. Ms. Egleston
holds a B.S. in Business Management and Marketing from Cornell University.
Nancy Lindemeyer has served as one of our directors since January 1999. Ms.
Lindemeyer is the editor-in-chief of Victoria Magazine, a magazine focused on
women's interests. From 1976 to 1985, Ms. Lindemeyer served as senior editor of
Better Homes and Gardens. Ms. Lindemeyer also serves on the board of directors
of The National Museum of Women in the Arts. Ms. Lindemeyer holds a B.A. in
History from the University of Connecticut.
Mark Miller has served as one of our directors since January 1999. Mr.
Miller has held several management roles within The Hearst Corporation since
1973, serving as Executive Vice President and General Manager of Hearst
Magazines, a division of Hearst Communications, Inc., since 1985.
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Mr. Miller is a Vice President and serves on the board of directors of The
Hearst Corporation and is a Trustee of The Hearst Family Trust. Mr. Miller holds
a B.S. in Economics from the Wharton School of Commerce and Finance.
William Miller has served as one of our directors since October 1998. Mr.
Miller currently serves as Chairman of the Board of Sentius Corporation, a
communications company. Mr. Miller recently retired from his position as Chief
Executive Officer and Chairman of the Board of SRI Development Company, a market
research company, positions he had held since 1979 and 1983, respectively. Mr.
Miller has been a professor at the Stanford Graduate School of Business since
1979. Mr. Miller also serves on the board of directors of Inprise Corporation
and Sentius Corporation. Mr. Miller holds a Ph.D. in Physics from Purdue
University.
Alfred Sikes has served as one of our directors since January 1999. Mr.
Sikes has served as both a Vice President of The Hearst Corporation, and
President of Hearst New Media & Technology, a unit of The Hearst Corporation,
since March 1993. From August 1989 to January 1993, Mr. Sikes served as chairman
of the Federal Communications Commission. Mr. Sikes holds a B.A. from
Westminster College and a J.D. from the University of Missouri Law School.
Barry Weinman has served as one of our directors since August 1995. Mr.
Weinman is a general partner of Media Technology Ventures/AVI Management, and is
Managing Director of Media Technology Equity Partners, a family of venture
capital firms. Mr. Weinman is also on the board of directors of TalkCity, Inc.,
InfoGear, Inc., Quokka Sports, Inc. and Be, Inc. Mr. Weinman holds a B.S. in
Industrial Engineering from Clarkson College of Technology and an M.A. in
International Relations from the London School of Economics/University of
Southern California.
BOARD COMPOSITION
In accordance with the terms of our restated certificate of incorporation,
the terms of office of the members of the board of directors will be divided
into three classes: Class I will expire at the annual meeting of the
stockholders to be held in 2000; Class II will expire at the annual meeting of
stockholders to be held in 2001; and Class III will expire at the annual meeting
of stockholders to be held in 2002. The first class (up for election in the
first annual election of our stockholders following the initial public offering)
will consist of two members, each of whom are representatives of Hearst. The
other two classes shall consist of three members each with the last class
comprised solely of non-Hearst representatives. 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,
our amended and restated 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.
Each officer is elected by, and serves at the discretion of, the board of
directors. Each of our officers and directors, other than non-employee
directors, devotes full time to our affairs. Our non-employee directors devote
such time to our affairs as is necessary to discharge their duties. There are no
family relationships among any of our directors, officers or key employees.
BOARD COMMITTEES
Our board of directors has an audit committee and a compensation committee.
The audit committee of the board of directors consists of Ms. Egleston and Mr.
Mark Miller. The audit committee reviews our financial statements and accounting
practices, makes recommendations to the board of directors
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regarding the selection of independent auditors and reviews the results and
scope of the audit and other services provided by our independent auditors. Ms.
Egleston is chairperson of the audit committee.
The compensation committee of the board of directors consists of Messrs.
Sikes and Weinman. The compensation committee makes recommendations to our board
of directors concerning salaries and incentive compensation for our officers and
employees and administers our employee benefit plans. Mr. Weinman is chairperson
of the compensation committee.
DIRECTORS' COMPENSATION
Our directors who are also our employees receive no compensation for
serving on the board of directors. We reimburse our non-employee directors for
all travel and other reasonable expenses incurred in attending board of director
and committee meetings to the extent they are not reimbursed by their employers.
Our non-employee directors, who are not officers, employees or directors of
Hearst or any of its subsidiaries, are also eligible to receive nonstatutory
stock option grants under the 1998 Equity Incentive Plan. Pursuant to such plan,
Mr. William Miller received a grant of an option to purchase 15,000 shares of
common stock in December 1998. This option vests monthly over a two-year period.
The exercise price of such option is $2.75 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving on our compensation committee. No interlocking relationship exists
between the board of directors or the compensation committee and the board of
directors or the compensation committee of any other company, nor has any such
interlocking relationship existed in the past. See "Certain Transactions" for a
discussion of matters between Women.com and members of the compensation
committee.
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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 our Chief Executive Officer and our other
four most highly compensated executive officers whose salary and bonus were in
excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------------
ANNUAL COMPENSATION NUMBER OF
-------------------- SECURITIES UNDERLYING OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)
--------------------------- --------- -------- --------------------- -----------------
<S> <C> <C> <C> <C>
Marleen McDaniel............................. $200,000 $ -- 650,000 --
Chairperson, Chief Executive Officer and
President
Michael Perry................................ 41,667 -- 300,000 --
Chief Financial Officer
Gina Garrubbo................................ 156,250 9,000 25,000 $54,952(2)
Executive Vice President, Sales
Ellen Pack................................... 140,000 -- 275,000 --
Founder, General Manager and Senior Vice
President
Frances Maier................................ 102,724 -- 125,000 --
Senior Vice President, Marketing
</TABLE>
- -------------------------
(1) Except for the grants of options to purchase 150,000 shares of common stock
to Ms. McDaniel, 25,000 shares of common stock to Ms. Garrubbo and 75,000
shares of common stock to Ms. Pack under our 1994 Stock Option Plan, all of
which vest in 24 equal monthly installments from the vesting commencement
date, options were granted under our 1994 Stock Option Plan and our 1998
Equity Incentive Plan and vest 1/4 of the total after one year and 1/48 of
the total monthly thereafter.
(2) Represents sale commissions.
Ms. Zornosa was hired in February 1999 as Senior Vice President, Strategic
Partnerships. Her current annual salary is $175,000. As of March 31, 1999, the
annual salaries of the named executive officers were increased as follows: Ms.
McDaniel's salary was increased to $240,000, Ms. Garrubbo's salary was increased
to $185,000, Ms. Maier's salary was increased to $150,000, and Ms. Pack's salary
was increased to $185,000. Mr. Perry was hired in October 1998 and his annual
salary is $200,000. Ms. Maier was hired in March 1998 and her annual salary is
$150,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of stock
options to our named executive officers during the fiscal year ended December
31, 1998. The exercise price per share of each option was equal to the fair
market value of the common stock of the date of grant as determined by the board
of directors. The potential realizable value is calculated based on the term of
the option at its time of grant (10 years). It is calculated assuming that the
fair market value of common stock on the date of grant appreciates at the
indicated annual rate compounded annually for the entire term of the option and
that the option is exercised and sold on the last day of its term for the
appreciated stock price. These
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numbers are calculated based on the requirements of the Securities and Exchange
Commission and do not reflect our estimate of future stock price growth.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
SHARES OPTIONS OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
GRANTED(#) FISCAL YEAR(%) PER SHARE($) DATE 5% 10%
----------- -------------- -------------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marleen
McDaniel........ 150,000 6.95% $ .80 1/15/08 $ 75,467 $ 191,249
500,000 23.18 1.50 7/16/08 471,667 1,195,305
Michael Perry..... 300,000 13.91 2.75 11/12/08 518,834 1,314,836
Gina Garrubbo..... 25,000 1.15 .80 1/15/08 12,577 31,875
Ellen Pack........ 75,000 3.47 .80 1/15/08 37,733 95,624
200,000 9.27 1.50 7/16/08 188,667 478,122
Frances Maier..... 125,000 5.79 .80 3/12/08 62,885 159,375
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain summary information concerning the
exercise of stock options during the fiscal year ended December 31, 1998 by our
Chief Executive Officer and each of our other four most highly compensated
executive officers. The value of unexercised in-the-money options at fiscal year
end is based on $2.75 per share, the assumed fair market value of the common
stock at December 31, 1998, less the exercise price per share.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
1998(#) DECEMBER 31, 1998($)
----------------------- ------------------------
NAME VESTED UNVESTED VESTED UNVESTED
---- -------- --------- --------- -----------
<S> <C> <C> <C> <C>
Marleen McDaniel.............................. 109,583 700,417 $276,107 $1,054,592
Michael Perry................................. -- 300,000 -- --
Gina Garrubbo................................. 94,791 105,208 238,873 250,875
Ellen Pack.................................... 45,833 304,167 113,707 474,042
Frances Maier................................. -- 125,000 -- 243,750
</TABLE>
STOCK BASED PLANS
1998 EQUITY INCENTIVE PLAN
The Amended and Restated 1998 Equity Incentive Plan was adopted by the
board of directors in April 1998 and was subsequently approved by the
stockholders in May 1998. The Plan was amended and restated by the board in May
1998, November 1998, March 1999 and May 1999. Except for the May 1999 amendment,
all of the amendments have been approved by the stockholders. The Plan will
terminate in April 2008 unless the Board terminates it sooner.
As of April 30, 1999, there were 8,822,500 shares of common stock reserved
for issuance under the Plan, 3,044,150 of which were subject to outstanding
options and 5,693,796 of which were available for grant, less any options
granted or shares issued under the 1994 Stock Option Plan. If stock awards
granted under the Plan expire or otherwise terminate without being exercised,
the shares of common stock not acquired pursuant to such stock awards again
become available for issuance under the Plan.
The Plan provides for the grant of incentive stock options, nonstatutory
stock options, stock bonuses and restricted stock purchase awards. Incentive
stock options granted under the Plan are intended to
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qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended. Nonstatutory stock options granted
under the Plan are not intended to qualify as incentive stock options under the
Internal Revenue Code.
The board administers the Plan. Subject to the provisions of the Plan, the
board has the power to construe and interpret the Plan and to determine the
persons to whom and the dates on which stock awards will be granted, the number
of shares of common stock to be subject to each stock award, the time or times
during the term of each stock award within which all or a portion of such stock
award may be exercised, the exercise price, the type of consideration and other
terms of the stock award. The board has the power to delegate administration of
the Plan to a committee composed of not less than one member of the board.
The board may grant incentive stock options under the Plan only to
employees of Women.com and its affiliates. Employees, directors and consultants
of both Women.com and its affiliates are eligible to receive all other types of
stock awards under the Plan. However, stock awards may not be granted to any
officer, member of the board of directors or employee of The Hearst Corporation
or to any officer, member of the board of directors or employee of any affiliate
of The Hearst Corporation, other than Women.com.
The board may not grant an incentive stock option under the Plan to any
person who, at the time of the grant, owns (or is deemed to own) stock
possessing more than 10% of the total combined voting power of Women.com or any
affiliate of Women.com, unless the exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant and the
term of the option does not exceed five years from the date of grant. In
addition, the aggregate fair market value, determined at the time of grant, of
the shares of common stock with respect to which incentive stock options are
exercisable for the first time by an optionholder during any calendar year
(under the Plan and all other such plans of Women.com and its affiliates) may
not exceed $100,000.
No employee is eligible to receive options under the Plan exercisable for
more than 600,000 shares of common stock during any calendar year. However, this
limitation applies only after the closing of the initial public offering of
Women.com's common stock and then only upon the earliest to occur of certain
specified events.
The exercise price of incentive stock options may not be less than 100% of
the fair market value of the stock subject to the option on the date of the
grant. The exercise price of nonstatutory options generally may not be less than
85% of the fair market value of the stock on the date of grant. In the event of
a decline in the value of Women.com's common stock, the board has the authority
to offer optionholders the opportunity to replace outstanding higher priced
options with new lower priced options. To the extent required by Section 162(m)
of the Internal Revenue Code, a repriced option is deemed to be canceled and a
new option granted. Both the option deemed to be canceled and the new option
deemed to be granted will be counted against the Section 162(m) limitation.
The maximum term of options under the Plan is ten years. Generally options
under the Plan terminate three months after termination of the optionholder's
service. If such termination is due to the optionholder's disability, the option
generally may be exercised at any time within 12 months of such termination. If
the optionholder dies before the optionholder's service has terminated, or
within three months after termination of such service, the option generally may
be exercised within 18 months of the optionholder's death by the person or
persons to whom the rights to such option pass by will or by the laws of descent
and distribution. An optionholder may designate a beneficiary who may exercise
the option following the optionholder's death. Individual option grants by their
terms may provide for exercise within a longer or shorter period of time
following termination of service.
With respect to stock awards other than options, the board determines the
purchase price under a restricted stock purchase agreement but the purchase
price may not be less than 85% of the fair market
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value of Women.com's common stock on the date of grant. The board may award
stock bonuses in consideration of past services without a purchase payment.
Shares of stock sold or awarded under the Plan may, but need not be, subject to
a repurchase option in favor of Women.com in accordance with a vesting schedule
as determined by the board. The board has the power to accelerate the vesting of
stock acquired pursuant to a restricted stock purchase agreement or stock bonus
award under the Plan.
Transactions not involving receipt of consideration by Women.com, such as a
merger, consolidation, reorganization, stock dividend, or stock split, may
change the class and number of shares of common stock subject to the Plan and
outstanding stock awards. In that event, the board will appropriately adjust the
Plan as to the class and the maximum number of shares of common stock subject to
the Plan and the Section 162(m) limitation and will adjust outstanding stock
awards as to the class, number of shares and price per share of common stock
subject to such stock awards.
In the event of merger, combination, a sale of substantially all of the
assets of Women.com, or other change of control event, any surviving corporation
may either assume stock awards outstanding under the Plan or substitute similar
stock awards for those outstanding under the Plan. Whether or not the surviving
corporation does so, with respect to participants whose service has not
terminated prior to such event, the vesting and the time during which such stock
awards may be exercised will be accelerated and any reacquisition or repurchase
rights of Women.com will lapse.
As of April 30, 1999, 6,250 shares of common stock had been issued upon the
exercise of options granted under the Plan, options to purchase 3,044,150 shares
of common stock at a weighted average exercise price of $3.76 were outstanding
and 5,693,796 shares remained available for future grant. As of April 30, 1999,
78,304 shares of common stock had been issued pursuant to stock bonuses and
restricted stock awards.
1994 STOCK OPTION PLAN
The Amended and Restated 1994 Stock Option Plan was adopted by the board of
directors in October 1994 and was subsequently approved by the stockholders in
July 1995. The Plan was amended and restated by the board in July 1995, February
1996, March 1997, and July 1997. All of the amendments have been approved by the
stockholders. The 1994 Stock Option Plan will terminate in October 2004 unless
the board terminates it sooner.
If options granted under the 1994 Stock Option Plan expire or otherwise
terminate without being exercised, the shares of common stock not acquired
pursuant to such options again become available for issuance under the 1998
Equity Incentive Plan. However, the board does not intend to make any further
grants under the 1994 Stock Option Plan.
The 1994 Stock Option Plan provides for the grant of incentive stock
options and nonstatutory stock options. Incentive stock options granted under
the 1994 Stock Option Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code. Nonstatutory
stock options granted under the 1994 Stock Option Plan are not intended to
qualify as incentive stock options under the code.
The maximum term of options under the 1994 Stock Option Plan is 10 years.
Generally options under the 1994 Stock Option Plan terminate 30 days after
termination of the optionholder's service. If such termination is due to the
optionholder's disability, the option generally may be exercised at any time
within 12 months of such termination. If the optionholder dies before the
optionholder's service has terminated, or within 30 days after termination of
such service, the option generally may be exercised within 12 months of the
optionholder's death by the person or persons to whom the rights to such option
pass by will or by the laws of descent and distribution. Individual option
grants by their terms may provide for exercise within a longer or shorter period
of time following termination of service.
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Transactions not involving receipt of consideration by Women.com, such as a
merger, consolidation, reorganization, stock dividend, or stock split, may
change the class and number of shares of common stock subject to the 1994 Option
Plan and outstanding options. In that event, the board will appropriately adjust
the 1994 Stock Option Plan as to the class and the maximum number of shares of
common stock subject to the 1994 Stock Option Plan and will adjust outstanding
options as to the class, number of shares and price per share of common stock
subject to such options.
In the event of merger, combination, a sale of substantially all of the
assets of Women.com, or other change of control event, any surviving corporation
may either assume stock awards outstanding under the 1994 Stock Option Plan or
substitute similar stock awards for those outstanding under the 1994 Stock
Option Plan. Whether or not the surviving corporation does so, with respect to
participants whose service has not terminated prior to such event, the vesting
and the time during which such stock awards may be exercised will be accelerated
and any reacquisition or repurchase rights of Women.com will lapse.
As of April 30, 1999, 486,771 shares of common stock had been issued upon
the exercise of options granted under the 1994 Stock Option Plan, and options to
purchase 1,177,227 shares of common stock at a weighted average exercise price
of $.41 were outstanding.
EMPLOYEE STOCK PURCHASE PLAN
In May 1999, the board approved the Employee Stock Purchase Plan covering
an aggregate of 1,000,000 shares of common stock. The Employee Stock Purchase
Plan has not yet been submitted to the stockholders. The Employee Stock Purchase
Plan will become effective on the effective date of the initial public offering
of Women.com's common stock and will terminate at the board's direction or when
all of the shares reserved for issuance under the Employee Stock Purchase Plan
have been issued.
The Employee Stock Purchase Plan is intended to qualify as an "employee
stock purchase plan" within the meaning of Section 423 of the Internal Revenue
Code. Under the Employee Stock Purchase Plan, the board may authorize
participation by eligible employees, including officers, in periodic offerings
following the adoption of the Employee Stock Purchase Plan. The offering period
for any offering will be no longer than 27 months.
Employees are eligible to participate if they are employed either by
Women.com or by an affiliate of Women.com designated by the board. However,
employees of Hearst or affiliates of Hearst, other than Women.com, will not be
eligible to participate in an offering.
Employees who participate in an offering generally may have up to 15% of
their earnings withheld and applied, on specified dates determined by the board,
to the purchase of shares of common stock, subject to other limitations
specified in the offering or under the Internal Revenue Code. The price of
common stock purchased under the Employee Stock Purchase Plan generally will be
equal to 85% of the lower of the fair market value of the common stock on the
commencement date of each offering period or the relevant purchase date. If the
board provides that employees who become eligible to participate after the
offering period begins may enroll in the offering, for such employees the price
of common stock purchased under the Employee Stock Purchase Plan will be equal
to 85% of the lower of the fair market value of the common stock on the day
their participation begins or the relevant purchase date.
Employees may end their participation in the offering as specified by the
board for that offering, and participation ends automatically on termination of
employment with Women.com or an affiliate.
In the event of certain changes of control, the board has discretion to
provide that each right to purchase common stock will be assumed or an
equivalent right substituted by the successor corporation, or the board may
shorten the offering period and provide for all sums collected by payroll
deductions to be applied to purchase stock immediately prior to the change in
control.
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As of April 30, 1999, none of the shares of common stock reserved under the
Employee Stock Purchase Plan had been issued.
EMPLOYMENT ARRANGEMENTS
Pursuant to an employment agreement, dated as of January 29, 1999, between
Women.com and Ms. McDaniel, Ms. McDaniel serves as our Chairperson, Chief
Executive Officer and President through January 29, 2002. Under the terms of her
employment agreement, Ms. McDaniel is entitled to an initial annual base salary
of $200,000, subject to annual adjustment, and is eligible to participate in any
cash bonus program.
401(K) PLAN
Women.com provides a tax-qualified employee savings and retirement plan,
commonly known as a 401(k) plan, which covers our eligible employees. Pursuant
to the 401(k) plan, employees may elect to reduce their current annual
compensation up to the lesser of 15% or the statutorily prescribed limit, which
is $10,000 in calendar year 1999, and have the amount of the reduction
contributed to the 401(k) plan. The 401(k) plan is intended to qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code, so that contributions
by Women.com or our employees to the 401(k) plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
plan, and so that contributions will be deductible by Women.com if made. The
trustee of the 401(k) plan invests the assets of the 401(k) plan in the various
investment options as directed by the participants.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Section 145 of the Delaware General Corporation Law authorizes a
corporation's board of directors to grant indemnity to directors and officers in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities, including reimbursement for expenses incurred,
arising under the Securities Act of 1933, as amended.
As permitted by Delaware law, our restated certificate of incorporation
includes a provision that eliminates the personal liability of its directors for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to us or our
stockholders; (2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) under Section 174 of
the Delaware General Corporation Law regarding unlawful dividends and stock
purchases; or (4) for any transaction from which the director derived an
improper personal benefit.
As permitted by Delaware law, our restated certificate of incorporation
provides that (1) we are required to indemnify our directors and officers to the
fullest extent permitted by Delaware law, subject to certain very limited
exceptions; (2) we are permitted to indemnify our other employees to the extent
that we indemnify our officers and directors, unless otherwise required by law,
our restated certificate of incorporation, our amended and restated bylaws or
agreements; (3) we are required to advance expenses, as incurred, to our
directors and officers in connection with a legal proceeding to the fullest
extent permitted by Delaware law, subject to certain very limited exceptions;
and (4) the rights conferred in the restated certificate of incorporation are
not exclusive.
Our amended and restated bylaws provide that we shall indemnify our
directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our amended and restated bylaws covers at least
negligence and gross negligence on the part of indemnified parties. Our amended
and restated bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the amended and restated bylaws
would permit indemnification.
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We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our amended and
restated bylaws. These agreements, among other things, indemnify our directors
and executive officers for certain expenses, including attorneys' fees,
judgments, fines and settlement amounts incurred by any such person in any
action or proceeding, including any action by us arising out of such person's
services as our director or executive officer, any of our subsidiaries or any
other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers.
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CERTAIN TRANSACTIONS
In July 1997, Women.com Networks, a California corporation, issued shares
of Series C Preferred Stock at a purchase price of $3.04 per share to certain
accredited investors. In connection with such financing, Women.com Networks
issued 620,492 shares of Series C Preferred Stock to affiliates of AVI
Management for cash. Each share of Series C Preferred Stock will convert into
one share of our common stock upon completion of this offering. Mr. Weinman, a
director of Women.com, is a general partner of AVI Management.
In July and August 1997, Women.com Networks, a California corporation,
issued shares of Series C Preferred Stock at a purchase price of $1.90 per share
to certain accredited investors. In connection with such financing, Women.com
Networks issued (1) 1,315,790 shares of Series C Preferred Stock to MediaOne
Interactive Services, Inc. for cash and (2) 1,315,790 shares of Series C
Preferred Stock to HC Crown Corp. for cash. Each share of Series C Preferred
Stock will convert into one share of our common stock upon completion of this
offering. Ms. Egleston, a director of Women.com, is the Vice President of
Business Development for MediaOne Interactive Ventures, an affiliate of MediaOne
Interactive Services, Inc. MediaOne Interactive Services, Inc. and HC Crown
Corp. each own in excess of 5% of our outstanding common stock.
In connection with the issuance of Series C Preferred Stock to MediaOne
Interactive Services, Inc., Women.com Networks agreed to allocate $1,500,000 of
MediaOne's investment to several co-branded and co-linked products that are to
be developed by Women.com Networks in association with MediaOne. If these
products are not completed by the specified dates and/or all of the funds are
not utilized for the development of the co-branded and co-linked products, we
may be required to return the unused portion of such funds pro rata to the
holders of our Series C Preferred Stock and Series D Preferred Stock.
In connection with the issuance of Series C Preferred Stock to HC Crown
Corp., Women.com Networks agreed to allocate $1,250,000 of HC Crown's investment
to produce web sites for Hallmark Connections, a division of HC Crown Corp.,
over a two year period.
In June and July of 1998, Women.com Networks, a California corporation,
issued shares of Series D Preferred Stock at a purchase price of $3.29 per share
to certain accredited investors. In connection with such financing, Women.com
Networks issued (1) 151,976 shares of Series D Preferred Stock to entities
affiliated with AVI Management for cash and (2) 607,903 shares of Series D
Preferred Stock to MediaOne Interactive Services, Inc. for cash. Each share of
Series D Preferred Stock will convert into one share of our common stock upon
completion of this offering. Mr. Weinman, a director of Women.com, is a general
partner of AVI Management. Ms. Egleston, a director of Women.com, is the Vice
President of Business Development for MediaOne Interactive Ventures, an
affiliate of MediaOne Interactive Services, Inc. MediaOne Interactive Services,
Inc. owns in excess of 5% of our outstanding common stock.
In May 1999, Women.com Networks, a California corporation, issued 924,000
shares of Series E Preferred Stock at a purchase price of $10.00 per share to
certain accredited investors. In connection with such financing, Women.com
Networks issued (1) 105,747 shares of Series E Preferred Stock to entities
affiliated with AVI Management for cash and (2) 132,275 shares of Series E
Preferred Stock to MediaOne Interactive Services, Inc. for cash. Each share of
Series E Preferred Stock will convert into one share of common stock of
Women.com Networks, Inc. a Delaware corporation, upon completion of this
offering. Mr. Weinman, a director of Women.com, is a general partner of AVI
Management. Ms. Egleston, a director of Women.com, is the Vice President of
Business Development for MediaOne Interactive Ventures, an affiliate of MediaOne
Interactive Services, Inc. MediaOne Interactive Services, Inc. owns in excess of
5% of our outstanding common stock. Women.com Networks utilized the proceeds of
such sale of Series E Preferred Stock to purchase an additional 924,000 units of
Women.com Networks LLC.
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In May 1999, Women.com Networks LLC issued 1,076,000 units to Hearst
HomeArts, Inc. at a purchase price of $10.00 per unit. At the time of the merger
of Women.com Networks and Hearst HomeArts, Inc. and the dissolution of Women.com
Networks, LLC, Hearst Communications, Inc. will receive additional shares of
Hearst HomeArts, Inc. as a result of this investment. Hearst Communications,
Inc. owns in excess of 5% of our outstanding common stock.
On January 27, 1999, Women.com Networks and Hearst Communications, Inc.
entered into a Magazine Content License and Hosting Agreement. In addition to
the provisions discussed under "Business -- Content Relationships," the
agreement also contains provisions relating to ownership of intellectual
property rights, representations and warranties by Hearst and Women.com and
indemnification. Ms. Black, Ms. Lindemeyer, Mr. Miller and Mr. Sikes, Board
members of Women.com, are the President of Hearst Magazines, the editor-in-chief
of Victoria Magazines, the Executive Vice President and General Manager of
Hearst Magazines and the President of Hearst New Media & Technology, a unit of
The Hearst Corporation, respectively. See "Risk Factors." In addition, Hearst
Communications, Inc. owns in excess of 5% of our outstanding common stock.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the common stock, as of April 30, 1999 and as adjusted to reflect
the sale of common stock in this offering, for:
- each person known by us to beneficially own more than 5% of the common
stock
- each of our directors
- each executive officer named in the Summary Compensation Table
- all of our directors and executive officers 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. 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 April 30, 1999 but excludes shares of common stock
underlying options or warrants held by any other person. Percentage of
beneficial ownership is based on 33,127,390 shares of common stock outstanding
as of April 30, 1999, assuming (1) the conversion of the convertible preferred
stock into shares of common stock, (2) the merger of Women.com Networks into
Hearst HomeArts, Inc. and (3) the split of the outstanding capital stock of
Hearst HomeArts, Inc. into an aggregate of 17,749,171 shares of common stock,
and shares of common stock outstanding after completion of this
offering. The number of shares of common stock outstanding does not include the
issuance of 2,000,000 units of Women.com Networks LLC sold pursuant in a private
placement in May 1999 or the exercise of the underwriters' over-allotment
option.
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<PAGE> 62
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON STOCK
BENEFICIALLY OWNED
NUMBER OF SHARES ---------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
------------------------------------ ------------------ --------------- --------------
<S> <C> <C> <C>
Hearst Communications, Inc.(1) ..................... 17,749,171 53.6%
The Hearst Corporation
959 Eighth Avenue
New York, NY 10019
MediaOne Interactive Services, Inc.(2).............. 2,811,358 8.3
188 Inverness Drive West
Suite 600
Englewood, CO 80112
Natalie Egleston(3)................................. 2,811,358 8.3
188 Inverness Drive West
Suite 600
Englewood, CO 80112
HC Crown Corp.(4)................................... 2,203,455 6.5
2501 McGee, Mail Drop 339
Kansas City, MO 64141
Marleen McDaniel(5)................................. 367,083 1.1
Barry Weinman(6).................................... 1,537,898 4.6
William Miller(7)................................... 4,375 *
Cathleen Black...................................... -- --
Nancy Lindemeyer.................................... -- --
Alfred Sikes........................................ -- --
Mark Miller......................................... -- --
Ellen Pack(8)....................................... 821,793 2.5
Gina Garrubbo(9).................................... 122,916 *
Frances Maier(10)................................... 39,062 *
Michael Perry....................................... -- --
All executive officers and directors as a group (15
persons)(11)...................................... 5,750,317 17.3
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) The Hearst Family Trust is the sole stockholder of The Hearst Corporation
which is directly or indirectly the sole stockholder of Hearst
Communications, Inc.
(2) Includes 887,665 shares issuable pursuant to warrants exercisable within 60
days of April 30, 1999.
(3) Natalie Egleston is the Director of Business Development for MediaOne
Interactive Ventures, an affiliate of MediaOne Interactive Services, Inc.
Ms. Egleston does not have voting or investment power with respect to the
shares of common stock owned by MediaOne. Ms. Egleston disclaims beneficial
ownership of the shares of common stock beneficially owned by MediaOne.
(4) Includes 887,665 shares issuable pursuant to warrants exercisable within 60
days of April 30, 1999. These warrants will expire on the closing of this
offering.
(5) Includes 32,083 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999. Also includes 75,000 shares held by Ms.
McDaniel's spouse in a trust for his benefit and 75,000 shares held in a
trust established for the benefit of Ms. McDaniel. Ms. McDaniel disclaims
beneficial ownership of shares held in trust for the benefit of her spouse.
(6) Includes 217,011 shares held by Associated Venture Investors III, L.P.,
1,305,975 shares held by AVI Capital, L.P. and 14,912 shares held by AVI
Silicon Valley Partners, L.P. Mr. Weinman, a director of Women.com, is a
member of AVI Management Partners III, L.P., which the General Partner of
Associated Venture Investors III, L.P., AVI Capital, L.P. and AVI Silicon
Valley Partners, L.P. Mr. Weinman disclaims beneficial ownership of shares
held by such entities except for his proportional interest therein.
(7) Includes 4,375 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
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<PAGE> 63
(8) Includes 73,958 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999. Also includes an additional 197,061 shares held
by Ms. Pack's sister and mother. Ms. Pack disclaims beneficial ownership of
shares held by her sister and mother.
(9) Includes 9,375 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
(10) Includes 39,062 shares issuable upon exercise of options exercisable within
60 days of April 30, 1999.
(11) Includes the shares described in footnotes (3) and (5) through (10) and
includes an additional 45,832 shares held by other executive officers, of
which 29,166 were outstanding as of April 30, 1999 and of which 16,666
shares are subject to options or warrants that are exercisable within 60
days of April 30, 1999.
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<PAGE> 64
DESCRIPTION OF CAPITAL STOCK
GENERAL
Immediately prior to the consummation of this offering, our authorized
capital stock will consist of 195,000,000 shares of common stock, par value
$.001 per share, and 5,000,000 shares of preferred stock, par value $.001 per
share. Upon completion of this offering, there will be outstanding
shares of common stock, outstanding options to purchase 4,221,377 shares of
common stock and outstanding warrants to purchase 2,067,003 shares of common
stock.
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock
outstanding at the time, the holders of outstanding shares of common stock are
entitled to received dividends out of assets legally available thereof at such
time and in such amounts as the board of directors may from time to time
determine. Each stockholder is entitled to one vote for each share of common
stock held on all matters submitted to a vote of stockholders. Cumulative voting
for the election of directors is not provided for in our restated certificate of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The common stock is
not entitled to preemptive rights and is not to subject to conversion or
redemption. Upon the occurrence of a liquidation, dissolution or winding-up, the
holders of shares of common stock would be entitled to share ratably in the
distribution of all of the company's assets remaining available for distribution
after satisfaction of all of its liabilities and the payment of any liquidation
preference of any outstanding preferred stock. Each outstanding share of common
stock is, and all shares of common stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
The board of directors has the authority, within the limitations and
restrictions stated in the restated certificate of incorporation, to provide by
resolution for the issuance of shares of preferred stock, in one or more classes
or series, and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares constituting any
series or the designation of such series. The issuance of preferred stock could
have the effect of decreasing the market price of the common stock and could
adversely affect the voting and other rights of the holders of common stock.
OPTIONS
As of April 30, 1999, options to purchase a total of 4,221,377 shares of
common stock were outstanding and 4,029,798 additional shares of common stock
were available for future grant under the 1998 Equity Incentive Plan. As of
April 30, 1999, no shares have been issued under the Employee Stock Purchase
Plan. See "Management -- 1998 Equity Incentive Plan," "-- Employee Stock
Purchase Plan" and "-- Summary Compensation."
WARRANTS
Upon completion of this offering, we will have outstanding warrants to
purchase 2,067,003 shares of common stock at a weighted average exercise price
of $3.06 per share. All of the warrants contain standard anti-dilution
provisions. These warrants expire on dates ranging from October 2000 to February
2006.
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<PAGE> 65
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION,
AMENDED AND RESTATED BYLAWS AND DELAWARE LAW
RESTATED CERTIFICATE OF INCORPORATION AND AMENDED AND RESTATED BYLAWS
Upon the closing of this offering, our restated certificate of
incorporation will provide that our board of directors be classified into three
classes of directors. The restated certificate of incorporation also provides
that all stockholder action must be effected at a duly called meeting of
stockholders and not by a consent in writing. In addition, the restated
certificate of incorporation and amended and restated bylaws provide that only
our Chief Executive Officer, the Chairperson of the board of directors or a
majority of the members of the board of directors may call a special meeting of
stockholders. In addition, directors may not be removed without cause. Finally,
the amended and restated bylaws establish procedures including advance notice,
with regard to the nomination of directors and stockholder proposals. These
provisions of the restated certificate of incorporation and amended and restated
bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control. Such provisions also may have the effect of
preventing changes in our management.
DELAWARE TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless (1) prior to such date, the board of directors
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (2) upon consummation of the
transaction which resulted in the stockholder 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
for purposes of determining the number of shares outstanding those shares owned
(a) by persons who are directors and also officers and (b) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (3) on or subsequent to such date, the business
combination is approved by the board of directors and authorized at an annual or
special meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder.
Section 203 defines business combination to include: (1) any merger or
consolidation involving the corporation and the interested stockholder; (2) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation; (3) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (4)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (5) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person. Hearst is not subject to the restrictions
of Section 203.
REGISTRATION RIGHTS
As of the completion of this offering, the holders of an aggregate of
15,126,437 shares of common stock or securities convertible into common stock
will be entitled to certain registration rights. These rights are provided under
the terms of an Amended and Restated Investor Rights' Agreement between
Women.com and the holders of our registrable securities, who include Ms.
McDaniel, Ms. Pack,
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<PAGE> 66
AVI Management (and all affiliated entities), MediaOne Interactive Services,
Inc., HC Crown Corporation, holders of certain warrants and all other holders of
our preferred stock. This agreement provides demand registration rights to the
holders of our registrable securities. In addition, the holders of all of the
registrable securities are entitled under the agreement, subject to certain
limitations, to require us to include their registrable securities in future
registration statements we file. Registration of shares of common stock pursuant
to the rights granted in this agreement will result in such shares becoming
freely tradeable without restriction under the Securities Act of 1933, as
amended. However, the agreement provides that we have the right to delay any
registration request until 180 days after the effective date of this prospectus.
All registration expenses incurred in connection with the above registrations
will be borne by us.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
LISTING
We intend to apply for quotation of our common stock on the Nasdaq National
Market under the trading symbol "WOMN."
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<PAGE> 67
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
there can be no assurance that a significant public market for our common stock
will develop or be sustained after this offering. Future sales of substantial
amounts of common stock, including shares issued upon exercise of outstanding
options and warrants, in the public market after this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through the sale of its equity securities. Sales of substantial
amounts of our common stock in the public market could adversely affect the
prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering and the Hearst private placement, we will
have outstanding shares of common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding warrants and
options as of April 30, 1999. Of these shares, the shares (
shares if the underwriters exercise their over-allotment option in full) of
common stock sold in this offering will be freely tradeable without restriction
under the Securities Act unless purchased by our "affiliates" as that term is
defined in Rule 144 under the Securities Act or by persons subject to other
contractual limitations and restrictions described below. Sales by affiliates
are subject to certain limitations and restrictions described below.
SALES OF RESTRICTED SHARES
The remaining shares of common stock held by existing
stockholders and the shares sold in the Hearst private placement
were issued by us in reliance on exemptions from the registration requirements
of the Securities Act. Of these shares, approximately shares will
be subject to lock-up agreements described below on the effective date of the
offering. Upon expiration of the lock-up agreements after the effective date of
the offering, all remaining shares will become eligible for sale in the public
market without restriction except in the case of shares held by affiliates and
Hearst. For those shares held by affiliates other than Hearst, after the
expiration of the lock-up, shares may be sold, subject to the volume limitations
provided in Rule 144. Pursuant to the volume limitations of Rule 144, an
affiliate would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (1) 1% of the number of shares of
common stock then outstanding, which will equal approximately
shares immediately after this offering, or (2) the average weekly
trading volume of the common stock during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. The shares held by Hearst prior
to the offering and the shares acquired in the private placement are restricted
securities as such term is defined under Rule 144 of the Securities Act of 1933.
Upon the expiration of its lock-up agreement, Hearst will be entitled to sell
its shares pursuant to the volume, manner of sale, notice and availability of
current public information requirements of Rule 144 and will remain subject to
such requirements at all times that it is an affiliate of Women.com.
OPTIONS
As of April 30, 1999, there were a total of 4,221,377 shares of common
stock subject to outstanding options under our 1994 Stock Option Plan and under
our 1998 Equity Incentive Plan, 1,002,416 of which were vested and exercisable.
All of these shares are subject to lock-up agreements or otherwise subject to
restrictions on transfer. Immediately after the completion of the offering, we
intend to file a registration statement on Form S-8 under the Securities Act to
register all of the shares of common stock issued or reserved for future
issuance under our 1994 Stock Option Plan, 1998 Equity Incentive Plan and
Employee Stock Purchase Plan. After the effective dates of the registration
statement on Form S-8, shares purchased upon exercise of options granted
pursuant to the 1994 Stock Option Plan, 1998 Equity Incentive Plan and Employee
Stock Purchase Plan generally would be available for resale in the public
market.
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<PAGE> 68
LOCK-UP AGREEMENTS
All executive officers, directors and other stockholders subject to lock-up
agreements have agreed that they will not, without the prior written consent of
Morgan Stanley & Co. Incorporated, offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, directly or indirectly, any shares of common stock or securities convertible
into or exercisable or exchangeable for common stock of Women.com for a period
of 180 days after the date of this offering. Morgan Stanley & Co. Incorporated,
in its sole discretion at any time and without notice, may release any or all
shares from the lock-up agreements and permit holders of the shares to resell
all or any portion of their shares at any time prior to the expiration of the
lock-up period.
In addition, the stockholders subject to "lock-up" agreements have agreed
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters, such stockholder will not during the period ending
180 days after the date of the prospectus, make any demand for, or exercise any
right with respect to, the registration of any shares of common stock or any
security convertible into or exercisable or exchangeable for common stock.
Beginning 180 days after the date of this prospectus, all shares subject to the
lock-up agreements will be eligible for sale in the public market without
restriction, except for shares held by affiliates and Hearst as described above.
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<PAGE> 69
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, BT Alex. Brown Incorporated and Salomon
Smith Barney Inc. are acting as representatives, have severally agreed to
purchase, and we have agreed to sell to them, the respective number of shares of
common stock set forth opposite the names of the underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ----------
<S> <C>
Morgan Stanley & Co. Incorporated...........................
BT Alex. Brown Incorporated.................................
Salomon Smith Barney Inc. ..................................
----------
Total.............................................
==========
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept delivery
of the shares of common stock offered hereby are subject to the approval of
certain legal matters by their counsel and to certain other conditions. The
underwriters are obligated to take and pay for all of the shares of common stock
offered by this prospectus, other than those covered by the over-allotment
option described below, if any such shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ per share under the public offering price. Any
underwriter may allow, and the dealers may reallow, a concession not in excess
of $ per share to other underwriters or to certain other dealers. After the
initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives of the
underwriters.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of
additional shares of common stock at the public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The underwriters
may exercise this option solely for the purpose of covering over-allotments, if
any, made in connection with this offering of common stock. To the extent this
over-allotment option is exercised, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
additional shares of common stock as the number set forth next to each
underwriter's name in the preceding table bears to the total number of shares of
common stock set forth next to the names of all underwriters in the preceding
table.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
Concurrent with this offering, Hearst is purchasing shares of our
common stock in a private placement at the public offering price.
At our request, the underwriters have reserved up to percent of the
shares of common stock to be issued by us and offered hereby for sale, at the
initial public offering price, to certain of our employees and to certain other
persons. The number of shares available for sale to the general public will be
reduced to the extent that such persons purchase such reserved shares. Any
reserved shares which are not so
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<PAGE> 70
purchased will be offered by the underwriters to the general public on the same
basis as the other shares of common stock offered by this prospectus.
We intend to apply for quotation of our common stock on the Nasdaq National
Market under the symbol "WOMN."
We and our directors, executive officers and substantially all other
stockholders of Women.com have agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the underwriters, we will not,
during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described above is to be
settled by delivery of common stock or such other securities, in cash or
otherwise.
The restrictions described in the previous paragraph do not apply to
certain circumstances, including:
- the sale of the shares to the underwriters;
- the issuance by us of restricted stock awards under our existing employee
benefit plans or of shares of common stock upon the exercise of an option
or a warrant or the conversion of a security outstanding on the date of
this prospectus;
- the grant of options to certain officers, directors, employees or
consultants provided such options are not exercisable prior to the end of
the lock-up period; or
- transactions relating to shares of common stock or other securities
acquired in open market transactions after the date of this prospectus.
In addition, our stockholders have agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters,
neither they nor any of their affiliates will, during the period ending 180 days
after the date of the prospectus, make any demand for, or exercise any right
with respect to, the registration of any shares of common stock or any security
convertible into or exercisable or exchangeable for common stock.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering if the syndicate repurchases previously distributed
common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities and may
end any of these activities at any time.
The underwriters and we have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
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<PAGE> 71
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the shares of common
stock will be determined by negotiations between us and the representatives of
the underwriters. Among the factors to be considered in determining the initial
public offering price will be our future prospects and our industry in general,
our sales, earnings and certain other financial and operating information in
recent periods, and the price-earnings ratios, price-sales ratios, market prices
of securities and certain financial and operating information of companies
engaged in activities similar to us.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
and certain other matters will be passed upon for us by Cooley Godward LLP,
Menlo Park, California and the validity of the shares of common stock offered
hereby will be passed upon for the underwriters by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. An investment
partnership comprised of members and senior associates of Cooley Godward LLP
beneficially owns 19,791 shares of common stock.
EXPERTS
The financial statements as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998, included in this
Prospectus and the financial statement schedule included in the Registration
Statement, have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of Certain Operations of the New
Media & Technology Division of The Hearst Corporation as of December 31, 1998
and 1997, and for each of the three years in the period ended December 31, 1998
included in this prospectus and the related financial statement schedule
included elsewhere in the registration statement have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of
common stock offered hereby. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the
registration statement. For further information with respect to us and our
common stock see the registration statement and the exhibits and schedules
thereto. Statements contained in this prospectus regarding the contents of any
contract or any other document to which reference is made are not necessarily
complete, and, in each instance where a copy of such contract or other document
has been filed as an exhibit to the registration statement, reference is made to
the copy so filed, each such statement being qualified in all respects by such
reference. Any documents we file, including a copy of the registration statement
and the exhibits thereto may be inspected without charge at the Public Reference
Room of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the Commission upon the payment of
the fees prescribed by the Commission. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. The Commission also maintains an
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<PAGE> 72
Internet site at www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants, such as Women.com, that
file electronically with the Commission.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities and Exchange Act, as
amended, and, accordingly, will file periodic reports, proxy statements and
other information with the Commission. Such periodic reports, proxy statements
and other information will be available for inspection and copying at the
Commission's public reference rooms, and the Web site of the Commission referred
to above.
Our principal executive offices are located at 1820 Gateway Drive, Suite
100, San Mateo, California 94404. Our fiscal year ends on December 31. We
maintain an Internet site at www.women.com. The reference to our web address
does not constitute incorporation by reference of the information contained at
this site.
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WOMEN.COM NETWORKS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WOMEN.COM NETWORKS, INC.
Report of Independent Accountants......................... F-2
Balance Sheets............................................ F-3
Statements of Operations.................................. F-4
Statements of Stockholders' Equity (Deficit).............. F-5
Statements of Cash Flows.................................. F-6
Notes to Financial Statements............................. F-8
CERTAIN OPERATIONS OF THE NEW MEDIA AND TECHNOLOGY DIVISION
OF THE HEARST CORPORATION (HOMEARTS) FINANCIAL STATEMENTS
Independent Auditors' Report.............................. F-26
Consolidated Balance Sheets............................... F-27
Consolidated Statements of Operations..................... F-28
Consolidated Statements of Cash Flows..................... F-29
Notes to Consolidated Financial Statements................ F-30
PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma Combined Statements of Operations (unaudited)... F-36
Notes to Pro Forma Combined Statements of Operations
(unaudited)............................................ F-38
</TABLE>
F-1
<PAGE> 74
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Women.com Networks, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Women.com Networks,
Inc., as of December 31, 1997 and 1998 and the results of its operations and its
cash flows for each of three years ended December 31, 1996, 1997 and 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of Women.com Network Inc.'s management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial 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 expressed above.
San Jose, California
May 7, 1999
- --------------------------------------------------------------------------------
The roll-up of the limited liability company into a Delaware corporation as
described in Note 1 has not been consummated at May 7, 1999. When such roll-up
has been consummated, we will furnish the above report assuming that from May 7,
1999 to the effective date of such roll-up no other events shall have occurred
that would affect the accompanying financial statements or notes thereto.
/s/ PricewaterhouseCoopers LLP
San Jose, California
May 7, 1999
F-2
<PAGE> 75
WOMEN.COM NETWORKS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------- MARCH 31, MARCH 31,
1997 1998 1999 1999
-------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 4,885 $ 12,235 $ 19,164 $ 19,164
Accounts receivable, less allowance for doubtful
accounts of $47, $295 and $425 (unaudited),
respectively......................................... 962 2,442 3,577 3,577
Prepaid and other current assets....................... 28 526 3,660 3,660
-------- -------- -------- --------
Total current assets..................................... 5,875 15,203 26,401 26,401
Property and equipment, net.............................. 493 1,261 3,340 3,340
Intangible assets, net................................... -- 1,505 59,863 59,863
Other assets............................................. 62 93 5,773 5,773
-------- -------- -------- --------
Total assets............................................. $ 6,430 $ 18,062 $ 95,377 $ 95,377
======== ======== ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND WARRANTS AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 611 $ 2,828 $ 4,630 $ 4,630
Accounts payable, related parties...................... -- -- 816 816
Accrued liabilities.................................... 5 337 1,760 1,760
Accrued compensation and related benefits.............. 263 364 925 925
Current portion of capital lease obligation............ 65 15 7 7
Notes payable.......................................... 244 348 348 348
Deferred revenue....................................... 1,813 1,455 1,228 1,228
-------- -------- -------- --------
Total current liabilities................................ 3,001 5,347 9,714 9,714
Other liabilities........................................ 673 -- -- --
-------- -------- -------- --------
Total liabilities........................................ 3,674 5,347 9,714 9,714
-------- -------- -------- --------
Mandatorily redeemable convertible preferred stock, no
par value:
Authorized: 18,286 shares
Issued and outstanding: 6,891 shares at December 31,
1997, 13,438 shares at December 31, 1998, 13,438
shares at March 31, 1999 (unaudited) and none in pro
forma (unaudited)
(Aggregate liquidation value of $37,482 (unaudited) at
March 31, 1999)...................................... 14,512 34,905 35,000 --
Mandatorily redeemable convertible preferred stock
warrants............................................. 500 515 515 265
-------- -------- -------- --------
15,012 35,420 35,515 265
-------- -------- -------- --------
Commitments and contingencies (Note 7)
Stockholders' equity (deficit):
Preferred stock, $0.001 par value:
Authorized: none at March 31, 1999 and 5,000 shares
pro forma
None issued or outstanding........................... -- -- -- --
Common stock, par value: $0.001
Authorized: 60,000 shares at March 31, 1999 and
195,000 shares pro forma
Issued and outstanding: 749 shares at December 31,
1997, 1,497 shares at December 31, 1998, 19,616
(unaudited) shares at March 31, 1999 and 33,054
(unaudited) shares pro forma....................... 1 3 21 33
Additional paid-in capital............................. 126 5,269 92,563 127,801
Notes receivable from stockholders..................... (44) (44) (44) (44)
Unearned compensation.................................. -- (1,979) (3,248) (3,248)
Accumulated deficit.................................... (12,339) (25,954) (39,144) (39,144)
-------- -------- -------- --------
Total stockholders' equity (deficit)..................... (12,256) (22,705) 50,148 85,398
-------- -------- -------- --------
Total liabilities, mandatorily redeemable convertible
preferred stock and warrants and stockholders' equity
(deficit).............................................. $ 6,430 $ 18,062 $ 95,377 $ 95,377
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 76
WOMEN.COM NETWORKS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------ -------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................... $ 729 $ 2,798 $ 7,247 $ 1,113 $ 3,413
Operating expenses:
Production, product and
technology.................... 1,174 2,922 5,728 1,027 3,848
Sales and marketing.............. 957 3,907 12,042 1,298 6,568
General and administrative....... 956 1,101 1,374 310 1,968
Stock-based compensation......... -- -- 1,170 157 612
Amortization of acquired
intangibles................... -- -- 517 -- 3,671
------- ------- -------- ------- --------
Total operating expenses...... 3,087 7,930 20,831 2,792 16,667
------- ------- -------- ------- --------
Loss from operations............... (2,358) (5,132) (13,584) (1,679) (13,254)
Other income, net.................. 69 154 596 38 176
Interest expense................... (16) (117) (57) -- (17)
------- ------- -------- ------- --------
Net loss........................... (2,305) (5,095) (13,045) (1,641) (13,095)
Dividend accretion on mandatorily
redeemable convertible preferred
stock............................ (682) (1,517) (570) (95) (95)
------- ------- -------- ------- --------
Net loss attributable to common
stockholders..................... $(2,987) $(6,612) $(13,615) $(1,736) $(13,190)
======= ======= ======== ======= ========
Basic and diluted net loss per
share attributable to common
stockholders..................... $ (4.26) $ (9.15) $ (10.52) $ (2.30) $ (.95)
======= ======= ======== ======= ========
Shares used in computing basic and
diluted net loss per share....... 702 722 1,294 754 13,820
======= ======= ======== ======= ========
Basic and diluted pro forma net
loss per share................... $ (1.13) $ (.48)
======== ========
Shares used in computing pro forma
basic and diluted net loss per
share............................ 11,548 27,258
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 77
WOMEN.COM NETWORKS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE TOTAL
--------------- PAID-IN FROM UNEARNED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT EQUITY (DEFICIT)
------ ------ ---------- ------------ ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1995................... 700 $ 1 $ 120 $(44) $ -- $ (2,740) $ (2,663)
Issuance of common stock
pursuant to exercise of
stock options.......... 3 -- -- -- -- -- --
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- -- -- -- (682) (682)
Net loss................. -- -- -- -- -- (2,305) (2,305)
------ --- ------- ---- ------- -------- --------
Balances, December 31,
1996................... 703 1 120 (44) -- (5,727) (5,650)
Issuance of common stock
pursuant to exercise of
stock options.......... 46 -- 6 -- -- -- 6
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- -- -- -- (1,517) (1,517)
Net loss................. -- -- -- -- -- (5,095) (5,095)
------ --- ------- ---- ------- -------- --------
Balances, December 31,
1997................... 749 1 126 (44) -- (12,339) (12,256)
Issuance of common stock
pursuant to exercise of
stock options.......... 73 -- 15 -- -- -- 15
Issuance of common stock
pursuant to acquisition
of Wild Wild Web....... 675 2 1,753 -- -- -- 1,755
Issuance of warrants..... -- -- 226 -- -- -- 226
Unearned compensation.... -- -- 3,149 -- (3,149) -- --
Amortization of unearned
compensation........... -- -- -- -- 1,170 -- 1,170
Accretion of mandatorily
redeemable convertible
preferred stock........ (570) (570)
Net loss................. -- -- -- -- -- (13,045) (13,045)
------ --- ------- ---- ------- -------- --------
Balances, December 31,
1998................... 1,497 3 5,269 (44) (1,979) (25,954) (22,705)
Issuance of common stock
pursuant to exercise of
stock options.......... 270 -- 81 -- -- -- 81
Issuance of common stock
pursuant to acquisition
of HomeArts............ 17,849 18 85,332 -- -- -- 85,350
Unearned compensation.... -- -- 1,881 -- (1,881) -- --
Amortization of unearned
compensation........... -- -- -- -- 612 -- 612
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- -- -- -- (95) (95)
Net loss................. -- -- -- -- -- (13,095) (13,095)
------ --- ------- ---- ------- -------- --------
Balances, March 31, 1999
(unaudited)............ 19,616 $21 $92,563 $(44) $(3,248) $(39,144) $ 50,148
====== === ======= ==== ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 78
WOMEN.COM NETWORKS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss..................................... $(2,305) $(5,095) $(13,045) $(1,641) $(13,095)
Adjustments to reconcile net loss to net cash
used in operating activities, net of the
effects of acquisitions:
Depreciation and amortization of
tangible assets...................... 78 181 323 74 244
Amortization of intangibles............. -- -- 517 -- 3,661
Provision for doubtful accounts......... -- 47 248 56 130
Interest converted to preferred stock... (226) 109 -- -- --
Amortization of stock-based
compensation......................... -- -- 1,170 157 612
Issuance of common stock warrant in
exchange for financing services...... -- -- 15 -- --
Decrease (increase) in accounts
receivable........................... (27) (783) (1,728) 183 (288)
Decrease (increase) in prepaids and
other current assets................. -- 25 (471) (48) 454
Increase in other assets................ 141 (62) (31) -- --
Decrease (increase) in accounts
payable.............................. 72 439 1,907 (284) 2,618
Increase (decrease) in accrued
liabilities.......................... (252) 133 433 245 (1703)
Increase (decrease) in deferred
revenue.............................. (15) 2,440 (1,031) (299) (352)
Decrease in other liabilities........... -- (18) -- -- --
------- ------- -------- ------- --------
Net cash used in operating
activities......................... (2,534) (2,584) (11,693) (1,557) (7,719)
------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment........ (117) (506) (1,075) (116) (279)
Cash received from HomeArts acquisition...... -- -- -- -- 14,854
------- ------- -------- ------- --------
Net cash provided by (used in)
investing activities............... (117) (506) (1,075) (116) 14,575
------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock and
warrants, net of issuance costs........... 2,296 5,552 20,049 -- --
Proceeds from issuance of promissory note.... 1,517 -- -- -- --
Proceeds from exercise of stock options...... -- 6 15 5 81
Principal payments under capital lease
obligations............................... (61) (88) (50) (15) (8)
Principal payment under term loan............ -- -- (244) (4) --
Proceeds from notes payable.................. 95 744 348 -- --
------- ------- -------- ------- --------
Net cash provided by (used in)
financing activities............... 3,847 6,214 20,118 (14) 73
------- ------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents.................................. 1,196 3,124 7,350 (1,687) 6,929
Cash and cash equivalents at beginning of
period....................................... 564 1,761 4,885 4,885 12,235
------- ------- -------- ------- --------
Cash and cash equivalents at end of period..... $ 1,760 $ 4,885 $ 12,235 $ 3,198 $ 19,164
======= ======= ======== ======= ========
</TABLE>
F-6
<PAGE> 79
WOMEN.COM NETWORKS, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments for interest................ $ 16 $ 24 $ -- $ -- $ --
Revenue and advertising expense from
barter transactions..................... $ -- $ -- $ 656 $ 20 $ 154
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
INFORMATION:
Accretion of preferred stock.............. $ 682 $ 1,517 $ 570 $ 95 $ 95
Conversion of notes payable and accrued
interest to preferred stock............. $ -- $ 2,017 $ -- $ -- $ --
Unearned compensation related to stock
option grants........................... $ -- $ -- $ 3,149 $ 869 $ 1,881
Issuance of Series D mandatorily
redeemable convertible preferred stock
warrant in exchange for services........ $ -- $ -- $ 226 $ -- $ --
Liabilities assumed in connection with
acquisition of Wild Wild Web, Inc.:
Fair value of assets acquired........... $ 2,065
Common stock issued..................... (1,755)
--------
Liabilities assumed..................... $ 310
========
Liabilities assumed in connection with
acquisition of HomeArts:
Fair value of assets acquired........... $ 74,318
Cash received........................... 14,854
Common stock issued..................... (85,000)
--------
Liabilities assumed..................... $ 4,172
========
</TABLE>
See accompanying notes.
F-7
<PAGE> 80
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
NOTE 1 -- FORMATION AND BUSINESS
Women.com Networks Inc. ("Women.com"), a California corporation was
incorporated in October 1992 as Wire Networks, Inc. Women.com provides women
with original content, personalized services, community and shopping on the
internet.
Effective January 29, 1999, Women.com entered into a joint venture
agreement with Hearst HomeArts, Inc. ("HomeArts"), a subsidiary of The Hearst
Corporation.
Concurrent with the joint venture agreement, Women.com and HomeArts entered
a roll-up agreement whereby prior to an initial public offering Women.com and
HomeArts will merge and Women.com Networks LLC will be rolled up in connection
with such merger and Women.com Networks Inc., a Delaware corporation, will be
the surviving entity. The corporation will be authorized to issue 195,000,000
shares of $0.001 par value common stock and 5,000,000 shares of $0.001 par value
preferred stock. All share and per share data have been retroactively adjusted
to reflect the roll-up.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The financial statements as of March 31, 1999 and for the three months
ended March 31, 1999 and March 31, 1998 are unaudited but have been prepared in
accordance with generally accepted accounting principles for interim financial
statements and the rules of the Securities and Exchange Commission and do not
include all disclosures required by generally accepted accounting principles for
annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Women.com considers all highly liquid investments with original or
remaining maturities at the date of purchase of three months or less to be cash
equivalents. The majority of Women.com's cash and cash equivalents are held in a
short-term investment portfolio.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of the Women.com's financial instruments including cash
and cash equivalents, accounts receivable, accounts payable, accrued liabilities
and term loan approximate fair value due to their short maturities.
F-8
<PAGE> 81
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a
straight-line basis over an estimated useful life of three years. Leasehold
improvements are amortized on a straight-line basis over their estimated useful
lives or the term of the lease, whichever is shorter.
Maintenance and repairs are charged to expense as incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations.
INTANGIBLE ASSETS
Goodwill and intangible assets resulting from acquisitions were estimated
by independent appraisers. The intangible asset include the advertising and
viewership base, advertising agreement, trade name, assembled workforce and
covenant not to compete. Goodwill and other intangible assets are amortized on a
straight-line basis over the estimated periods of benefit, which range from two
to five years, except for the advertising agreement, which is being amortized as
utilized.
IMPAIRMENT OF LONG-LIVED ASSETS
Women.com evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of'("SFAS No. 121"). SFAS No. 121 requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets.
REVENUE RECOGNITION
Advertising revenues are derived principally from short-term advertising
contracts in which Women.com typically guarantees a minimum number of
impressions or pages to be delivered to users over a specified period of time
for a fixed fee. Advertising revenues are recognized ratably in the period in
which the advertising is displayed, provided that no significant obligations
remain. To the extent that minimum guaranteed page deliveries are not met,
Women.com defers recognition of the corresponding revenues until the guaranteed
page deliveries are achieved.
To date, Women.com's revenues have been derived primarily from the sale of
advertising contracts, advertising sponsorships and production contracts.
Sponsorship revenues are derived principally from contracts ranging from two to
six years in which Women.com commits to provide sponsors enhanced promotional
opportunities beyond traditional banner advertising. Sponsorship agreements
typically include the delivery of impressions, exclusive relationships and the
design and development of co-branded sites designed to enhance the promotional
objective of the sponsor. Women.com recognizes sponsorship revenues as earned,
which is generally ratably over the contract period, provided that no
significant obligations remain. To the extent that committed obligations are not
met, Women.com defers recognition of the corresponding revenues until the
obligations are met.
Sponsorship and advertising revenues were approximately 58%, 88%, 74% and
81% of total revenues for the years ended December 31, 1996, 1997 and 1998 and
the three months ended March 31, 1999, respectively.
F-9
<PAGE> 82
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
Advertising revenues include barter revenues, which are the exchange by
Women.com of advertising space on Women.com's Web sites for reciprocal
advertising space 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 received or delivered and are recognized when the
advertisements are run on Women.com's Web sites. Barter expenses are recorded
when Women.com's advertisements are run on the reciprocal Web sites, which is
typically in the same period as when advertisements are run on Women.com's Web
sites. There was no barter revenue in 1996 and 1997. Barter revenues represented
9% of net revenues for the year ended December 31, 1998 and 4% of net revenues
for the three months ended March 31, 1999.
A number of Women.com's agreements provide that it receive revenues from
electronic commerce transactions. These revenues are recognized by Women.com
upon notification from the advertiser of revenues earned by Women.com.
Production revenue represent fees for content and site production.
Production revenues are derived from contracts in which Women.com designs and
develops content for third parties, for use principally on the Women.com
network. Women.com recognizes production revenues as earned, which is generally
as services are performed over the contract period. To the extent that committed
obligations under production agreements are not met, revenue recognition is
deferred until the obligations are met.
ADVERTISING
Women.com expenses advertising costs as they are incurred. Advertising
expense for the years ended December 31, 1996, 1997 and 1998 was $227,000,
$1,600,000 and $4,021,000, respectively, and for the three months ended March
31, 1999 was $1,410,000.
INCOME TAXES
Women.com accounts for income taxes using the liability method under which
deferred tax assets and liabilities are calculated using current tax laws and
rates in effect at the balance sheet date. A valuation allowance is recorded
when it is more likely than not that the net deferred tax asset will not be
recovered.
STOCK-BASED COMPENSATION
Women.com accounts for its stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Women.com has elected to adopt the disclosure only
provisions of Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation," which also requires pro forma
disclosures in the financial statements as if the measurement provisions of SFAS
123 had been adopted. Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant, between the deemed fair value of
Women.com's stock and exercise price. Stock options issued to non-employees have
been accounted for in accordance with SFAS 123 and valued using the
Black-Scholes model.
CERTAIN RISKS AND CONCENTRATIONS
Substantially all of Women.com's cash and cash equivalents as of December
31, 1998 are on deposit with one major financial institution. Deposits at any
point in time may exceed the federally insured limits.
F-10
<PAGE> 83
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
Financial instruments which potentially subject Women.com to concentrations
of credit risk consist principally of trade accounts receivable.
Women.com provides advertising to a variety of customers for placement on
its Web sites and generally does not require collateral. Although Women.com
maintains allowance for potential credit losses that it believes to be adequate,
a payment default on a significant sale could materially and adversely affect
its operating results and financial condition. At December 31, 1997, one
customer accounted for 30.9% of accounts receivable, at December 31, 1998, one
customer accounted for 10.6% of accounts receivable and at March 31, 1999, one
customer accounted for 25% of accounts receivable. For fiscal years 1997 and
1998, and for the three months ended March 31, 1999, one individual customer
accounted for approximately 19%, 13% and 21% of revenues, respectively. No
individual customer accounted for 10% or more of revenues in fiscal year 1996.
Women.com operates in a single business segment which is characterized by
rapid technological advances, changes in customer requirements and evolving
regulatory requirements and industry standards. Any failure by Women.com to
anticipate or to respond adequately to technological changes in its industry,
changes in customer requirements or changes in regulatory requirements or
industry standards, could have a material adverse affect on Women.com's business
and operating results.
Women.com relies on a number of third party suppliers for various services,
including web hosting, banner advertising, delivery software and Internet
traffic measurement software.
NET LOSS PER SHARE
Women.com computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share." Under the provisions of SFAS No. 128, basic net loss per
share is computed by dividing the net loss attributable to common stockholders
for the period by the weighted average number of common shares outstanding
during the period. Diluted net loss per share is computed by dividing the net
loss for the period by the weighted average number of common and common stock
equivalent shares outstanding during the period. Common equivalent shares,
composed of common shares issuable upon the exercise of stock options and
warrants and upon conversion of mandatorily redeemable convertible preferred
stock, are included in the diluted net loss per share to the extent such shares
are dilutive.
F-11
<PAGE> 84
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated, (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net loss......................... $(2,305) $(5,095) $(13,045) $(1,641) $(13,095)
Accretion of mandatorily
redeemable convertible
preferred stock to redemption
value......................... (682) (1,517) (570) (95) (95)
------- ------- -------- ------- --------
Net loss attributable to common
stockholders.................. $(2,987) $(6,612) $(13,615) $(1,736) $(13,190)
======= ======= ======== ======= ========
Denominator:
Shares used in computing basic
and diluted net loss per
share......................... 702 722 1,294 754 13,820
Basic and diluted net loss per
share attributable to common
stockholders.................. $ (4.26) $ (9.15) $ (10.52) $ (2.30) $ (.95)
======= ======= ======== ======= ========
Antidilutive securities including
options, warrants and preferred
stock not included in net loss
per share calculation............ 4,014 10,065 18,607 10,558 19,708
======= ======= ======== ======= ========
</TABLE>
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1998 and the
three months ended March 31, 1999, is computed using the weighted average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of mandatorily redeemable convertible preferred stock into common
stock effective upon the closing of Women.com's initial public offering on an
as-if-converted basis. Pro forma diluted net loss per share is computed using
the pro forma weighted average number of common and common equivalent shares
outstanding. Common equivalent shares, composed of common shares issuable upon
the exercise of stock options and warrants, are not included in diluted net loss
per share as such shares are anti-dilutive.
F-12
<PAGE> 85
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
The following table sets forth the computation of pro forma basic and
diluted net loss per share (unaudited) (in thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
Numerator:
Net loss............................................... $(13,045) $(13,095)
======== ========
Denominator:
Shares used in computing basic and diluted net loss per
share............................................... 1,294 13,820
Adjustment to reflect assumed conversion of all
preferred stock from date of issuance............... 10,254 13,438
-------- --------
Shares used in computing pro forma basic and diluted
net loss per share.................................. 11,548 27,258
======== ========
Basic and diluted pro forma net loss per share........... $ (1.13) $ (.48)
======== ========
Antidilutive securities including options and warrants
not included in pro form net loss per share
calculation............................................ $ 8,353 $ 6,270
======== ========
</TABLE>
PRO FORMA MARCH 31, 1999 (UNAUDITED)
Effective upon the closing of this offering, the outstanding shares of
mandatorily redeemable convertible preferred stock will automatically convert
into 13,437,879 shares of common stock.
COMPREHENSIVE INCOME
Effective January 1, 1998, Women.com adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." This statement requires companies to
classify items of other comprehensive income by their components in the
financial statements and display the accumulated balance of other comprehensive
income separately from retained earnings in the equity section of a statement of
financial position. To date, Women.com has not had any transactions that are
required to be reported as comprehensive income.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This statement established standards for reporting information about operating
segments in annual financial statements. It also established standards for
related disclosures about products and services, geographic areas and major
customers. The disclosures prescribed by SFAS No. 131 are effective for fiscal
years beginning after December 15, 1997. Women.com has determined that it does
not have any separately reportable business segments as of December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Accounting for the Cost of
Computer Software Developed or Obtained 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
F-13
<PAGE> 86
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
after December 15, 1998. The adoption of SOP No. 98-1 will not have a material
impact on its financial statements.
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organization costs. It requires the costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. The
adoption of SOP No. 98-5 will not have a material impact on its financial
statements.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments 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 for fiscal years beginning after June 15, 1999. Women.com is
assessing the potential impact of this pronouncement on the financial
statements, however they do not expect any significant impact since Women.com
currently does not have any derivative instruments and does not anticipate
acquiring any.
NOTE 3 -- ACQUISITIONS
Effective April 2, 1998, Women.com acquired substantially all the assets of
Wild Wild Web, Inc., which developed the Web site known as Storksite. The
acquisition has been accounted for using the purchase method of accounting and
accordingly, the purchase price has been allocated to the tangible and
intangible assets acquired and liabilities assumed on the basis of their
respective fair values on the acquisition date. The fair value of net assets
acquired was determined by an independent appraiser. The allocation of the
purchase price is summarized below (in thousands):
<TABLE>
<S> <C>
Intangibles................................................. $1,516
Goodwill.................................................... 506
Property and equipment...................................... 16
Net current liabilities assumed............................. (253)
------
Total purchase price.............................. $1,785
======
</TABLE>
Intangibles include advertising and viewership base, trade name, assembled
workforce and a covenant not to compete. The excess of the purchase price over
the fair value of the net tangible and identifiable intangible assets acquired
has been recorded as goodwill.
Effective January 29, 1999, Women.com Networks and HomeArts entered into a
joint venture agreement as described in Note 1. Under the terms of the
agreement, Women.com Networks and HomeArts contributed their businesses to
Women.com Networks LLC. Since the economic substance of the transaction was not
consistent with the accounting definition of joint venture the transaction has
been accounted for as the purchase of HomeArts by Women.com Networks. Under the
terms of the agreement Women.com Networks and HomeArts each have fifty percent
voting interest, except that Women.com Networks has the sole authority to
initiate an initial public offering. In addition, senior-management of the joint
venture is comprised solely of Women.com Networks management. Therefore,
Women.com was determined to be the accounting acquirer pursuant to Staff
Accounting Bulletin Topic 2-A2.
F-14
<PAGE> 87
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
The acquisition has been accounted for using the purchase method of
accounting and accordingly, the purchase price has been allocated to the
tangible and intangible assets acquired and liabilities assumed on the basis of
their respective fair values on the acquisition date. The fair value of net
assets acquired was determined by an independent appraiser.
The acquisition has been structured as a tax free exchange of stock,
therefore, the differences between the recognized fair values of the acquired
assets, including tangible assets and their historical tax bases are not
deductible for tax purposes. Women.com Networks LLC elected to be taxed as a
partnership beginning with the formation of the joint venture and until
Women.com Networks LLC is rolled up into Women.com Networks, Inc. in connection
with an initial public offering. As a consequence, for this period the federal
and state tax effects of the tax losses will be recorded by the members of the
joint venture in their respective income tax returns.
The allocation of the purchase price is summarized below (in thousands):
<TABLE>
<S> <C>
Intangibles................................................. $14,078
Goodwill.................................................... 47,951
Prepaid advertising......................................... 5,680
Property and equipment...................................... 2,044
Net current assets.......................................... 16,685
-------
Total purchase price.............................. $86,438
=======
</TABLE>
Intangibles include advertising and viewership base and assembled
workforce. The excess of the purchase price over the fair value of the net
tangibles and identifiable intangible assets acquired has been recorded as
goodwill. The intangibles and goodwill are being amortized on a straight-line
basis over a period of two to five years.
The following unaudited pro forma financial information reflects the
results of operations for the year ended December 31, 1998 and the three months
ended March 31, 1999 as if the acquisition of HomeArts had occurred on January
1, 1998 and 1999, respectively, and after giving effect to purchase accounting
adjustments. These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what operating results would have
been had the acquisition actually taken place on January 1, 1998 or 1999, and
may not be indicative of future operating results (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
Net revenues......................................... $ 10,204 $ 3,663
Loss from operations................................. (49,314) (16,201)
Net loss attributable to common stockholders......... (49,345) (16,137)
Basic and diluted net loss per share................. $ (2.56) $ (.83)
</TABLE>
F-15
<PAGE> 88
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
NOTE 4 -- BALANCE SHEET COMPONENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- MARCH 31,
1997 1998 1999
----- ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Prepaid and other current assets
Prepaid advertising.......................... $ -- $ -- $ 3,408
Other prepaid expenses and current assets.... 28 526 252
----- ------ -------
$ 28 $ 526 $ 3,660
===== ====== =======
Property and equipment, net
Computer equipment and software................. $ 709 $1,688 $ 4,030
Furniture and fixtures.......................... 98 195 174
Leasehold improvements.......................... 17 32 34
----- ------ -------
824 1,915 4,238
Less accumulated depreciation and
amortization................................. (331) (654) (898)
----- ------ -------
$ 493 $1,261 $ 3,340
===== ====== =======
Intangible assets
Advertising and viewership base................. $ -- $1,138 $13,444
Assembled workforce............................. -- 100 1,872
Covenant not to compete......................... -- 66 66
Goodwill........................................ -- 506 48,457
Tradename....................................... -- 212 212
----- ------ -------
-- 2,022 64,051
Less accumulated amortization................... -- (517) (4,188)
----- ------ -------
$ -- $1,505 $59,863
===== ====== =======
Other assets
Prepaid advertising............................. -- -- 5,680
Rent deposits and other assets.................. 62 93 93
----- ------ -------
$ 62 $ 93 $ 5,773
===== ====== =======
</TABLE>
Equipment under capital lease obligations totaled $250,580 with accumulated
amortization of $188,208, for the three months ended March 31, 1999,
respectively.
NOTE 5 -- CAPITAL LEASE OBLIGATION AND NOTE PAYABLE
Women.com has acquired equipment under a capital lease agreement. At
December 31, 1998, there are no additional amounts available under the agreement
for capital lease financing. At December 31, 1998, future minimum lease payments
under the capital lease of approximately $15,000 are due in 1999.
In April 1998, Women.com entered into a loan agreement to borrow the lesser
of $3 million or 80% of eligible receivables with a bank, bearing interest at
prime plus 0.5% (8.25% at December 31, 1998) and is collateralized by
substantially all of Women.com's assets. At December 31, 1998, $348,000 was
outstanding. The outstanding principal and interest are due on demand.
F-16
<PAGE> 89
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
NOTE 6 -- DEFERRED REVENUE
In connection with the issuance of Women.com's Series C preferred stock in
July and August 1997, Women.com entered into investment agreements with two
stockholders. Under the terms of the agreements, Women.com's right to retain
$1,500,000 and $1,250,000 in proceeds from each of the two stockholders,
respectively, is contingent upon Women.com's development of Web sites in
accordance with the timetable and requirements set forth in the agreements. In
the event of discontinuation of the projects, the unused portion may be returned
or allocated for use on another project. Women.com has deferred the $1,500,000
and $1,250,000 and is recognizing revenues in accordance with development
efforts. As of December 31, 1998 and March 31, 1999, Women.com has recognized
approximately $1,987,000 and $2,158,000 of revenues, respectively, related to
these agreements.
NOTE 7 -- COMMITMENTS AND CONTINGENCIES
Women.com leases its offices under noncancelable operating leases which
expire through 2001. Women.com is committed to pay a portion of the building's
operating expenses as determined under the agreements.
At December 31, 1998, future minimum lease payments are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
1999........................................................ $ 610
2000........................................................ 598
2001........................................................ 608
------
Total future minimum lease payments............... $1,816
======
</TABLE>
Rent expense was $163,400, $304,534 $603,702 and $334,337 for the years
ended December 31, 1996, 1997 and 1998, and the three months ended March 31,
1999, respectively.
ADVERTISING
In 1998, Women.com entered into certain non-cancelable on-line distribution
agreements. At December 31, 1998, $1.7 million of minimum payments are due in
1999.
ROYALTIES
In connection with the acquisition of HomeArts (See Note 3), Women.com
agreed to pay Hearst a royalty on the net advertising revenues generated from
the Hearst magazine sites on the Women.com network or from proprietary Hearst
content, until such time as Hearst has recouped the cumulative production costs
incurred in the ongoing production of the Hearst magazine sites. Thereafter, a
royalty shall be payable, calculated as a percentage of the net advertising
revenues dependent on the gross revenues generated.
LITIGATION
From time to time, the Company may be involved in litigation arising out of
claims in the normal course of business. Based upon the information presently
available, including discussion with outside legal counsel, management believes
that there are no claims or actions pending or threatened against the
F-17
<PAGE> 90
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
Company, the ultimate resolution of which will have a material adverse effect on
the Company's financial position, liquidity or results of operations.
NOTE 8 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK (IN THOUSANDS):
The following table summarizes the activity on mandatorily redeemable
convertible preferred stock and warrants to purchase mandatorily redeemable
convertible preferred stock (in thousands):
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D
--------------- --------------- --------------- ---------------- TOTAL
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT AMOUNT
------ ------ ------ ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 1, 1996............. 1,937 $2,839 -- $ -- -- $ -- -- $ -- $ 2,839
Issuance of preferred stock............. -- -- 579 1,286 -- -- -- -- 1,286
Accretion on preferred stock............ -- 519 -- 163 -- -- -- -- 682
Issuance and exercise of warrants....... 748 1,010 -- -- -- -- -- -- 1,010
----- ------ --- ------ ----- ------ ----- ------- -------
Balance at December 31, 1996............ 2,685 4,368 579 1,449 -- -- -- -- 5,817
Issuance of preferred stock............. -- -- -- -- 3,627 7,178 -- -- 7,178
Accretion on preferred stock............ -- 545 -- 195 -- 777 -- -- 1,517
Issuance of warrants.................... -- -- -- -- -- 500 -- -- 500
----- ------ --- ------ ----- ------ ----- ------- -------
Balance at December 31, 1997............ 2,685 4,913 579 1,644 3,627 8,455 -- -- 15,012
Issuance of preferred stock............. -- -- -- -- -- -- 6,546 19,823 19,823
Issuance of warrants.................... -- -- -- -- -- -- -- 15 15
Accretion on preferred stock............ -- -- -- -- -- 570 -- -- 570
----- ------ --- ------ ----- ------ ----- ------- -------
Balance at December 31, 1998............ 2,685 4,913 579 1,644 3,627 9,025 6,546 19,838 35,420
Accretion on preferred stock............ -- -- -- -- -- 95 -- -- 95
----- ------ --- ------ ----- ------ ----- ------- -------
Balance at March 31, 1999
(unaudited)........................... 2,685 $4,913 579 $1,644 3,627 $9,120 6,546 $19,838 $35,515
===== ====== === ====== ===== ====== ===== ======= =======
Authorized at March 31, 1999
(unaudited)........................... 2,707 579 7,000 8,000
===== === ===== =====
</TABLE>
VOTING
Each share of Series A, B, C, and D preferred stock entitles a holder to
the number of votes per share equal to the number of shares of common stock into
which each share of preferred stock is then convertible.
CONVERSION
Each share of Series A, B, C and D preferred stock is convertible into
common stock determined by dividing the original issue price by the current
conversion price for each series of preferred stock. The current conversion
price equates to the original issue price. Conversion is at the option of the
holder at any time after issuance.
The preferred stock would mandatorily convert into common stock at the
conversion price relevant at that time, if Women.com closes a firm commitment
underwritten public offering of shares of common stock in which the aggregate
price received for such shares by Women.com (net of underwriting discount,
commissions and expenses) was at least $20 million for Series D preferred stock
and $10 million for Series A, B and C preferred stock, and at a price per common
share of at least $7.50 for Series C and D preferred stock and $6.75 for Series
A and B preferred stock (subject to adjustment for stock splits, stock
dividends, recapitalizations and the like).
F-18
<PAGE> 91
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
In addition, the preferred stockholders have certain registration rights
and other rights and the right to one vote for each share of common stock into
which such shares of preferred stock are convertible.
LIQUIDATION
The Series A, B, C and D preferred stock has liquidation preference of
$1.35, $2.25, $3.04 and $3.29 per share, respectively, subject to adjustment for
splits or other recapitalization, plus all declared but unpaid dividends. Upon
liquidation, the holders of Series C and D preferred stock shall be entitled to
be paid out the assets of Women.com before any distribution or payment shall be
made to the holders of Series A preferred stock, Series B preferred stock or any
common stock. If funds are insufficient to permit the payment of the full
preferential amount to the holders of Series C and D preferred stock, then the
entire assets of Women.com legally available for distribution shall be
distributed ratably among the holders of the Series C and D preferred stock.
After the payment of the full liquidation preference of the Series C and D
preferred stock, the assets of Women.com legally available for distribution, if
any, shall be distributed ratably to the holders of Series A and B preferred
stock. If funds are insufficient for full payment to holders of Series A and B
preferred stock, the entire assets and funds of Women.com legally available are
to be distributed ratably among the holders of Series A and B preferred stock.
After the preferred stockholders have received the full amount to which they are
entitled, the remaining assets shall be paid ratably to the holders of the
common stock.
DIVIDENDS
The holders of Series A, B, C and D preferred stock are entitled to
noncumulative dividends at the rate of $.08, $.225, $.304 and $.329 per share
per annum, respectively, when and if declared by Women.com's Board of Directors.
Such dividends will be declared or paid prior and in preference to any
declaration or payment of any dividend on the common stock, other than a common
stock dividend payable solely in shares of common stock.
REDEMPTION
At the election of at least a majority of the holders of preferred stock,
Women.com is required to redeem the Series A, B, C and D preferred stock in
three equal annual installments beginning no earlier than March 31, 2001. Upon
redemption, Women.com shall pay in cash in exchange for preferred shares to be
redeemed at their respective original issue price per shares plus a premium of
fifteen percent per year accruing from the original issue dates through December
31, 1997, minus any previously paid dividends. If Women.com does not have
sufficient funds, the redemption shall be effected on a pro-rata basis to the
extent possible and shall redeem the remaining redeemable shares or as soon as
sufficient funds are legally available.
If required by the stockholders, the redeemable preferred stock payments,
including required accretion would be $13.4 million per year for three years
commencing in 2001.
CONVERTIBLE PREFERRED STOCK WARRANTS
In 1994, in conjunction with a capital lease agreement, Women.com issued
fully exercisable nontransferable warrants to purchase 22,222 shares of its
Series A preferred stock at a price of $1.35 per share. The warrants expire at
the earlier of December 2004 or upon an initial public offering. The fair value
of these warrants is not material to the financial statements.
F-19
<PAGE> 92
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
In 1997, in conjunction with the issuance of Series C preferred stock,
Women.com issued fully exercisable nontransferable warrants to purchase
1,775,330 shares of Series C preferred stock at a price of $3.04 per share.
Warrants for 887,665 shares expire in August 2000 or upon an initial public
offering and warrants for 887,665 shares expire in October 2000 and have been
valued, in aggregate, at $500,000 using the Black-Scholes option pricing model.
In 1998, in conjunction with a financing arrangement, Women.com issued to
Imperial Bank fully exercisable warrants to purchase 8,224 shares of Series D
preferred stock at an exercise price of $3.29 per share. The warrants expire
April 9, 2003. Women.com valued the warrant using the Black-Scholes option
pricing model. The fair value was recorded as a discount to the amount borrowed
and is being amortized to interest expense.
NOTE 9 -- STOCKHOLDERS' EQUITY
COMMON STOCK
Each share of common stock has the right to one vote. The holders of common
stock are also entitled to receive dividends whenever funds are legally
available and when declared by the Board of Directors, subject to the prior
rights of holders of all classes of stock at the time outstanding having
priority rights as to dividends.
At December 31, 1998, the Company had reserved shares of common stock for
future issuance as follows (in thousands):
<TABLE>
<S> <C>
Convertible preferred stock................................. 13,438
Warrants.................................................... 2,067
Stock option plan........................................... 3,693
------
19,198
======
</TABLE>
COMMON STOCK WARRANTS
In February 1996, in conjunction with a facility lease agreement, Women.com
issued fully exercisable and transferable warrants to purchase 21,357 shares of
common stock at a price of $0.13 per share. These warrants, which were granted
at the fair market value of the common stock at the date of grant as determined
by the Board of Directors, expire on February 15, 2006. The fair value of these
warrants is not material to the financial statements.
In connection with its Series C preferred stock offering, Women.com issued
warrants to the investment banker to purchase up to 89,167 shares of Women.com's
common stock, at an exercise price of $3.00 per share. These warrants are fully
exercisable for a period of five years expiring in July and August 2002 or upon
an initial public offering. The fair value of these warrants is not material to
the financial statements.
F-20
<PAGE> 93
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
In connection with its Series D preferred stock offering, Women.com issued
to an investment banker warrants to purchase up to 150,703 shares of Women.com's
common stock, at an exercise price of $3.95 per share. These warrants are fully
exercisable and expire at the earlier of July 2003 or upon an initial public
offering. Women.com valued the warrants using the Black-Scholes option pricing
model. The fair value was recorded as issuance costs. Warranty activity is as
follows (in thousands):
<TABLE>
<CAPTION>
WARRANTS OUTSTANDING
----------------------------
EXERCISE
SHARES PRICE AMOUNT
------ -------- ------
<S> <C> <C> <C>
Balance, December 31, 1995............................ 21 $ .13 $ 3
Warrants granted...................................... -- --
--- ----
Balance, December 31, 1996............................ 21 3
Warrants granted...................................... 89 $3.00 267
--- ----
Balance, December 31, 1997............................ 110 270
Warrants granted...................................... 151 $3.95 496
--- ----
Balance, December 31, 1998............................ 261 766
--- ----
Balance, March 31, 1999 (unaudited)................... 261 $766
=== ====
</TABLE>
NOTE 10 -- EMPLOYEE BENEFIT PLANS
401(K) SAVINGS PLAN
Women.com's 401(k) savings plan (the "401(k) Plan") is a defined
contribution retirement plan intended to qualify under Section 401(a) and 401(k)
of the Internal Revenue Code. All full-time employees of Women.com are eligible
to participate in the 401(k) Plan pursuant to the terms of the Plan.
Contributions by Women.com are discretionary and no contributions have been made
by Women.com for the years ended December 31, 1996, 1997 and 1998 and for the
three months ended March 31, 1999.
STOCK OPTION PLAN
Under Women.com's 1994 Stock Option Plan and 1998 Equity Incentive Plan,
shares of Women.com's common stock have been reserved for the grant of stock
purchase rights and stock options to employees, directors, or consultants under
terms and provisions established by the Board of Directors. Under the terms of
the Plans, incentive options may be granted to employees, and nonstatutory
options and stock purchase rights may be granted to employees and consultants at
prices no less than 100% and 85%, respectively, of the fair market value of
Women.com's common stock at the date of grant, as determined by the Board of
Directors. The options vest at a rate of 25% or 20% per year over a period of
four or five years and expire ten years after the date of grant. In addition,
under the 1994 Stock Option Plan, Women.com has a repurchase right for shares
exercised when an employee ceases to be employed by Women.com.
F-21
<PAGE> 94
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
The following table summarizes activity under the Plans (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------
WEIGHTED
SHARES AVERAGE
AVAILABLE FOR NUMBER OF EXERCISE
GRANT SHARES PRICE AMOUNT
------------- --------- -------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1995................... 192 271 $ .13 $ 35
Additional shares reserved................. 400 -- --
Options granted............................ (502) 502 .18 91
Options canceled........................... 65 (65) .13 (8)
Options exercised.......................... -- (2) .13 (1)
------ ----- -------
Balance, December 31, 1996................... 155 706 .18 117
Additional shares reserved................. 1,100 -- --
Options granted............................ (682) 682 .37 254
Options canceled........................... 77 (77) .15 (12)
Options exercised.......................... -- (45) .13 (6)
------ ----- -------
Balance, December 31, 1997................... 650 1,266 .28 353
Additional shares reserved................. 1,850 -- --
Options granted............................ (2,111) 2,111 1.65 3,493
Options canceled........................... 202 (202) .37 (75)
Options exercised.......................... -- (73) .20 (15)
------ ----- -------
Balance, December 31, 1998................... 591 3,102 1.21 3,756
Additional shares reserved................. 5,000 -- --
Options granted............................ (1,655) 1,655 4.20 6,546
Options canceled........................... 234 (234) 3.46 (786)
Options exercised.......................... -- (320) .25 (81)
------ ----- -------
Balance, March 31, 1999 (unaudited).......... 4,170 4,203 $2.34 $ 5,885
====== ===== ===== =======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE AT
OPTIONS OUTSTANDING AT DECEMBER 31, 1998 DECEMBER 31, 1998
----------------------------------------- ----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE PRICE
- -------------- ------------ -------------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$.13 - .30 819 7.66 $ .21 484 $.20
.60 182 8.90 .60 55 .60
.80 568 9.10 .80 28 .80
1.25 - 1.50 885 9.53 1.46 -- --
2.50 - 2.75 648 9.81 2.68 -- --
----- ---
3,102 567 $.27
===== ===
</TABLE>
At December 31, 1996 and 1997, 101,792 and 274,521 shares, respectively,
were exercisable at a weighted average price of $.15 and $.17, respectively.
F-22
<PAGE> 95
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
FAIR VALUE DISCLOSURES
Women.com has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS No. 123), "Accounting for
Stock-Based Compensation." Women.com, however, continues to apply APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations
in accounting for its plans.
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted average assumptions used
for grants:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate......................... 6.09% 5.84% 5.00%
Expected life................................... 5 years 5 years 5 years
Dividend yield.................................. -- -- --
</TABLE>
The weighted average fair value of options granted in 1996, 1997 and 1998
are $0.19, $0.37 and $3.11, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options's vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Net loss attributable to common stockholders..... $(2,987) $(6,612) $(13,615)
======= ======= ========
Net loss -- FAS 123 adjusted..................... $(2,990) $(6,627) $(13,862)
======= ======= ========
Net loss per share-as reported (Note 2)
Basic and diluted.............................. $ (4.26) $ (9.15) $ (10.52)
======= ======= ========
Net loss per share -- FAS 123 adjusted
Basic and diluted.............................. $ (4.26) $ (9.18) $ (10.71)
======= ======= ========
</TABLE>
The effects of applying SFAS No. 123 in this pro forma disclosure may not
be indicative of future amounts. Additional awards in future years are
anticipated.
STOCK-BASED COMPENSATION
In connection with certain stock option grants during the year ended
December 31, 1998, Women.com recorded stock-based compensation totaling $3.1
million, which is being amortized in accordance with FASB Interpretation No. 28
over the vesting periods of the related options, which is generally four years.
Stock-based compensation amortization recognized during the year ended December
31, 1998 totaled $1,170,000. An additional $1,881,000 of unearned stock-based
compensation has been recorded for the three months ended March 31, 1999.
Amortization of the total stock-based compensation during the three months ended
March 31, 1999 totaled $612,000. If the stock-based compensation for the year
ended December 31, 1998 and the three months ended March 31, 1999 had
F-23
<PAGE> 96
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
been allocated across the relevant functional expense categories within
operating expenses, it would be allocated as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, -------------------
1998 1998 1999
------------ ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Production, product and technology............. $ 396 $ 61 $145
Sales and marketing............................ 220 31 195
General and administrative..................... 554 65 272
------ ---- ----
$1,170 $157 $612
====== ==== ====
</TABLE>
NOTE 11 -- INCOME TAXES
The components of the net deferred tax asset as of December 31, 1996, 1997
and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Net operating loss carryforwards.................. $ 1,546 $ 2,844 $ 7,034
Deferred revenue.................................. -- 569 306
Other............................................. 49 85 483
------- ------- -------
1,595 3,498 7,823
Less valuation allowance.......................... (1,595) (3,498) (7,823)
------- ------- -------
Net deferred tax asset.................. $ -- $ -- $ --
======= ======= =======
</TABLE>
Women.com has established a valuation allowance to the extent of its
deferred tax asset due to the uncertainty that the benefit may not be realized
in the future.
At December 31, 1998, Women.com had federal and state net operating loss
carryforwards of approximately $19 million and $9 million, respectively,
available to offset future regular and alternative minimum taxable income.
Women.com's federal net operating loss carryforwards will expire in the years
2011 and 2013. For state tax purposes, the net operating loss carryforwards will
expire in the years 2001 and 2003.
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. Women.com may have had an ownership change which may
limit the utilization of these carryforwards.
NOTE 12 -- RELATED PARTIES
In 1998, Women.com issued for cash 911,855 shares of Series D preferred
stock to a customer. Total revenues from this customer in 1996, 1997 and 1998
were $3,300, zero and $167,000, respectively. Receivable due from this customer
at December 31, 1997 and 1998 was zero and $125,000, respectively.
In 1998, Women.com issued 33,000 shares of Series D preferred stock to an
officer of Women.com's recruiting service provider, who had been granted 41,119
shares of Series C preferred stock. Total
F-24
<PAGE> 97
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE THREE MONTHS
ENDED MARCH 31, 1999 IS UNAUDITED)
expense incurred for this party in 1996, 1997 and 1998 were zero, $63,502 and
$133,000, respectively. Payable due to the officer at December 31, 1997 and 1998
was zero and $17,000, respectively.
NOTE 13 -- SUBSEQUENT EVENTS
OFFERING OF LLC UNITS
On May 7, 1999, 2,000,000 units of Women.com Networks LLC were issued at a
price of $10.00 per unit which will convert to 2,000,000 shares of common stock
upon the initial public offering.
EMPLOYEE STOCK PURCHASE PLAN
In May 1999, the Board approved the Employee Stock Purchase Plan covering
an aggregate of 1,000,000 shares of Common Stock. The Employee Stock Purchase
Plan will become effective on the effective date of the initial public offering
and is intended to qualify as an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code of 1986, as amended.
F-25
<PAGE> 98
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
The Hearst Corporation
We have audited the accompanying consolidated balance sheets of Certain
Operations of the New Media & Technology Division of The Hearst Corporation (the
"Unit") as of December 31, 1998 and 1997, and the related consolidated
statements of operations and cash flows for each of the three years in the
period ended December 31, 1998. Our audits also included the financial statement
schedule listed in Item 16(b) herein. These consolidated financial statements
and financial statement schedule are the responsibility of the Unit's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
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.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Unit at December 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
The accompanying consolidated financial statements and financial statement
schedule have been prepared from the separate records maintained by the Unit and
may not necessarily be indicative of the conditions that would have existed or
the results of operations if the Unit had been operated as an unaffiliated
company. Portions of certain expenses represent allocations made from The Hearst
Corporation.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 29, 1999
F-26
<PAGE> 99
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 23,508 $ --
Accounts receivable, net of allowance for doubtful
accounts of $79,655 and $21,114 in 1998 and 1997,
respectively........................................... 1,216,094 652,701
Prepaid expenses.......................................... 154,751 31,345
----------- -----------
Total current assets.............................. 1,394,353 684,046
----------- -----------
Property, plant and equipment:
Furniture and fixtures.................................... 515,016 369,768
Computer equipment........................................ 4,127,939 3,422,417
Leasehold improvements.................................... 475,174 475,174
Less accumulated depreciation and amortization............ (3,595,579) (2,572,186)
----------- -----------
Property, plant and equipment, net................ 1,522,550 1,695,173
Other Assets................................................ 540,887 125,000
Goodwill.................................................... 4,760,389 --
----------- -----------
Total assets................................................ $ 8,218,179 $ 2,504,219
=========== ===========
LIABILITIES AND DUE TO PARENT COMPANY AND AFFILIATES
Current liabilities:
Accounts payable.......................................... $ 108,446 $ 96,160
Accrued liabilities (Note 4).............................. 2,077,015 1,304,722
Other current liabilities................................. 60,218 96,170
Deferred advertising revenue.............................. 137,750 16,967
----------- -----------
Total current liabilities......................... 2,383,429 1,514,019
Other long-term liabilities................................. 570,873 62,727
Commitments and contingencies
(Note 9)
Due to parent company and affiliates........................ 5,263,877 927,473
----------- -----------
Total liabilities and due to parent company and
affiliates................................................ $ 8,218,179 $ 2,504,219
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE> 100
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION
OF THE HEARST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Net revenues.................................. $ 2,957,387 $ 1,895,715 $ 1,278,572
Operating expenses:
Production, product and technology.......... 8,095,577 4,997,679 4,254,427
Sales and marketing......................... 8,625,079 5,945,733 3,528,495
General and administration.................. 969,616 878,203 989,936
------------ ----------- -----------
Net loss...................................... $(14,732,885) $(9,925,900) $(7,494,286)
============ =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE> 101
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION
OF THE HEARST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net loss.................................... $(14,732,885) $(9,925,900) $(7,494,286)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization of
property, plant and equipment.......... 1,105,301 1,152,941 906,023
Provision for doubtful accounts.......... 58,541 21,114 --
Changes in operating assets and
liabilities:
Accounts receivable.................... (476,659) (366,543) (307,272)
Prepaid expenses....................... (123,406) 19,661 (10,366)
Other assets........................... (549,383) (150,000) --
Accounts payable....................... (54,720) 93,911 (561,501)
Accrued liabilities.................... 771,654 265,316 593,862
Other liabilities...................... 472,194 36,833 18,782
Deferred advertising revenue........... 120,783 (28,333) 45,300
------------ ----------- -----------
Net cash used in operating
activities....................... (13,408,580) (8,881,000) (6,809,458)
------------ ----------- -----------
Investing activities:
Purchases of property, plant and
equipment................................ (756,369) (860,346) (501,264)
Payments for acquisition.................... (4,880,832) -- --
------------ ----------- -----------
Net cash used in financing
activities....................... (5,637,201) (860,346) (501,264)
------------ ----------- -----------
Financing activities -- Due to parent company
and affiliates.............................. 19,069,289 9,741,346 7,310,722
Change in cash and
cash equivalents............................ 23,508 -- --
Cash and cash equivalents, beginning of
year........................................ -- -- --
------------ ----------- -----------
Cash and cash equivalents, end of year........ $ 23,508 $ -- $ --
============ =========== ===========
SUPPLEMENTAL INFORMATION:
Business acquired:
Fair value of assets acquired............... $ 4,962,937
Liabilities assumed......................... 82,105
------------
Cash paid for business acquired............. $ 4,880,832
============
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE> 102
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
The accompanying consolidated financial statements include the operations
of the HomeArts Unit ("HomeArts") of the New Media & Technology Division (the
"Division") of The Hearst Corporation (the "Corporation"), certain property,
plant and equipment of Hearst Leasing, Co., a subsidiary of Hearst
Communications, Inc., a subsidiary of the Corporation and certain property,
plant and equipment of the Division, for all years presented and the operations
of the Astronet Unit ("Astronet") of the Division of the Corporation for the
period December 24, 1998 to December 31, 1998, which are subsequent to the date
of acquisition, (collectively the "Unit"). Such consolidated financial
statements have been prepared from the separate records maintained by the Unit
and may not necessarily be indicative of the conditions that would have existed
or the results of operations if the Unit had been operated as an unaffiliated
company. Portions of certain expenses represent allocations made from The Hearst
Corporation (see Note 6). In addition, it is the Corporation's present intention
to continue to provide funding to the Unit for working capital and operations.
Based upon regular assessments of the Unit's operations performed by key
management, the Corporation has determined that its reportable segment is online
advertising.
HomeArts is a women's lifestyle network site on the World Wide Web that
provides extensive information on every aspect of a woman's life: family, self,
career, food, finance, health, relationships, and home. The HomeArts internet
site provides articles from popular magazines of the Corporation, and HomeArts
sells advertising messages for business, links and other on line service
marketing tools (including but not limited to split-screen sponsorship, program
sponsorship, integrated advertising) to a variety of customers.
Astronet is the largest astrology site on the Internet. In addition to
daily, weekly, and monthly horoscopes from some of the world's most renowned
sources, Astronet provides cosmic views on a wide variety of subjects.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES
CONCENTRATION OF CREDIT RISK
The Unit performs ongoing credit evaluations of its customers and generally
does not require collateral. Although the Unit maintains an allowance for
potential credit losses that it believes to be adequate, the loss of a
significant account could materially affect its operating results and financial
condition. One customer represented approximately 8%, 19% and 15% of the Unit's
net revenues for the years ended December 31, 1998, 1997 and 1996, respectively.
One customer represented approximately 13% and 21% of accounts receivable as of
December 31, 1998 and 1997, respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are generally
calculated on the straight-line method over the estimated useful lives of the
assets ranging from 3 to 8 years (or lease terms, whichever is shorter).
GOODWILL
Goodwill resulting from an acquisition is recorded based upon the excess of
the purchase price over the net assets acquired. Amortization is calculated on
the straight-line method over 40 years. The
F-30
<PAGE> 103
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
recoverability of the carrying value of the excess purchase price over the net
assets acquired is evaluated quarterly to determine if an impairment in value
has occurred. At December 31, 1998, it has been determined that there has been
no impairment.
NET REVENUES
Revenues are stated net of commissions and provisions for uncollectible
receivables and are recognized on a prorated basis over the period of display of
the advertisement on the internet site. Amounts received in advance of providing
advertisements are deferred until such time that they are displayed on the
internet site.
INCOME TAXES
The Unit is included in the Corporation's consolidated Federal, state and
local income tax returns. The Unit's pro rata share of the Corporation's
consolidated income tax liabilities or tax assets are allocated to the Unit on a
separate return basis. Federal income taxes payable are paid directly to the
Corporation. In accordance with Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, deferred income tax assets and liabilities are
measured based upon the difference between the financial accounting and tax
bases of assets and liabilities. A valuation allowance is recorded when it is
more likely than not that the net deferred tax asset will not be recovered in
the future. No deferred tax assets have been recorded for the Unit's operating
losses because the Unit is part of a division of the Corporation and any such
losses would be recorded at the Corporation level.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Significant accounting estimates used in the preparation of
the Unit's financial statements include estimates of allowance for uncollectible
accounts and accrued liabilities and payables. In management's opinion, actual
results are not expected to vary materially from the estimates and assumptions
used in preparing these financial statements.
CASH FLOWS
For purposes of the statements of consolidated cash flows, the Unit
considers all highly liquid debt instruments in which it invests and which have
original maturity of three months or less to be short-term investments.
3. ACQUISITIONS
On December 24, 1998, the Corporation acquired Astronet, Inc. ("Astronet"),
an online astrology site, for approximately $5,000,000. The purchase price and
related acquisition costs have been allocated to the acquired assets and
liabilities based upon their fair market values. The excess of the purchase
price over the net fair market value of the tangible assets acquired and
liabilities assumed was allocated to goodwill. The fair value of Astronet's net
assets have been included in the accompanying consolidated financial statements
as a capital contribution from the Corporation.
F-31
<PAGE> 104
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following unaudited pro forma information presents the results of
operations of the Unit as if the acquisition of Astronet Inc. had taken place on
January 1, 1998 and 1997, respectively, and after giving effect to purchase
accounting adjustments.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Net revenues................................. $ 4,403,478 $ 2,895,986
Operating expenses........................... 19,768,538 13,574,825
------------ ------------
Net loss..................................... $(15,365,060) $(10,678,839)
============ ============
</TABLE>
The acquisition has been accounted for by the purchase method. The
preliminary purchase cost allocations are subject to adjustment when additional
information concerning asset and liability valuations are obtained. The final
asset and liability fair values may differ from those set forth on the
accompanying consolidated balance sheet at December 31, 1998; however, the
changes are not expected to have a material effect on the consolidated financial
statements of the Unit. The consolidated financial statements include the
operating results of this acquisition subsequent to the date of acquisition.
4. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1998 and 1997 consist of the following:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Payroll, benefits and related costs.................... $ 166,411 $ 374,171
Accrued payables....................................... 149,278 128,640
Accrued marketing...................................... 1,154,070 308,863
Accrued bonuses........................................ 425,169 395,351
Accrued pension cost................................... 50,531 42,873
Accrued insurance...................................... 10,428 14,999
Other accrued liabilities.............................. 121,128 39,825
---------- ----------
$2,077,015 $1,304,722
========== ==========
</TABLE>
5. INCOME TAXES
Deferred income tax assets at December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Tax basis versus book basis depreciation.............. $ 97,948 $ 165,739
Allowance for doubtful accounts and others............ 111,792 155,359
Deferred rent......................................... 878 21,954
--------- ---------
Total deferred income tax assets........................ 210,618 343,052
Less valuation allowance................................ (210,618) (343,052)
--------- ---------
Net deferred tax asset.................................. $ -- $ --
========= =========
</TABLE>
The Unit has established a valuation allowance to the extent of deferred
tax assets, since it is more likely than not that the benefit may not be
realized in the future.
F-32
<PAGE> 105
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
Certain management services are provided to the Unit by the Corporation.
Such services include data processing, payroll, legal, tax, treasury, internal
audit, risk management, and other support services. The Unit was allocated
expenses for the years ended December 31, 1998, 1997 and 1996 of $142,500,
$126,672 and $143,872, respectively, related to these services.
The Unit was charged $2,779,235, $681,199 and $-0- for software development
services rendered by the Division during 1998, 1997 and 1996, respectively.
Allocated expenses are based on the Corporation's estimate of expenses
related to the services provided to the Unit in relation to those provided to
other units, divisions or subsidiaries of the Corporation. Management believes
that these allocations were made on a reasonable basis. However, the allocations
are not necessarily indicative of the level of expenses that might have been
incurred had the Unit contracted directly with third parties.
The Unit advertised its internet site in various magazines of the
Corporation and was charged approximately $3,039,467, $2,504,000 and $789,000
for such services in 1998, 1997 and 1996, respectively. In addition, the Unit
provided advertising to certain magazines of the Corporation in the amount of
$206,826, $162,483 and $34,663 in 1998, 1997 and 1996, respectively.
Payment of trade payables and other disbursements are processed through a
cash concentration account maintained by the Corporation. Billings to customers
are made as part of the services provided to the Unit by the Corporation. All
receipts from customers are collected in a divisional lock box and then
transferred to the Corporation.
The activity in the Due to Parent Company and Affiliates account for the
years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year............ $ 927,473 $ 1,112,027 $ 1,295,591
Net loss.............................. (14,732,885) (9,925,900) (7,494,286)
Transfers from the Corporation and
affiliated companies -- net......... 19,069,289 9,741,346 7,310,722
------------ ----------- -----------
Balance, end of year.................. $ 5,263,877 $ 927,473 $ 1,112,027
============ =========== ===========
</TABLE>
The Corporation does not assess interest to the Unit on its outstanding
intercompany balances.
In accordance with the requirements of SFAS No. 107, Disclosures About Fair
Value of Financial Instruments, the Unit believes that it is not practicable to
estimate the current fair value of the amounts due to the Corporation because of
the related party nature of the transactions.
7. INCENTIVE COMPENSATION PLAN
The Corporation has a long-term incentive compensation plan that covers one
employee of the Unit who is considered by management to be making substantial
contributions to the growth and profitability of the Unit and the Corporation.
Grants awarded under this plan cover three-year operating cycles, with cash
payouts made after the close of each three-year cycle based upon growth in
operating performance.
F-33
<PAGE> 106
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The annual amount charged to expense, which amounted to $ 66,195 in 1998,
$35,592 in 1997 and $0 in 1996, is determined by estimating the aggregate
expense for each open three-year cycle.
8. PENSION AND EMPLOYEE SAVINGS PLANS
Certain employees of the Unit are eligible for participation in the
Corporation's noncontributory defined benefit plan. The Unit's pension cost for
this plan is allocated to the Unit through the Due to Parent Company and
Affiliates account. The cost of this plan was $52,641 in 1998, $20,036 in 1997
and $53,866 in 1996.
Substantially all of the Unit's employees are eligible to participate in
the Corporation's defined contribution plan. The Unit's expense recognized for
this plan was $41,744 in 1998, $30,373 in 1997 and $20,771 in 1996.
9. COMMITMENTS AND CONTINGENCIES
HomeArts has an agreement relating to a noncancelable operating lease which
expires on January 15, 2000, in connection with its office space at Four
Columbus Circle in New York City. Astronet has an agreement relating to a
noncancelable operating lease which expires on October 31, 1999 in connection
with its office space in New Canaan, CT and other operating leases relating to
various pieces of equipment that have expiration dates through August 2001.
Additionally, HomeArts has employment contracts with three key employees. Future
minimum payments under the terms of these agreements at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
OPERATING EMPLOYMENT
LEASES CONTRACTS
--------- ----------
<S> <C> <C>
1999............................................. $419,372 $1,400,833
2000............................................. 19,278 650,833
2001............................................. 2,183 --
-------- ----------
$440,833 $2,051,666
======== ==========
</TABLE>
Rent expense for the operating lease was $314,806 for the year ended
December 31, 1998 and $313,782 for the years ended December 31, 1997 and 1996.
In the normal course of business, the Unit is subject to various claims and
lawsuits. In the opinion of the Unit's management, liabilities, if any, arising
from these matters will not have a material effect on the Unit's consolidated
financial statements.
10. SUBSEQUENT EVENTS
On January 27, 1999, Hearst HomeArts, Inc. ("Hearst") and Women.com
Networks ("Women.com") signed an agreement to form a limited liability company
and named it Women.com Networks LLC (the "Company"). Under the terms of this
agreement, Hearst will create a new wholly-owned subsidiary (the "Hearst
Subsidiary") and contribute HomeArts, $5,000,000 in cash and certain other
assets of Hearst, including certain property, plant and equipment of Hearst
Leasing, Co. and certain property, plant and equipment of the New Media &
Technology Division, to the Hearst Subsidiary. The Hearst Subsidiary will
contribute its assets and Women.com will contribute its assets and liabilities
to the Company subject to certain adjustments at the time of closing, including
a payment
F-34
<PAGE> 107
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
by the Hearst Subsidiary equal to the difference between the amount by which the
Women.com cash balance exceeds the Hearst Subsidiary cash balance. Such payment
is expected to approximate $10,000,000. In addition, the Hearst Subsidiary will
purchase and contribute to the Company an agreed-upon amount of television and
cable advertising time on behalf of the Company as well as contribute print
promotions in magazines of the Corporation. Both Women.com and Hearst will
receive an approximately 50% interest in the Company for their respective
contributions.
******
F-35
<PAGE> 108
WOMEN.COM NETWORKS, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
Effective January 29, 1999, Women.com Networks entered into a joint venture
agreement with Hearst HomeArts Inc. ("HomeArts"), a subsidiary of The Hearst
Corporation. Under the terms of the agreement, Women.com Networks and HomeArts
contributed their businesses to Women.com Networks LLC. Since the economic
substance of the transaction was not consistent with the accounting definition
of joint venture, the transaction has been accounted for as the purchase of
HomeArts by Women.com Networks. Under the terms of the agreement Women.com
Networks and HomeArts each have fifty percent voting interest, except that,
Women.com Networks has the sole authority to initiate an initial public
offering. In addition, senior management of the joint venture is comprised
solely of Women.com Networks management. Therefore, Women.com was determined to
be the accounting acquirer pursuant to Staff Accounting Bulletin Topic 2-A2. The
acquisition has been accounted for using the purchase method of accounting and
accordingly the purchase price has been allocated to the tangible and intangible
assets acquired and liabilities assumed on the basis of their respective fair
values on the acquisition date. The fair value of net assets acquired was
determined by an independent appraiser.
The allocation of the purchase price is summarized below (in thousands):
<TABLE>
<S> <C>
Intangibles................................................. $14,078
Goodwill.................................................... 47,951
Prepaid advertising......................................... 5,680
Property and equipment...................................... 2,044
Net current assets.......................................... 16,685
-------
Total purchase price.............................. $86,438
=======
</TABLE>
The acquisition has been structured as a tax free exchange of stock,
therefore, the differences between the recognized fair values of acquired
assets, including tangible assets, and their historical tax bases are not
deductible for tax purposes.
Prior to entering into the joint venture agreement with Women.com, The
Hearst Corporation acquired Astronet Inc, an online astrology site. Astronet
Inc. ("Astronet") was part of the business contributed by HomeArts to Women.com
Networks LLC. The acquisition was accounted for using the purchase method and
the operations of Astronet have been included in the historical financial
statements of HomeArts from December 24, 1998, the date of acquisition. The
total purchase price was approximately $5,000,000 of which approximately
$200,000 was allocated to net tangible assets and $4,800,000 was allocated to
intangibles and goodwill.
The following unaudited pro forma combined financial statements of
operations for the year ended December 31, 1998 and the three months ended March
31, 1999 gives effect to the acquisition of HomeArts and HomeArts acquisition of
Astronet as if they had occurred on January 1, 1998, by combining the results of
operations of HomeArts and Astronet with results of operations of Women.com for
the respective periods.
The unaudited pro forma combined statements of operations are not
necessarily indicative of the operating results that would have been achieved
had the transactions been in effect as of the beginning of the periods presented
and should not be construed as being representative of future operating results.
The historical financial statements of Women.com and HomeArts are included
elsewhere in this Prospectus and the unaudited pro forma financial information
presented herein should be read in conjunction with those financial statements
and related notes. The historical financial statements of Astronet are not
included in this prospectus.
F-36
<PAGE> 109
WOMEN.COM NETWORKS, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------------------
HOMEARTS WOMEN.COM
HOMEARTS ASTRONET ADJUSTMENTS PRO FORMA WOMEN.COM ADJUSTMENTS PRO FORMA
-------- -------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues................ $ 2,957 $1,446 $ -- $ 4,403 $ 7,247 $ -- $ 11,650
-------- ------ ------- -------- -------- -------- --------
Operating expenses:
Production, product and
technology.............. 8,095 1,192 -- 9,287 5,728 -- 15,015
Sales and marketing....... 8,625 357 -- 8,982 12,042 -- 21,024
General and
administrative.......... 970 410 -- 1,380 1,374 -- 2,754
Stock-based
compensation............ -- -- -- -- 1,170 -- 1,170
Amortization of acquired
intangibles............. -- 119 1,468 1,587 517 19,410 21,514
-------- ------ ------- -------- -------- -------- --------
Total operating
expenses................ 17,690 2,078 1,468 21,236 20,831 19,410 61,477
-------- ------ ------- -------- -------- -------- --------
Loss from operations........ (14,733) (632) (1,468) (16,833) (13,584) (19,410) (49,827)
Other income, net........... -- -- -- -- 596 -- 596
Interest expense............ -- -- -- -- (57) -- (57)
-------- ------ ------- -------- -------- -------- --------
Net loss.................... (14,733) (632) (1,468) (16,833) (13,045) (19,410) (49,288)
Dividend accretion on
mandatorily redeemable
convertible preferred
stock..................... -- -- -- -- (570) -- (570)
-------- ------ ------- -------- -------- -------- --------
Net loss attributable to
common stockholders....... $(14,733) $ (632) $(1,468) $(16,833) $(13,615) $(19,410) $(49,858)
======== ====== ======= ======== ======== ======== ========
Basic and diluted pro forma
net loss per share........ $ (1.70)
========
Shares used in computing pro
forma basic and diluted
net loss per share........ 29,347
========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
----------------------------------------------
WOMEN.COM HOMEARTS ADJUSTMENTS PRO FORMA
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues............................................... $ 3,413 $ 250 $ -- $ 3,663
-------- ------- ------- --------
Operating expenses:
Production, product and technology....................... 3,848 671 -- 4,519
Sales and marketing...................................... 6,568 752 -- 7,320
General and administrative............................... 1,968 28 -- 1,996
Stock-based compensation................................. 612 -- -- 612
Amortization of acquired intangibles..................... 3,671 -- 1,746 5,417
-------- ------- ------- --------
Total operating expenses................................. 16,667 1,451 1,746 19,864
-------- ------- ------- --------
Loss from operations....................................... (13,254) (1,201) (1,746) (16,201)
Other income, net.......................................... 176 -- -- 176
Interest expense........................................... (17) -- -- (17)
-------- ------- ------- --------
Net loss................................................... (13,095) (1,201) (1,746) (16,042)
Dividend accretion on mandatorily redeemable convertible
preferred stock.......................................... (95) -- -- (95)
-------- ------- ------- --------
Net loss attributable to common stockholders............... $(13,190) $(1,201) $(1,746) $(16,137)
======== ======= ======= ========
Basic and diluted pro forma net loss per share............. $ (.49)
========
Shares used in computing pro forma basic and diluted net
loss per share........................................... 32,851
========
</TABLE>
F-37
<PAGE> 110
WOMEN.COM NETWORKS, INC.
NOTES TO PRO FORMA COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
The following adjustments were applied to Women.com's historical financial
statements and those of HomeArts and Astronet to arrive at the pro forma
financial information.
(A) The HomeArts and Astronet historical financial statements for 1998
were adjusted to record the amortization of intangible assets related
to HomeArt's acquisition of Astronet as if the transaction occurred
January 1, 1998.
(B) The pro forma HomeArts and Women.com financial statements for 1998
and 1999 were adjusted to record the amortization of intangible
assets and goodwill related to Women.com's acquisition of HomeArts as
if the transaction occurred January 1, 1998.
(C) Pro forma basic and diluted net loss per share for the year ended
December 31, 1998 and the three months ended March 31, 1999, is
computed using the weighted average number of common shares
outstanding, including the pro forma effects of the automatic
conversion of Women.com's convertible preferred stock effective upon
the closing of this Offering as if such conversion occurred on
January 1, 1998 or at date of original issuance, if later and the
shares issued in conjunction with the acquisition as if such shares
were outstanding from January 1, 1998, for the year ended December
31, 1998 and for the three months ended March 31, 1999.
F-38
<PAGE> 111
women.com networks logo
<PAGE> 112
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
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 12,788
NASD Filing fee............................................. 5,100
Nasdaq National Market listing fee.......................... 90,000
Printing and engraving expenses............................. 200,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 325,000
Blue sky fees and expenses.................................. 10,000
Transfer agent fees......................................... 10,000
Miscellaneous fees and expenses............................. 7,112
----------
Total....................................................... $1,160,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Delaware law, Article VI of our Restated Certificate of
Incorporation provides that limited exceptions; we are required to advance
expenses, as incurred, to our directors and officers in connection with a legal
proceeding to the fullest extent permitted by Delaware law, subject to certain
very limited exceptions; and (4) the rights conferred in the Restated
Certificate of Incorporation are not exclusive.
Section 145 of the Delaware General Corporation Law authorizes a
corporation's board of directors to grant indemnity to directors and officers in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities, including reimbursement for expenses incurred,
arising under the Securities Act of 1933.
As permitted by Delaware law, our Restated Certificate of Incorporation
includes a provision that eliminates the personal liability of our directors for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to us or our
stockholders; (2) for acts of omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) under Section 174 of
Delaware General Corporation Law regarding payments of dividends, stock
purchases or redemptions which are unlawful; or (4) for any transaction from
which the director derived an improper personal benefit. This provision in the
Restated Certificate of Incorporation does not eliminate the directors'
fiduciary duty, and in appropriate circumstances equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to us for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
As permitted by Delaware law, we intend to purchase insurance covering our
directors and officers against liability asserted against them in their capacity
as such. Reference is made to the Underwriting
II-1
<PAGE> 113
Agreement contained in Exhibit 1.1 hereto, which contains provisions
indemnifying our officers and directors against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since March 31, 1996, the Registrant has issued and sold the following
unregistered securities:
(1) In June 1997, Women.com Networks, a California corporation, issued
and sold a stock subscription warrant to purchase 49,167 shares of common
stock at a price of $3.00 per share to Volpe Brown Whelan & Company, LLC.
This warrant may be exercised to purchase up to 49,167 shares of common
stock of the Registrant upon the closing of the merger of Hearst HomeArts,
Inc., a Delaware corporation, and Women.com Networks, a California
corporation.
(2) In July 1997, Women.com Networks, a California corporation, issued
and sold an aggregate of 995,342 shares of Series C Preferred Stock at a
price of $3.04 per share to a group of accredited investors for an
aggregate purchase price of $3,025,839. Women.com Networks paid Volpe Brown
Whelan & Company, LLC a commission of $552,499 in connection with such
issuance. Such shares of Series C Preferred Stock will be converted into
995,342 shares of common stock of the Registrant upon the closing of the
merger of Hearst HomeArts, Inc., a Delaware corporation, and Women.com
Networks, a California corporation.
(3) In July and August 1997, Women.com Networks, a California
corporation, issued and sold an aggregate of 2,631,580 shares of Series C
Preferred Stock at a price of $1.90 per share to a group of accredited
investors for an aggregate purchase price of $5,000,002. Women.com Networks
paid Volpe Brown Whelan & Company, LLC a commission as referenced in (2)
above in connection with such issuance. Such shares of Series C Preferred
Stock will be converted into 2,631,580 shares of common stock of the
Registrant upon the closing of the merger of Hearst HomeArts, Inc., a
Delaware corporation, and Women.com Networks, a California corporation
(4) In July 1997, Women.com Networks, a California corporation, issued
a stock subscription warrant to purchase 887,665 shares of Series C
Preferred Stock at a price per share of $3.04 to MediaOne Interactive
Services, Inc. This warrant may be exercised to purchase up to 887,665
shares of common stock of the Registrant upon the closing of the merger of
Hearst HomeArts, Inc., a Delaware corporation, and Women.com Networks, a
California corporation.
(5) In August 1997, Women.com Networks, a California corporation,
issued a stock subscription warrant to purchase 40,000 shares of common
stock at a price of $3.00 per share to Volpe Brown Whelan & Company, LLC.
This warrant may be exercised to purchase up to 40,000 shares of common
stock of the Registrant upon the closing of the merger of Hearst HomeArts,
Inc., a Delaware corporation, and Women.com Networks, a California
corporation.
(6) In August 1997, Women.com Networks, a California corporation,
issued and a stock subscription warrant to purchase 887,665 shares of
Series C Preferred Stock at purchase price of $3.04 per share to HC Crown
Corp. This warrant may be exercised to purchase up to 887,665 shares of
common stock of the Registrant upon the closing of the merger of Hearst
HomeArts, Inc., a Delaware corporation, and Women.com Networks, a
California corporation.
(7) In April 1998, Women.com Networks, a California corporation,
issued and a stock subscription warrant to purchase 8,224 shares of Series
D Preferred Stock at a price of $3.29 per share to Imperial Bank. This
warrant may be exercised to purchase up to 8,224 shares of common stock of
the Registrant upon the closing of the merger of Hearst HomeArts, Inc., a
Delaware corporation, and Women.com Networks, a California corporation.
(8) In April 1998, Women.com Networks, a California corporation,
issued 675,000 shares of common stock to Raymond B. Kropp, M.D. and
Victoria P. Kropp, the shareholders of Wild Wild
II-2
<PAGE> 114
Web, Incorporated in exchange for substantially all of the assets of Wild
Wild Web, Incorporated. Such shares of common stock will be converted into
675,000 shares of common stock of the Registrant upon the closing of the
merger of Hearst HomeArts, Inc., a Delaware corporation, and Women.com
Networks, a California corporation.
(9) In June 1998, Women.com Networks, a California corporation, issued
and sold a stock subscription warrant to purchase 150,703 shares of common
stock at a purchase price of $3.95 per share to BT Alex. Brown
Incorporated. This warrant may be exercised to purchase up to 150,703
shares of common stock of the Registrant upon the closing of the merger of
Hearst HomeArts, Inc., a Delaware corporation, and Women.com Networks, a
California corporation.
(10) In June and July 1998, Women.com Networks, a California
corporation, issued and sold an aggregate of 6,515,974 shares of Series D
Preferred Stock at a price of $3.29 per share to a group of accredited
investors for an aggregate purchase price of $21,437,554. Women.com
Networks paid BT Alex. Brown Incorporated a commission of $1,267,268 in
connection with such issuance. Such shares of Series D Preferred Stock will
be converted into 6,515,974 shares of common stock of the Registrant upon
the closing of the merger of Hearst HomeArts, Inc., a Delaware corporation,
and Women.com Networks, a California corporation.
(11) In January 1999, the Registrant issued shares of common stock to
Hearst Communications, Inc. Upon the closing of the merger between Hearst
HomeArts, Inc., a Delaware corporation, and Woman.com Networks, a
California corporation, such shares will split into 18,825,171 shares of
common stock of the Registrant.
(12) In March and April 1999, Women.com Networks, a California
corporation issued an aggregate of 78,304 shares of common stock pursuant
to stock awards granted under the Amended and Restated 1998 Equity
Incentive Plan in consideration for services rendered. Such shares of
common stock will be converted into 78,304 shares of common stock of the
Registrant upon the closing of the merger of Hearst HomeArts, Inc., a
Delaware corporation, and Women.com Networks, a California corporation.
(13) In May 1999, Women.com Networks, a California corporation, issued
924,000 shares of Series E Preferred Stock at a price of $10.00 per share
to existing, accredited shareholders of the company for an aggregate
purchase price of $9,240,000. Such shares of Series E Preferred Stock will
be converted into 924,000 shares of common stock of the Registrant upon the
closing of the merger of Hearst HomeArts, Inc., a Delaware corporation, and
Women.com Networks, a California corporation. Women.com Networks paid BT
Alex. Brown Incorporated a commission of $750,000 in connection with such
issuance.
(14) During the period, the Registrant granted stock options to
employees, directors and consultants under its Amended and Restated 1994
Stock Option Plan and Amended and Restated 1998 Equity Incentive Plan
covering an aggregate of 4,788,345 shares of the Company's common stock, at
an average exercise price of $2.63. Options to purchase 542,773 shares of
common stock have been canceled or terminated. The Registrant sold an
aggregate of 370,730 shares of its common stock to employees, directors and
consultants of the Registrant for consideration in the aggregate amount of
$101,510.48 pursuant to the exercise of stock options granted under the
Amended and Restated 1994 Stock Option Plan and Amended and Restated 1998
Equity Incentive Plan.
The issuances described above in this Item 15 were deemed exempt from
registration under the Securities Act in reliance on either (1) Rule 701
promulgated under the Securities Act as offers and sales of securities pursuant
to certain compensatory benefit plans and contracts relating to compensation in
compliance with Rule 701 or (2) Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering.
II-3
<PAGE> 115
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1 Form of Agreement of Merger between Women.com Networks and
Hearst HomeArts, Inc.
3.1 Certificate of Incorporation of Hearst HomeArts, Inc.
3.2 By-Laws of Hearst HomeArts, Inc.
3.3 Form of Restated Certificate of Incorporation of the
registrant to be filed on the closing of the offering made
hereby.
3.4 Form of Amended and Restated Bylaws of the registrant to be
filed on the closing of the offering made hereby.
4.1 Reference is made to Exhibits 3.1 and 3.2 hereof.
4.2* Specimen Certificate for registrant's common stock.
4.3 Amended and Restated Investors' Rights Agreement dated May
7, 1999 by and between the Registrant, Ms. Marleen McDaniel,
Ms. Ellen Pack, holders of Women.com Networks preferred
stock and certain warrant holders of Women.com Networks.
5.1* Opinion of Cooley Godward LLP.
10.1.1 Amended and Restated 1998 Equity Incentive Plan.
10.1.2 Employee Stock Purchase Plan.
10.1.3 Amended and Restated 1994 Stock Option Plan.
10.2+ Magazine Content License and Hosting Agreement by and
between Women.com Networks LLC and Hearst Communications,
Inc. dated January 27, 1999.
10.3+ Investment Agreement by and between Women.com Networks and
Graphics International, Inc. d/b/a Hallmark Connections
dated August 19, 1997, as amended on May 7, 1998.
10.4+ Investment agreement by and between Women.com Networks and
MediaOne Interactive Services, Inc. dated July 7, 1997, as
amended on April 7, 1998.
10.5 Executive Employment Agreement by and between Women.com
Networks, Women.com Networks LLC and Marleen McDaniel dated
January 29, 1999.
10.6+ Investment Agreement by and between Rodale Press, Inc. and
Women.com Networks dated January 27, 1999.
10.7+ Letter Agreement by and between Women.com Networks and
Rodale Press, Inc. dated January 27, 1999.
10.8+ Website Agreement by and between Women.com Networks and
Rodale Press, Inc. dated May 2, 1997.
10.9 Warrant Purchase Agreement by and between Women.com Networks
and MediaOne Interactive Services, Inc. dated July 7, 1997.
10.10 Warrant Agreement by and between Women.com Networks and
MediaOne Interactive Services, Inc. dated July 7, 1997.
10.11 Lease Agreement dated November 7, 1994 and Addendum thereto
dated November 8, 1994 by and between Golden Century
Investment Company and Women.com Networks.
10.12 Amendment No. 1 to the Master Lease Agreement dated December
1, 1994 by and between Golden Century Investment Company,
Inc. and Women.com Networks. \
10.13 First Amendment to Lease Agreement dated July 27, 1997 by
and between Carramerica Realty Corporation (a successor in
interest to Golden Century Investment Company) and Women.com
Networks.
</TABLE>
II-4
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
10.14 Second Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated August 31, 1997.
10.15 Third Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated October 27, 1998.
10.16 Loan and Security Agreement between Women.com Networks and
Imperial Bank dated April 9, 1998.
10.17 Warrant Agreement by and between Women.com Networks and
Imperial Bank dated April 9, 1998.
10.18 Series C Preferred Stock Purchase Agreement by and between
Women.com Networks and the purchasers of Series C Preferred
Stock dated July 9, 1997.
10.19 Series D Preferred Stock Purchase Agreement by and between
Women.com Networks and the purchasers of Series D Preferred
Stock dated June 5, 1998.
10.20 Series E Preferred Stock Purchase Agreement by and between
Women.com Networks and the purchasers of Series E Preferred
Stock dated May 7, 1998.
10.21 Engagement Letter by and between Women.com Networks and BT
Alex. Brown Incorporated dated October 22, 1998.
10.22 Agreement of Merger and Purchase, by and among Hearst
Communications, Inc., Astronet, Inc., Hearst New Media, LLC
and certain shareholders and option holders of Astronet,
Inc. dated December 23, 1998.
10.23 Engagement Letter by and between Women.com Networks and BT
Alex. Brown Incorporated dated April 22, 1999.
10.24 Asset Purchase Agreement by and among Women.com Networks,
Wild Wild Web, Incorporated, Raymond B. Kropp and Victoria
P. Kropp dated April 2, 1998.
10.25 Fourth Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated March 24, 1999.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of attorney. Reference is made to page II-7.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Confidential treatment requested on portions of this exhibit.
(B) FINANCIAL STATEMENT SCHEDULES:
Schedule II(a) Valuation and Qualifying Accounts........................S-2
Schedule II(b) Valuation and Qualifying Accounts........................S-3
All schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the combined
financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
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.
Insofar as indemnification for liabilities arising under the Securities 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 Securities Act
and is,
II-5
<PAGE> 117
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 whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
by undertakes that:
(1) For purposes of determining any liability under the Securities
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) of
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
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-6
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Mateo,
State of California, on May 13, 1999.
WOMEN.COM NETWORKS, INC.
By: /s/ MARLEEN MCDANIEL
------------------------------------
Marleen McDaniel
Chairperson, Chief Executive Officer
and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that the persons whose signatures appear
below each severally constitutes and appoints Marleen McDaniel and Michael
Perry, and each of them, as true and lawful attorneys-in-fact and agents, with
full powers of substitution and resubstitution, for them in their name, place
and stead, in any and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement and
to sign any registration statement (and any post-effective amendments thereto)
relating to the same offering as this Registration Statement that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
they might or could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARLEEN MCDANIEL Chairperson, Chief Executive May 13, 1999
- ------------------------------------------------ Officer and President (Principal
Marleen McDaniel Executive Officer)
/s/ MICHAEL PERRY Chief Financial Officer (Principal May 13, 1999
- ------------------------------------------------ Financial Officer)
Michael Perry
/s/ NATALIE EGLESTON Director May 13, 1999
- ------------------------------------------------
Natalie Egleston
/s/ BARRY WEINMAN Director May 13, 1999
- ------------------------------------------------
Barry Weinman
/s/ WILLIAM MILLER Director May 13, 1999
- ------------------------------------------------
William Miller
</TABLE>
II-7
<PAGE> 119
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CATHLEEN BLACK Director May 13, 1999
- ------------------------------------------------
Cathleen Black
/s/ ALFRED SIKES Director May 13, 1999
- ------------------------------------------------
Alfred Sikes
/s/ NANCY LINDEMEYER Director May 13, 1999
- ------------------------------------------------
Nancy Lindemeyer
/s/ MARK MILLER Director May 13, 1999
- ------------------------------------------------
Mark Miller
</TABLE>
II-8
<PAGE> 120
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Women.com Networks, Inc.
In connection with our audits of the financial statements of Women.com
Networks, Inc. as of December 31, 1997 and 1998, and for each of the three years
in the period ended December 31, 1998, which financial statements are included
in the Prospectus, we have also audited the financial statement schedule listed
in Item 16(b) herein. In our opinion, this financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
San Jose, California
May 7, 1999
- --------------------------------------------------------------------------------
The roll-up of the limited liability company into a Delaware corporation as
described in Note 1 to the financial statements has not been consummated at May
7, 1999. When such roll-up has been consummated, we will furnish the above
report assuming that from May 7, 1999 to the effective date of such roll-up no
other events shall have occurred that would affect the accompanying financial
statement schedule.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
May 7, 1999
S-1
<PAGE> 121
SCHEDULE II(A)
WOMEN.COM NETWORKS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING ADDITIONS BALANCE AT
OF YEAR (REDUCTIONS) WRITE-OFFS END OF YEAR
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996............... $ -- $ -- $ -- $ --
Year ended December 31, 1997............... -- 47 -- 47
Year ended December 31, 1998............... 47 248 -- 295
Valuation allowance for deferred tax assets:
Year ended December 31, 1996............... 750 845 -- 1,595
Year ended December 31, 1997............... 1,595 1,903 -- 3,498
Year ended December 31, 1998............... 3,498 4,325 -- 7,823
</TABLE>
S-2
<PAGE> 122
SCHEDULE II(b)
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION
OF THE HEARST CORPORATION
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING ADDITIONS BALANCE AT
OF YEAR (REDUCTIONS) WRITE-OFFS END OF YEAR
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996............... $ -- $ -- $ -- $ --
Year ended December 31, 1997............... -- 21,114 -- 21,114
Year ended December 31, 1998............... 21,114 58,541 -- 79,655
</TABLE>
S-3
<PAGE> 123
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
1.1* Form of Underwriting Agreement.
2.1 Form of Agreement of Merger between Women.com Networks and
Hearst HomeArts, Inc.
3.1 Certificate of Incorporation of Hearst HomeArts, Inc.
3.2 By-Laws of Hearst HomeArts, Inc.
3.3 Form of Restated Certificate of Incorporation of the
registrant to be filed on the closing of the offering made
hereby.
3.4 Form of Amended and Restated Bylaws of the registrant to be
filed on the closing of the offering made hereby.
4.1 Reference is made to Exhibits 3.1 and 3.2 hereof.
4.2* Specimen Certificate for registrant's common stock.
4.3 Amended and Restated Investors' Rights Agreement dated May
7, 1999 by and between the Registrant, Ms. Marleen McDaniel,
Ms. Ellen Pack, holders of Women.com Networks preferred
stock and certain warrant holders of Women.com Networks.
5.1* Opinion of Cooley Godward LLP.
10.1.1 Amended and Restated 1998 Equity Incentive Plan.
10.1.2 Employee Stock Purchase Plan.
10.1.3 Amended and Restated 1994 Stock Option Plan.
10.2+ Magazine Content License and Hosting Agreement by and
between Women.com Networks LLC and Hearst Communications,
Inc. dated January 27, 1999.
10.3+ Investment Agreement by and between Women.com Networks and
Graphics International, Inc. d/b/a Hallmark Connections
dated August 19, 1997, as amended on May 7, 1998.
10.4+ Investment agreement by and between Women.com Networks and
MediaOne Interactive Services, Inc. dated July 7, 1997, as
amended on April 7, 1998.
10.5 Executive Employment Agreement by and between Women.com
Networks, Women.com Networks LLC and Marleen McDaniel dated
January 29, 1999.
10.6+ Investment Agreement by and between Rodale Press, Inc. and
Women.com Networks dated January 27, 1999.
10.7+ Letter Agreement by and between Women.com Networks and
Rodale Press, Inc. dated January 27, 1999.
10.8+ Website Agreement by and between Women.com Networks and
Rodale Press, Inc. dated May 2, 1997.
10.9 Warrant Purchase Agreement by and between Women.com Networks
and MediaOne Interactive Services, Inc. dated July 7, 1997.
10.10 Warrant Agreement by and between Women.com Networks and
MediaOne Interactive Services, Inc. dated July 7, 1997.
10.11 Lease Agreement dated November 7, 1994 and Addendum thereto
dated November 8, 1994 by and between Golden Century
Investment Company and Women.com Networks.
10.12 Amendment No. 1 to the Master Lease Agreement dated December
1, 1994 by and between Golden Century Investment Company,
Inc. and Women.com Networks.
10.13 First Amendment to Lease Agreement dated July 27, 1997 by
and between Carramerica Realty Corporation (a successor in
interest to Golden Century Investment Company) and Women.com
Networks.
10.14 Second Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated August 31, 1997.
10.15 Third Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated October 27, 1998.
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
10.16 Loan and Security Agreement between Women.com Networks and
Imperial Bank dated April 9, 1998.
10.17 Warrant Agreement by and between Women.com Networks and
Imperial Bank dated April 9, 1998.
10.18 Series C Preferred Stock Purchase Agreement by and between
Women.com Networks and the purchasers of Series C Preferred
Stock dated July 9, 1997.
10.19 Series D Preferred Stock Purchase Agreement by and between
Women.com Networks and the purchasers of Series D Preferred
Stock dated June 5, 1998.
10.20 Series E Preferred Stock Purchase Agreement by and between
Women.com Networks and the purchasers of Series E Preferred
Stock dated May 7, 1998.
10.21 Engagement Letter by and between Women.com Networks and BT
Alex. Brown Incorporated dated October 22, 1998.
10.22 Agreement of Merger and Purchase, by and among Hearst
Communications, Inc., Astronet, Inc., Hearst New Media, LLC
and certain shareholders and option holders of Astronet,
Inc. dated December 23, 1998.
10.23 Engagement Letter by and between Women.com Networks and BT
Alex. Brown Incorporated dated April 22, 1999.
10.24 Asset Purchase Agreement by and among Women.com Networks,
Wild Wild Web, Incorporated, Raymond B. Kropp and Victoria
P. Kropp dated April 2, 1998.
10.25 Fourth Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated March 24, 1999.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of attorney. Reference is made to page II-7.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Confidential treatment requested on portions of this exhibit.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of May __, 1999, by and between WOMEN.COM NETWORKS, a
California corporation ("Women.com"), and HEARST HOMEARTS, INC., a Delaware
corporation ("HomeArts"). Women.com and HomeArts are sometimes referred to as
the "Constituent Corporations."
The authorized capital stock of Women.com consists of ___________
(_________) shares of Common Stock, and _________ (________) shares of Preferred
Stock. The authorized capital stock of HomeArts, upon effectuation of the
transactions set forth in this Merger Agreement, will consist of One Hundred
Ninety Five Million (195,000,000) shares of Common Stock, $.001 par value.
The directors of the Constituent Corporations deem it advisable and to
the advantage of the Constituent Corporations that Women.com merge into HomeArts
upon the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Women.com shall
merge into HomeArts on the following terms, conditions and other provisions:
1. TERMS AND CONDITIONS.
1.1 MERGER. Women.com shall be merged with and into HomeArts (the
"Merger"), and HomeArts shall be the surviving corporation (the "Surviving
Corporation") effective upon the date that this Merger Agreement is filed with
the Secretary of State of Delaware (the "Effective Date").
1.2 NAME CHANGE. On the Effective Date, the name of HomeArts shall
be Women.com Networks, Inc.
1.3 SUCCESSION. On the Effective Date, HomeArts shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of Women.com, except insofar as it may be
continued by operation of law, shall be terminated and cease.
1.4 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger;
1.
<PAGE> 2
provided, however, that the liabilities of the Constituent Corporations and of
their shareholders, directors and officers shall not be affected and all rights
of creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and any claim existing or action or
proceeding pending by or against either of the Constituent Corporations may be
prosecuted to judgment as if the Merger had not taken place except as they may
be modified with the consent of such creditors and all debts, liabilities and
duties of or upon each of the Constituent Corporations shall attach to the
Surviving Corporation, and may be enforced against it to the same extent as if
such debts, liabilities and duties had been incurred or contracted by it.
1.5 COMMON STOCK OF WOMEN.COM AND HOMEARTS. On the Effective Date,
by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their shareholders, each share of Common Stock of
Women.com issued and outstanding immediately prior thereto shall be converted
into one (1) fully paid and nonassessable share of the Common Stock of HomeArts
and each share of Common Stock of HomeArts issued and outstanding immediately
prior thereto shall be cancelled and returned to the status of authorized but
unissued shares.
1.6 PREFERRED STOCK OF WOMEN.COM AND HOMEARTS. On the Effective
Date, by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their shareholders, each share of Preferred Stock of
Women.com issued and outstanding immediately prior thereto shall be converted
into one (1) fully paid and nonassessable share of Common Stock of HomeArts.
1.7 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock or of the Preferred Stock of Women.com shall be deemed for all
purposes to evidence ownership of and to represent the shares of HomeArts into
which the shares of Women.com represented by such certificates have been
converted as herein provided and shall be so registered on the books and records
of the Surviving Corporation or its transfer agents. The registered owner of any
such out-standing stock certificate shall, until such certificate shall have
been surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation or its transfer agent, have and be entitled to exercise
any voting and other rights with respect to and to receive any dividend and
other distributions upon the shares of HomeArts evidenced by such outstanding
certificate as above provided.
1.8 OPTIONS. On the Effective Date, the Surviving Corporation will
assume and continue Women.com's 1994 Stock Option Plan, 1998 Amended and
Restated Equity Incentive Plan, the 1999 Employee Stock Purchase Plan and the
outstanding and unexercised portions of all options to purchase Common Stock of
Women.com, including without limitation all options outstanding under such stock
plans and any other outstanding options, shall be converted into options of
HomeArts, such that an option for one (1) share of Women.com shall be converted
into an option for one (1) share of HomeArts, with no change in the exercise
price of the HomeArts option. No other changes in the terms and conditions of
such options will occur. Effective on the Effective Date, HomeArts hereby
assumes the outstanding and unexercised portions of such options and the
obligations of Women.com with respect thereto.
1.9 WARRANTS. On the Effective Date, the Surviving Corporation will
assume and continue warrants of Women.com, and the outstanding and unexercised
portions of all warrants shall be converted into warrants of HomeArts, such that
a warrant for one (1) share of
2.
<PAGE> 3
Women.com shall be converted into a warrant for one (1) share of HomeArts, with
no change in the exercise price of the HomeArts warrant. No other changes in the
terms and conditions of such warrants will occur. Effective on the Effective
Date, HomeArts hereby assumes the outstanding and unexercised portions of such
warrants and the obligations of Women.com with respect thereto.
1.10 EMPLOYEE BENEFIT PLANS. On the Effective Date, the Surviving
Corporation shall assume all obligations of Women.com under any and all employee
benefit plans in effect as of such date. On the Effective Date, the Surviving
Corporation shall adopt and continue in effect all such employee benefit plans
upon the same terms and conditions as were in effect immediately prior to the
Merger and shall reserve that number of shares of HomeArts Common Stock with
respect to each such employee benefit plan as is proportional to the number of
shares of Women.com Common Stock (if any) so reserved on the Effective Date.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation of HomeArts in effect on the Effective Date shall continue to be
the Certificate of Incorporation of the Surviving Corporation. The Bylaws of
HomeArts in effect on the Effective Date shall continue to be the Bylaws of the
Surviving Corporation
2.2 DIRECTORS. Upon the Effective Date, the current Board of
Directors of HomeArts shall resign and the Board of Directors of the Surviving
Corporation shall be replaced by the current Management Committee of Women.com
Networks, LLC. Such directors shall serve until the expiration of their terms
and until their successors are elected and qualified.
2.3 OFFICERS. The officers of HomeArts immediately prior to the
Effective Date shall resign on the Effective Date and the officers of Women.com
immediately preceding the Effective Date shall become the officers of the
Surviving Corporation on and after the Effective Date to serve at the pleasure
of its Board of Directors.
3. MISCELLANEOUS.
3.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Women.com such deeds and other instruments, and there
shall be taken or caused to be taken by it such further and other action, as
shall be appropriate or necessary in order to vest or perfect in or to conform
of record or otherwise, in the Surviving Corporation the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Women.com and otherwise to carry out the purposes of
this Merger Agreement, and the officers and directors of the Surviving
Corporation are fully authorized in the name and on behalf of Women.com or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the
shareholders of Women.com and HomeArts, this Merger Agreement may be amended in
any manner (except that, after the approval of the Merger Agreement by the
shareholders of Women.com and HomeArts, the principal terms may not be amended
without the further approval of the shareholders of Women.com and HomArts) as
may be determined in the judgment of the respective Board of Directors of
HomeArts and Women.com to be necessary, desirable, or
3.
<PAGE> 4
expedient in order to clarify the intention of the parties hereto or to effect
or facilitate the purpose and intent of this Merger Agreement.
3.3 CONDITIONS TO MERGER. The obligations of the Constituent
Corporations to effect the transactions contemplated hereby is subject to
satisfaction of the following conditions (any or all of which may be waived by
either of the Constituent Corporations in its sole discretion to the extent
permitted by law):
(a) the Merger shall have been approved by the shareholders
of Women.com in accordance with applicable provisions of the California
Corporations Code of the State of California;
(b) the Merger shall have been approved by the stockholders
of HomeArts in accordance with the applicable provisions of the General
Corporation Law of the State of Delaware; and
(c) any and all material consents, permits, authorizations,
approvals, and orders for the consummation of the Merger shall have been
obtained.
3.4 ABANDONMENT OR DEFERRAL. At any time before the Effective Date,
this Merger Agreement may be terminated and the Merger may be abandoned by the
mutual agreement of the Board of Directors of both Women.com and HomeArts.
Notwithstanding the approval of this Merger Agreement by the shareholders of
Women.com or the stockholders of HomeArts, the consummation of the Merger may be
deferred for a reasonable period of time if, by mutual agreement of the Board of
Directors of both Women.com and HomeArts, such action would be in the best
interest of such corporations. In the event of termination of this Merger
Agreement, this Merger Agreement shall become void and of no effect and there
shall be no liability on the part of either Constituent Corporation or its Board
of Directors or shareholders with respect thereto.
3.5 COUNTERPARTS. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by the Board of Directors of Women.com and HomeArts, is hereby executed
on behalf of each said corporation and attested by their respective officers
thereunto duly authorized.
WOMEN.COM NETWORKS,
a California corporation
By:
-----------------------------------
Marleen McDaniel
President
ATTEST:
4.
<PAGE> 5
By:
-----------------------------------
Ellen Pack
Secretary
HEARST HOMEARTS, INC.,
a Delaware corporation
By:
-----------------------------------
Alfred C. Sikes
President
ATTEST:
By:
-----------------------------------
Jodie W. King
Secretary
5.
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
HEARST HOMEARTS, INC.
THE UNDERSIGNED, for the purpose of forming a corporation pursuant to
Section 102 of the Delaware General Corporation Law, does hereby certify the
following:
FIRST: The name of the corporation is: Hearst HomeArts, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the state
of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801. The name of the registered agent at such address
is The Corporation Trust Company.
THIRD: The purposes to be conducted or promoted are to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The aggregate number of shares of stock which the Corporation
shall have authority to issue is one thousand; each of such shares shall be
with a par value of $.01 per share.
FIFTH: The name and mailing address of the incorporator is: Kirstie
Rickett, c/o Rogers & Wells, 200 Park Avenue, New York, New York 10166.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter, or
repeal the by-laws of the Corporation.
SEVENTH: No director will have any personal liability to the Corporation
or its stockholders for monetary damages for any breach of fiduciary duty as a
director, except (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 Delaware General Corporation Law, as amended, or (iv)
for any transaction from which the director obtained an improper personal
benefit.
<PAGE> 2
EIGHTH: Pursuant to Section 211(e) of the Delaware General Corporation
Law, directors shall not be required to be elected by written ballot.
IN WITNESS WHEREOF, the incorporator named above has executed this
Certificate of Incorporation this 25th day of January, 1999.
HEARST HOME ARTS, INC.
By: /s/ KIRSTIE RICKETT
------------------------
Kirstie Rickett
Incorporator
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
HEARST HOMEARTS, INC.
A DELAWARE CORPORATION
ADOPTED JANUARY 27, 1999
ARTICLE I
OFFICES
Section 1. The registered office of the Corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other
places, within or outside the State of Delaware, as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of stockholders shall be held at the
registered office of the Corporation, or at such other place within or outside
of the State of Delaware as may be fixed from time to time by the Board of
Directors.
Section 2. Commencing with the year 2000, annual meetings of
stockholders shall be held on January 15th of each year, or if that day is a
legal holiday, on the next following business day, at 5:00 p.m., or at such
other date and time as may be fixed by the Board of Directors. At each annual
meeting of stockholders the
<PAGE> 2
stockholders shall elect directors and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of each annual meeting of stockholders,
stating the place, date and hour of the meeting, shall be given in the manner
set forth in Article VI of these By-Laws. Such notice shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at the meeting.
Section 4. Special meetings of stockholders may be called at any
time for any purpose or purposes by the Board of Directors or by the President,
and shall be called by the President or the Secretary upon the written request
of the majority of the directors or upon the written request of the holders of
at least 50% of all outstanding shares entitled to vote on the action proposed
to be taken. Such written requests shall state the time, place and purpose or
purposes of the proposed meeting. A special meeting of stockholders called by
the Board of Directors or the President, other than one required to be called by
reason of a written request of stockholders, may be canceled by the Board of
Directors at any time not less than 24 hours before the scheduled commencement
of the meeting.
Section 5. Written notice of each special meeting of stockholders
shall be given in the manner set forth in Article VI of these By-Laws. Such
notice shall be given not less than ten nor more than sixty days before the date
of the meeting to each stockholder entitled to vote at the meeting. Each such
notice of a special meeting of stockholders shall state the place, date and hour
of a meeting and the purpose or purposes for which the meeting is called.
Section 6. Except as otherwise required by law or the Certificate
of Incorporation, the presence in person or by proxy of holders of a majority of
the shares entitled
<PAGE> 3
to vote at a meeting of stockholders shall be necessary, and shall constitute a
quorum, for the transaction of business at such meeting. If a quorum is not
present or represented by proxy at any meeting of stockholders, the holders of a
majority of the shares entitled to vote at the meeting who are present in person
or represented by proxy may adjourn the meeting from time to time until a quorum
is present. An adjourned meeting may be held later without notice other than
announcement at the meeting, except that if the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given in the manner
set forth in Article VI to each stockholder of record entitled to vote at the
adjourned meeting.
Section 7. At any meeting of stockholders each stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or in the certificate of Incorporation, each
stockholder shall be entitled to one vote for each share of stock entitled to
vote standing in his name or on the books of the Corporation. All elections of
Directors shall be determined by plurality votes. Except as otherwise provided
by law or in the Certificate of Incorporation or By-Laws, any other matter
shall be determined by the vote of a majority of the shares which are voted with
regard to it at a meeting where a valid quorum is present.
Section 8. Whenever the vote of stockholders at a meeting is required or
permitted in connection with any corporate action, the meeting and vote may be
dispensed with if action taken has the written consent of the holders of shares
having at least the minimum number of votes required to authorize the action at
a meeting at which all shares entitled to vote were present and voted.
ARTICLE III
3
<PAGE> 4
DIRECTORS
Section 1. The Board of Directors shall manage the business of the
Corporation, except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws.
Section 2. The number of directors which shall constitute the entire
Board of Directors shall be such number, not less than three nor more than five
as shall be determined by the Board of Directors from time to time. Until
further action by the Board of Directors, the number of directors which shall
constitute the entire Board of Directors shall be four. As used in these
By-Laws, the term "entire Board of Directors" means the total number of
directors which the Corporation would have if there were no vacancies.
Section 3. Except as provided in Section 5 of this Article, the
directors shall be elected at the annual meeting of stockholders. Except as
otherwise provided by law, the Certificate of Incorporation, or these By-Laws,
each director elected shall serve until the next succeeding annual meeting of
stockholders and until his successor is elected and qualified.
Section 4. Any of the directors may be removed for cause by vote of a
majority of the entire Board. Any or all of the directors may be removed for
cause or without cause by vote of the holders of a majority of the outstanding
shares of each class of voting stock of the Corporation voting as a class.
Section 5. Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board may be filled by vote
of a majority of the directors then in office, even if less than a quorum
exists. A director elected to fill a vacancy, including a vacancy created by a
newly created directorship, shall serve until the next succeeding annual
meeting of stockholders and until his successor is elected and qualified.
4
<PAGE> 5
Section 6. The books of the Corporation, except such as are required by
law to be kept within the State of Delaware, may be kept at such place or
places within or outside of the State of Delaware as the Board of Directors may
from time to time determine.
Section 7. The Board of Directors, by the affirmative vote of a majority
of the directors then in office, and irrespective of any personal interest of
any of its members, may establish reasonable compensation of any or all
directors for services to the Corporation as directors or officers or otherwise.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. The first meeting of each newly elected Board of Directors
shall be held immediately following the annual meeting of stockholders. If the
meeting is held at the place of the meeting of stockholders, no notice of the
meeting need be given to the newly elected directors. If the first meeting is
not held at that time and place, it shall be held at a time and place specified
in a notice given in the manner provided for notice of special meetings of the
Board of Directors.
Section 2. Regular meetings of the Board of Directors may be held upon
such notice, or without notice, at such times and at such places within or
outside of the State of Delaware as shall from time to time be determined by
the Board of Directors.
Section 3. Special meetings of the Board of Directors may be called by
the Chairman of the Board, if there is one, or by the President, on at least
forty-eight hours' notice to each director and shall be called by the President
or the Secretary on like notice at the written request of any two directors.
5
<PAGE> 6
Section 4. Whenever notice of a meeting of the Board of Directors
is required, the notice shall be given in the manner set forth in Article VI of
these By-Laws and shall state the place, date and hour of the meeting. Except as
provided by law, the Certificate of Incorporation, or other provisions of these
By-Laws, neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of the meeting.
Section 5. Except as otherwise required by law or the Certificate
of Incorporation or other provisions of these By-Laws, a majority of the
directors in office, but in no event less than one-third of the entire Board of
Directors, shall constitute a quorum for the transaction of business, and the
vote of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. If a quorum is not present
at any meeting of directors, a majority of the directors present at the meeting
may adjourn the meeting from time to time, without notice of the adjourned
meeting other than announcement at the meeting. To the extent permitted by law,
a director participating in a meeting by conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other will be deemed present in person at the meeting and all acts
taken by him during his participation shall be deemed taken at the meeting.
Section 6. Any action of the Board of Directors may be taken
without a meeting if written consent to the action signed by all members of the
Board of Directors is filed with the minutes of the Board of Directors.
ARTICLE V
COMMITTEES
6
<PAGE> 7
Section 1. The Board of Directors may designate from among its
members an Executive Committee and other committees, each consisting of two or
more directors, and may also designate one or more of its members to serve as
alternates on these committees. To the extent permitted by law, the Executive
Committee shall have all the authority of the Board of Directors, except as the
Board of Directors otherwise provides, and the other committees shall have such
authority as the Board of Directors grants them. The Board of Directors shall
have power at any time to change the membership of any committees, to fill
vacancies in their membership and to discharge any committees. All resolutions
establishing or discharging committees, designating or changing members of
committees, or granting or limiting authority of committees, may be adopted only
by the affirmative vote of a majority of the entire Board of Directors.
Section 2. Each committee shall keep regular minutes of its
proceedings and report to the Board of Directors as and when the Board of
Directors shall require. Unless the Board of Directors otherwise provides, a
majority of the members of any committee may determine its actions and the
procedures to be followed at its meetings (which may include a procedure for
participating in meetings by conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each
other), and may fix the time and place of its meetings.
Section 3. Any action of a committee may be taken without a meeting
if written consent to the action signed by all the members of the committee is
filed with the minutes of the committee.
ARTICLE VI
NOTICES
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<PAGE> 8
Section 1. Any notice to a stockholder shall be given personally or by
mail. If mailed, a notice will be deemed given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of stockholders.
Section 2. Any notice to a director may be given personally, by telephone
or by mail, facsimile transmission, telex, telegraph, cable or similar
instrumentality. A notice will be deemed given when actually given in person or
by telephone; when transmitted by a legible transmission, if given by facsimile
transmission; when transmitted, answerback received, if given by telex; on the
day when delivered to a cable or similar communications company; one business
day after delivery to an overnight courier service; or on the third business
day after the day when deposited with the United States mail, postage prepaid,
directed to the director at his business address, facsimile number or telex
number or at such other address, facsimile number or telex number as the
director may have designated to the Secretary in writing as the address or
number to which notices should be sent.
Section 3. Any person may waive notice of any meeting by signing a
written waiver, whether before or after the meeting. In addition, attendance at
a meeting will be deemed a waiver of notice unless the person attends for the
purpose, expressed to the meeting at its commencement, of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE VII
OFFICERS
Section 1. The officers of the Corporation shall be a President, a
Secretary and a Treasurer. In addition, the Board of Directors may also elect a
Chairman of the Board, one or more Vice Chairmen of the Board, and one or more
Vice Presidents (one or more of
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<PAGE> 9
whom may be designated an Executive Vice President or a Senior Vice President),
one or more Assistant Secretaries or Assistant Treasurers, and such other
officers as it may from time to time deem advisable. Any two or more offices,
except for the offices of President and Secretary, may be held by the same
person. No officer except the Chairman of the Board need be a director of the
Corporation.
Section 2. Each officer shall be elected by the Board of Directors and
shall hold office for such term, if any, as the Board of Directors shall
determine. Any officer may be removed at any time, either with or without
cause, by the vote of a majority of the entire Board of Directors.
Section 3. Any officer may resign at any time by giving written notice to
the Board of Directors or to the President. Such resignation shall take effect
at the time specified in the notice or, if no time is specified, at the time of
receipt of the notice, and the acceptance of such resignation shall not be
necessary to make it effective.
Section 4. The compensation of officers shall be fixed by the Board of
Directors or in such manner as it may provide.
Section 5. The Chairman of the Board, if any, shall preside at all
meetings of the stockholders and of the Board of Directors and shall have such
other duties as from time to time may be assigned to him by the Board of
Directors.
Section 6. The President shall be the Chief Executive Officer of the
Corporation, shall have general charge of the management of the business and
affairs of the Corporation, subject to the control of Board of Directors, and
will ensure that all orders and resolutions of the Board of Directors are
carried into effect. The President shall preside over
9
<PAGE> 10
any meetings of the stockholders of the Board of Directors at which neither the
Chairman nor a Vice Chairman is present.
Section 7. The officers of the Corporation, other than the Chairman of the
Board and the President, shall have such powers and perform such duties in the
management of the property and affairs of the Corporation, subject to the
control of the Board of Directors and the President, as customarily pertain to
their respective offices, as well as such powers and duties as from time to
time may be prescribed by the Board of Directors.
Section 8. The Corporation may secure the fidelity of any or all of its
officers or agents by bond or otherwise. In addition, the Board of Directors
may require any officer, agent or employee to give security for the faithful
performance of his duties.
ARTICLE VIII
CERTIFICATES FOR SHARES
Section 1. The shares of stock of the Corporation shall be represented by
certificates, in such form as the Board of Directors may from time to time
prescribe, signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary.
Section 2. Any or all signatures upon a certificate may be a facsimile.
Even if an officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall cease to be that
officer, transfer agent or registrar before the certificate is issued, that
certificate may be issued by the Corporation with the same effect as if he or
it were that officer, transfer agent or registrar at the date of issue.
Section 3. The Board of Directors may direct that a new certificate be
issued in place of any certificate issued by the Corporation which is alleged
to have been lost, stolen
10
<PAGE> 11
or destroyed. When doing so, the Board of Directors may prescribe such terms
and conditions precedent to the issuance of the new certificate as it deems
expedient, and may require a bond sufficient to indemnify the Corporation
against any claim that may be made against it with regard to the allegedly
lost, stolen or destroyed certificate or the issuance of the new certificate.
Section 4. The Corporation or a transfer agent of the Corporation, upon
surrender to it of a certificate representing shares, duly endorsed and
accompanied by proper evidence of lawful succession, assignment or authority of
transfer, shall issue a new certificate to the person entitled thereto, and
shall cancel the old certificate and record the transaction upon the books of
the Corporation.
Section 5. The Board of Directors may fix a date as the record date for
determination of the stockholders entitled (i) to notice of or to vote at any
meeting of stockholders, (ii) to express consent to, or dissent from, corporate
action in writing without a meeting, or (iii) to receive payment of any dividend
or other distribution or allotment of any rights or to take or be the subject of
any other action. The record date must be on or after the date on which the
Board of Directors adopts the resolution fixing the record date and in the case
of (i) must be not less than ten nor more than sixty days before the date of the
meeting, in the case of (ii) must be not more than ten days after the date on
which the Board of Directors fixes the record date, and in the case of (iii)
must be not more than sixty days prior to the proposed action. If no record date
is fixed, the record date will be as provided by law. A determination of
stockholders entitled to notice of or to vote at any meeting of stockholders
which has been made as provided in this Section will apply to any adjournment of
the meeting, unless the Board of Directors fixes a new record date for the
adjourned meeting.
11
<PAGE> 12
Section 6. The Corporation shall for all purposes be entitled to treat a
person registered on its books, as the owner of shares, as the owner of those
shares, with the exclusive right, among other things, to receive dividends and
to vote with regard to those shares, and the Corporation shall be entitled to
hold a person registered on its books as the owner of shares liable for calls
and assessments, if any may legally be made, and shall not be bound to
recognize any equitable or other claim to or interest in shares of its stock on
the part of any other person, whether or not the Corporation shall have express
or other notice of the claim or interest of the other person, except as
otherwise provided by the laws of Delaware.
ARTICLE IX
INDEMNIFICATION
Section 1. Suits by Third Parties. The Corporation shall indemnify any
person who was or is made a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its
12
<PAGE> 13
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
conduct was unlawful.
Section 2. Derivative Suits. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that the person is or was
a director, officer, employee or agent of the Corporation, or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection with the defense or settlement of such action or
suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Delaware Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Indemnification as of Right. To the extent that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article, or in
13
<PAGE> 14
defense of any claim, issue or matter therein, the person shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by the person in connection therewith.
Section 4. Determination that Indemnification is Proper. Any
indemnification under Sections 1 and 2 of this Article (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination will be made (1) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a
quorum is not obtainable, or, even if obtainable and a quorum of disinterested
directors so directs, by independent legal counsel (compensated by the
Corporation) in a written opinion, or (3) by the stockholders.
Section 5. Advance of Funds. Expenses incurred by an officer, director,
employee or agent in defending a civil, criminal, administrative or
investigative action, suit or proceeding, or threat thereof, may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that the person
is not entitled to be indemnified by the Corporation as authorized in this
Article.
Section 6. Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this
Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement
14
<PAGE> 15
of expenses may be entitled under any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office.
Section 7. Insurance Premiums. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against the person and incurred by him in any such capacity, or
arising out of the person's status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article.
Section 8. References to "Corporation". References in this Article to
"the Corporation" will include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers and
employees or agents so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, will stand in the same position under the provisions of this
Article with respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its separate
existence had continued.
Section 9. References to Certain Terms. For purposes of this Article,
references to "other enterprises" will include employee benefit plans;
references to "fines" will include any excise taxes assessed on a person with
respect to an employee benefit plan; and
15
<PAGE> 16
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of a subsidiary of the
Corporation and any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan will be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article.
Section 10. Successors and Assigns. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article shall,
unless otherwise provided, when authorized or ratified continue as to a person
who has ceased to be a director, officer or agent and shall inure to the benefit
of the heirs, executors and administrators of such person.
Section 11. Retroactive Effect. The provisions of this Article will
be deemed retroactive and will include all acts of the officers and directors of
the Corporation since the date of incorporation.
ARTICLE X
GENERAL PROVISIONS
Section 1. The corporate seal shall have inscribed on it the name of
the Corporation, the year of its creation, the words "CORPORATE SEAL DELAWARE,"
and such other appropriate legend as the Board of Directors may from time to
time determine. Unless prohibited by the Board of Directors, a facsimile of the
corporate seal may be affixed or reproduced in lieu of the corporate seal
itself.
16
<PAGE> 17
Section 2. The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
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ARTICLE XI
AMENDMENTS
Section 1. These By-Laws may be amended or repealed, and new By-Laws may be
adopted, amended or repealed (a) at any regular or special meeting of
stockholders, or (b) by the affirmative vote of a majority of the entire Board
of Directors at any regular or special meeting of the Board of Directors,
except that no By-Law may be adopted or amended by the Board of Directors if
the By-Law or amendment is inconsistent with a By-Law, or an amendment to a
By-Law, adopted by the stockholders.
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EXHIBIT 3.3
RESTATED
CERTIFICATE OF INCORPORATION
OF
WOMEN.COM NETWORKS, INC.
MARLEEN MCDANIEL does hereby certify:
ONE: She is the President and Chief Executive Officer of Women.com
Networks, Inc., a corporation organized and existing under the laws of the state
of Delaware.
TWO: The original name of this corporation is Hearst HomeArts, Inc. and
the original Certificate of Incorporation was filed with the Secretary of State
of the State of Delaware on January 25, 1999.
THREE: The Certificate of Incorporation of this Corporation is hereby
amended and restated as follows:
I.
The name of the Corporation is Women.com Networks, Inc. (the
"Corporation" or the "Company").
II.
The address of the Corporation's registered office in the state of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name of the registered agent at such address is the
Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is Two Hundred Million
(200,000,000) shares, One Hundred Ninety Five Million (195,000,000) shares of
which shall be Common Stock, each having a par value of one tenth of one cent
($.001) (the "COMMON STOCK") and Five Million (5,000,000) shares of which shall
be Preferred Stock, each having a par value of one tenth of one cent ($.001)
(the "PREFERRED STOCK").
1.
<PAGE> 2
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
A. For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
1. The management of the business and the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
a. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the Closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting. During such time or times that the corporation is subject
to Section 2115(b) of the California General Corporation Law ("CGCL"), this
Section A.1.a of this Article V shall become effective and be applicable only
when the corporation is a "listed" corporation within the meaning of Section
301.5 of the CGCL.
b. In the event that the corporation (i) is subject to
Section 2115(b) of the CGCL and (ii) is not a "listed" corporation or ceases to
be a "listed" corporation under Section 301.5 of the CGCL, Section A.1.a. of
this Article V shall not apply and all directors shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
c. No person entitled to vote at an election for directors
may cumulate votes to which such person is entitled, unless, at the time of
such election, the corporation (i) is subject to Section 2115(b) of the CGCL
and (ii) is not a "listed" corporation or ceases to be a "listed" corporation
under Section 301.5 of the CGCL. During this time, every stockholder entitled
to vote at an election for directors may cumulate such stockholder's votes and
give one candidate a number of votes equal to the number of directors to be
elected multiplied by the number of votes to which such stockholder's shares
are otherwise entitled, or distribute the stockholder's votes on the same
principle among as many candidates as such stockholder thinks fit. No
stockholder, however, shall be entitled to so cumulate such stockholder's votes
unless (i) the names of such candidate or candidates have been placed in
nomination prior to the voting and (ii) the stockholder has given notice at the
meeting, prior to the voting, of such stockholder's intention to cumulate such
stockholder's votes. If any stockholder has given proper notice to cumulate
votes, all stockholders may cumulate their votes for any candidates who have
been properly placed in nomination. Under cumulative voting, the candidates
receiving the highest number of votes, up to the number of directors to be
elected, are elected.
Notwithstanding the foregoing provisions of this Section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
2. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote
on such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
a. At any time or times that the corporation is not subject
to Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A.2.a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
2.
<PAGE> 3
3. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, except for
Sections 6, 13, 15, 17, 18, 20 and 45, which may only be amended by the
affirmative vote of at least sixty-six and two-thirds percent (66 2/3%) of the
voting power of all then outstanding shares of Voting Stock, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least a
majority of the voting power of all of the then-outstanding shares of the Voting
Stock. The Board of Directors shall also have the power to adopt, amend or
repeal Bylaws.
2. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of the stockholders in
accordance with the Bylaws prior to the closing of the Initial
3.
<PAGE> 4
Public Offering and following the closing of the Initial Public Offering no
action shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any 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) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
The foregoing Restated Certificate of Incorporation has been duly
approved by the Board of Directors.
The foregoing Restated Certificate of Incorporation has been duly
approved by the vote of the stockholders in accordance with Sections 242 and 245
of the Delaware General Corporation Law. The number of shares voting in favor of
the amendment equaled or exceeded the vote required.
4.
<PAGE> 5
IN WITNESS WHEREOF, the undersigned has signed this certificate this __
day of May, 1999, and hereby affirms and acknowledges under penalty of perjury
that the filing of this Restated Certificate of Incorporation is the act and
deed of Women.com Networks, Inc.
WOMEN.COM NETWORKS, INC.
By_________________________________
Marleen McDaniel
President
5.
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
WOMEN.COM NETWORKS, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES....................................................................1
Section 1. Registered Office......................................................1
Section 2. Other Offices..........................................................1
ARTICLE II CORPORATE SEAL.............................................................1
Section 3. Corporate Seal.........................................................1
ARTICLE III STOCKHOLDERS' MEETINGS.....................................................1
Section 4. Place Of Meetings......................................................1
Section 5. Annual Meeting.........................................................1
Section 6. Special Meetings.......................................................3
Section 7. Notice Of Meetings.....................................................4
Section 8. Quorum.................................................................4
Section 9. Adjournment And Notice Of Adjourned Meetings...........................4
Section 10. Voting Rights..........................................................5
Section 11. Joint Owners Of Stock..................................................5
Section 12. List Of Stockholders...................................................5
Section 13. Action Without Meeting.................................................5
Section 14. Organization...........................................................6
ARTICLE IV DIRECTORS..................................................................7
Section 15. Number And Term Of Office..............................................7
Section 16. Powers.................................................................7
Section 17. Classes Of Directors...................................................7
Section 18. Vacancies..............................................................7
Section 19. Resignation............................................................8
Section 20. Removal................................................................8
Section 21. Meetings...............................................................8
Section 22. Quorum And Voting......................................................9
Section 23. Action Without Meeting.................................................9
Section 24. Fees And Compensation..................................................9
Section 25. Committees............................................................10
Section 26. Organization..........................................................11
ARTICLE V OFFICERS..................................................................11
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 27. Officers Designated...................................................11
Section 28. Tenure And Duties Of Officers.........................................11
Section 29. Delegation Of Authority...............................................12
Section 30. Resignations..........................................................12
Section 31. Removal...............................................................13
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED
BY THE CORPORATION........................................................13
Section 32. Execution Of Corporate Instruments....................................13
Section 33. Voting Of Securities Owned By The Corporation.........................13
ARTICLE VII SHARES OF STOCK...........................................................14
Section 34. Form And Execution Of Certificates....................................14
Section 35. Lost Certificates.....................................................14
Section 36. Transfers.............................................................14
Section 37. Fixing Record Dates...................................................15
Section 38. Registered Stockholders...............................................16
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION.......................................16
Section 39. Execution Of Other Securities.........................................16
ARTICLE IX DIVIDENDS.................................................................16
Section 40. Declaration Of Dividends..............................................16
Section 41. Dividend Reserve......................................................16
ARTICLE X FISCAL YEAR...............................................................17
Section 42. Fiscal Year...........................................................17
ARTICLE XI INDEMNIFICATION...........................................................17
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................................17
ARTICLE XII NOTICES...................................................................20
Section 44. Notices...............................................................20
ARTICLE XIII AMENDMENTS................................................................21
Section 45. Amendments............................................................21
ARTICLE XIV LOANS TO OFFICERS.........................................................22
Section 46. Loans To Officers.....................................................22
</TABLE>
ii.
<PAGE> 4
AMENDED AND RESTATED
BYLAWS
OF
WOMEN.COM NETWORKS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any
1.
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supplement thereto) given by or at the direction of the Board of Directors, (B)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (C) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not later than the close of business on the sixtieth (60th) day nor
earlier than the close of business on the ninetieth (90th) day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that no annual meeting was held in the previous year or the
date of the annual meeting has been changed by more than thirty (30) days from
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the close
of business on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the corporation fewer than seventy (70) days
prior to the date of such annual meeting, the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the Board of Directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such
2.
<PAGE> 6
person, (D) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nominations are to be made by the stockholder,
and (E) any other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the 1934 Act (including
without limitation such person's written consent to being named in the proxy
statement, if any, as a nominee and to serving as a director if elected); and
(ii) as to such stockholder giving notice, the information required to be
provided pursuant to paragraph (b) of this Section 5. At the request of the
Board of Directors, any person nominated by a stockholder for election as a
director shall furnish to the Secretary of the corporation that information
required to be set forth in the stockholder's notice of nomination which
pertains to the nominee. No person shall be eligible for election as a director
of the corporation unless nominated in accordance with the procedures set forth
in this paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption).
(b) If a special meeting is called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person or
persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not
3.
<PAGE> 7
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting, such notice to specify the
place, date and hour and purpose or purposes of the meeting. Notice of the time,
place and purpose of any meeting of stockholders may be waived in writing,
signed by the person entitled to notice thereof, either before or after such
meeting, and will be waived by any stockholder by his attendance thereat in
person or by proxy, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date,
4.
<PAGE> 8
as provided in Section 12 of these Bylaws, shall be entitled to vote at any
meeting of stockholders. Every person entitled to vote or execute consents shall
have the right to do so either in person or by an agent or agents authorized by
a proxy granted in accordance with Delaware law. An agent so appointed need not
be a stockholder. No proxy shall be voted after three (3) years from its date of
creation unless the proxy provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded.
5.
<PAGE> 9
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without
a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of the State of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written consent has been given in
accordance with Section 228 of the General Corporation Law of Delaware.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter
6.
<PAGE> 10
as convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the Initial Public Offering, the directors shall be divided into
three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class II directors shall expire and Class II directors shall be
elected for a full term of three years. At the third annual meeting of
stockholders following the Closing of the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the CGCL, this Section 17(a) shall become effective and apply only when the
corporation is a "listed" corporation within the meaning of Section 301.5 of
the CGCL.
(b) In the event that the corporation (i) is subject to Section 2115(b)
of the CGCL and (ii) is not a "listed" corporation or ceases to be a "listed"
corporation under Section 301.5 of the CGCL, Section 17(a) of these Bylaws shall
not apply and all directors shall be elected at each annual meeting of
stockholders to hold office until the next annual meeting.
(c) No person entitled to vote at an election for directors may cumulate
votes to which such person is entitled, unless, at the time of such election,
the corporation (i) is subject to Section 2115(b) of the CGCL and (ii) is not a
"listed" corporation or ceases to be a "listed" corporation under Section 301.5
of the CGCL. During this time, every stockholder entitled to vote at an election
for directors may cumulate such stockholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the
7.
<PAGE> 11
unexpired portion of the term of the Director whose place shall be vacated and
until his successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
(a) During such time or times that the corporation is subject to Section
2115(b) and the CGCL, the Board of Directors or any individual director may be
removed from office at any time without cause by the affirmative vote of the
holders of at least a majority of the voting power of all the then-outstanding
shares of voting stock of the corporation (the "Voting Stock") entitled to vote
on such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section 20(a) above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary and such meeting shall be
held for the purpose of electing officers and transacting such other business as
may lawfully come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting.
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Notice of any meeting may be waived in writing at any time before or after the
meeting and will be waived by any director by attendance thereat, except when
the director attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting, whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of
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Directors shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by the Delaware General Corporation Law to
be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to the provisions of
subsections (a) or (b) of this Bylaw may at any time increase or decrease the
number of members of a committee or terminate the existence of a committee. The
membership of a committee member shall terminate on the date of his death or
voluntary resignation from the committee or from the Board of Directors. The
Board of Directors may at any time for any reason remove any individual
committee member and the Board of Directors may fill any committee vacancy
created by death, resignation, removal or increase in the number of members of
the committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
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SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
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(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or
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superior officers upon whom such power of removal may have been conferred by the
Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the
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President or any Vice President and by the Treasurer or Assistant Treasurer or
the Secretary or Assistant Secretary, certifying the number of shares owned by
him in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon
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which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors or executive
officer; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer, of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an executive
officer of the corporation (except by reason of the fact that such executive
officer is or was a director of the corporation in which event this paragraph
shall not apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a
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quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct. In any suit
brought by a director or executive officer to enforce a right to indemnification
or to an advancement of expenses hereunder, the burden of proving that the
director or executive officer is not entitled to be indemnified, or to such
advancement of expenses, under this Article XI or otherwise shall be on the
corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
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(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or permitted
to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
19.
<PAGE> 23
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing,
and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
20.
<PAGE> 24
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS.
Subject to paragraph (h) of Section 43 of the Bylaws, except for
Sections 6, 13, 15, 17, 18, 20 and 45 of the Bylaws, which may only be amended
by the affirmative vote of at least sixty-six and two thirds percent (66-2/3%)
of the voting power of all then outstanding shares of Voting Stock, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least a majority of the voting power of all of the then-outstanding shares of
the Voting Stock. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its
21.
<PAGE> 25
subsidiaries, whenever, in the judgment of the Board of Directors, such loan,
guarantee or assistance may reasonably be expected to benefit the corporation.
The loan, guarantee or other assistance may be with or without interest and may
be unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
22.
<PAGE> 1
EXHIBIT 4.3
WOMEN.COM NETWORKS
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "AGREEMENT")
is entered into as of May 7, 1999, by and among WOMEN.COM NETWORKS, a California
corporation (the "COMPANY"), ELLEN PACK and MARLEEN MCDANIEL (each referred to
herein as a "FOUNDER") and those persons and entities set forth on the schedule
of investors and warrant holders attached hereto as EXHIBIT A who hold the
Company's Series A Preferred Stock (the "SERIES A INVESTORS"), Series B
Preferred Stock (the "SERIES B INVESTORS"), Series C Preferred Stock (the
"SERIES C INVESTORS"), Series D Preferred Stock (the "SERIES D INVESTORS")
and/or Series E Preferred Stock (the "SERIES E INVESTORS") (collectively, the
"INVESTORS") or warrants to purchase stock of the Company (the "WARRANT
HOLDERS").
RECITALS
WHEREAS, the Company, the Founders, the Investors and the Warrant
Holders are parties to that Amended and Restated Investors' Rights Agreement
dated as of March 31, 1999 (the "PRIOR AGREEMENT");
WHEREAS, the parties to the Prior Agreement desire to terminate the
Prior Agreement and to accept the rights and obligations created pursuant hereto
in lieu of the rights granted to them under the Prior Agreement;
WHEREAS, the Company proposes to sell and issue shares of its Series E
Preferred Stock pursuant to the Series E Preferred Stock Purchase Agreement of
even date herewith (the "PURCHASE AGREEMENT"); and
WHEREAS, as a condition of entering into the Purchase Agreement, the
purchasers of Series E Preferred Stock have requested that the Company extend to
them registration rights, information rights and other rights as set forth
below;
WHEREAS, the parties to the Prior Agreement wish to amend and restate
such agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, the parties mutually agree as follows:
AGREEMENT
SECTION 1. AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT.
1.1 AMENDMENT AND RESTATEMENT. The Prior Agreement is terminated in
its entirety and restated herein. Such termination and restatement is effective
upon execution of this Agreement by the Company, each of the Founders and
holders of at least a majority in interest of the Shares (as such term is
defined in the Prior Agreement). Upon such execution, all provisions of, rights
granted and covenants made in the Prior Agreement are hereby waived, released
and terminated in their entirety and shall have no further force or effect. The
rights and covenants contained in this Agreement set forth the sole
1.
<PAGE> 2
and entire agreement among the Company, the Founders, the Warrant Holders and
the Investors on the subject matter hereof and supersede any and all rights
granted and covenants made under any prior agreements.
SECTION 2. GENERAL.
2.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"FORM S-3" means such form under the Securities Act (as
hereinafter defined) as in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC (as
hereinafter defined) which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
"HOLDER" means any person owning or having the right to acquire
Registrable Securities (as hereinafter defined) or any assignee of record
thereof in accordance with Section 3.10 hereof.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) common stock of the Company
acquired from the Company by a Founder, (ii) common stock of the Company issued
or issuable upon conversion of the Shares; (iii) any common stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, such above-described securities;
and (iv) solely for purposes of Sections 3.1, 3.3, 3.7, 3.8, 3.9, 3.10, 3.11,
3.13 and 8 only, any common stock of the Company issued (or issuable) upon the
conversion or exercise of the warrant to purchase up to 8,224 shares of Series D
Preferred Stock held by Imperial Bank dated April 9, 1998 and the warrant issued
to BT Alex. Brown Incorporated dated as of July 24, 1998. Notwithstanding the
foregoing, Registrable Securities shall not include any securities sold by a
person to the public either pursuant to a registration statement or Rule 144 or
sold in a private transaction in which the transferror's rights under Section 3
of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
common stock that are Registrable Securities and either (i) are then issued and
outstanding or (ii) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 3.2, 3.3 and 3.4 hereof, including, without
limitation, all registration, filing and qualification fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, reasonable
fees and disbursements not to exceed twenty-five thousand dollars ($25,000) of a
single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
2.
<PAGE> 3
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the sale.
"SHARES" shall mean the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
SECTION 3. REGISTRATION; RESTRICTIONS ON TRANSFER.
3.1 RESTRICTIONS ON TRANSFER.
(a) Each Investor and Warrant Holder agrees not to make any
disposition of all or any portion of the Shares (or the common stock issuable
upon the conversion thereof) unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by the terms of this
Agreement and:
(i) There is then in effect a registration statement
under the Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
(ii) (a) Such Investor or Warrant Holder shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a detailed statement of the circumstances surrounding the proposed
disposition, and (b) if reasonably requested by the Company, such Investor or
Warrant Holder shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such shares under the Securities Act. It is agreed that the
Company will not require opinions of counsel for transactions made pursuant to
Rule 144 except in unusual circumstances.
(iii) Notwithstanding the provisions of paragraphs (i)
and (ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor or Warrant Holder which is (a) a
partnership to its partners in accordance with partnership interests, (b) an
individual to the Investor's or Warrant Holder's family member or trust for the
benefit of an individual Investor or Warrant Holder, (c) a corporation to its
shareholders in accordance with their interest in the corporation, and (d) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, provided the transferee agrees
in writing to be subject to the terms of this Agreement to the same extent as if
he were an original Investor or Warrant Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in the Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON
OTHER WRITTEN EVIDENCE IN FORM
3.
<PAGE> 4
AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company to the effect that the securities
proposed to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
3.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 3.2, if the
Company shall receive at any time and from time to time on or following the
earlier of (i) six months after the effective date of the Company's initial
public offering of the Company's common stock (the "INITIAL OFFERING"), or (ii)
June 5, 2000, a written request from the Series D Investors (or any assignee
pursuant to Section 3.10 hereof) holding more than forty percent (40%) of the
Series D Preferred Stock (or common stock issued upon conversion of the Series D
Preferred Stock or a combination of such common stock and Series D Preferred
Stock) then outstanding (the "REQUESTING HOLDERS") that the Company file a
registration statement under the Securities Act covering the registration of all
or any portion of the Registrable Securities, then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of Section 3.2(c) effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities that the Holders request to be registered.
(b) Subject to the conditions of this Section 3.2, if the
Company shall receive at any time after the earlier of (i) the date one hundred
eighty (180) days following the effective date of the registration statement
pertaining to the Company's Initial Offering, or (ii) October 25, 1999, a
written request from the Series A Investors, the Series B Investors, the Series
C Investors and/or the Series E Investors (or any assignee thereof pursuant to
Section 3.10 hereof) holding more than fifteen percent (15%) of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or
Series E Preferred Stock (or common stock issued upon conversion of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or
Series E Preferred Stock or a combination of such common stock and Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or
Series E Preferred Stock) then outstanding (the "INITIATING HOLDERS") that the
Company file a registration statement under the Securities Act covering the
registration of all or any portion of the Registrable Securities, then the
Company shall, within thirty (30) days of the receipt thereof, give written
notice of such request to all Holders, and subject to the limitations of Section
3.2(c), effect, as soon as practicable, the registration under the Securities
Act of all Registrable Securities that the Holders request to be registered.
(c) If the Initiating Holders or Requesting Holders,
respectively, intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the Company as a part
of their request made pursuant to this Section 3.2 and the Company shall include
such information in the written notice referred to in Section 3.2(a) and Section
3.2(b). In such event, the right of any Holder to include its Registrable
Securities in such registration shall be conditioned upon such
4.
<PAGE> 5
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders or Requesting Holders, as
applicable, and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders or Requesting Holders, as applicable, (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding any
other provision of this Section 3.2, if the underwriter advises the Company in
writing that marketing factors require a limitation of the number of securities
to be underwritten (including Registrable Securities) then the Company shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares that may be included in
the underwriting shall be allocated to the Holders of such Registrable
Securities on a pro rata basis based on the number of Registrable Securities
held by all such Holders (including the Initiating Holders or Requesting
Holders, as applicable). Any Registrable Securities excluded or withdrawn from
such underwriting shall be withdrawn from the registration.
(d) The Company shall not be obligated to effect more than
two registrations pursuant to each of Section 3.2(a) and Section 3.2(b).
(e) The Company shall not be required to effect a
registration pursuant to this Section 3.2 during the period starting with the
date of filing of, and ending on the date one hundred eighty (180) days
following the effective date of the registration statement pertaining to its
Initial Offering, provided that the Company is making reasonable and good faith
efforts to cause such registration statement to become effective. In addition,
the Company shall not be required to effect a registration pursuant to this
Section 3.2 if within thirty (30) days of receipt of a written request from the
Requesting Holders pursuant to Section 3.2(a) or Initiating Holders pursuant to
Section 3.2(b), the Company gives notice to the Holders of the Company's
intention to make a public offering of the Company's common stock within sixty
(60) days.
(f) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this Section
3.2, a certificate signed by the President or the Chairperson of the Board
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than one hundred and twenty
(120) days after receipt of the request of the Initiating Holders or Requesting
Holders, as applicable; provided that such right to delay a request shall be
exercised by the Company no more than once in any one year period.
3.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans and corporate reorganizations) and will afford each such Holder an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder, provided, that such notice shall not
obligate the Company to file such registration statement. Each Holder desiring
to include in any such registration statement all or any part of the Registrable
Securities held by it shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing. Such
notice shall state the intended method
5.
<PAGE> 6
of disposition of the Registrable Securities by such Holder. If a Holder decides
not to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 3.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 3.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected by the Company for such underwriting. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the securities being offered by the
Company for its own account to be included in the registration and underwriting,
except that in no event shall the amount of securities of the Holders included
in the registration be reduced below thirty percent (30%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering, in which event any or all of the Registrable Securities of the Holders
may be excluded in accordance with the immediately preceding sentence. In no
event will shares of any other selling shareholder be included in such
registration which would reduce the number of shares which may be included by
any Holders without the written consent of Holders holding not less than a
majority of the Registrable Securities proposed to be sold in the offering.
3.4 FORM S-3 REGISTRATION. In case the Company shall receive from
either (a) the Series D Investors holding at least twenty percent (20%) of the
Series D Preferred Stock (the "REQUISITE SERIES D INVESTORS") (or common stock
issued upon conversion of the Series D Preferred Stock or a combination of such
common stock and Series D Preferred Stock) a written request or requests that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or (b) Series A Investors, Series B Investors, Series C Investors
and/or Series E Investors holding at least twenty percent (20%) of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and/or the
Series E Preferred Stock (the "REQUISITE JUNIOR INVESTORS") (or common stock
issued upon conversion of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and/or the Series E Preferred Stock or a
combination of such common stock and Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and/or the Series E Preferred Stock) a
written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or part of the
Registrable Securities owned by such Holder, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
6.
<PAGE> 7
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 3.4: (i) if
Form S-3 is not available for such offering by the Holders, (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$1,000,000, (iii) if the Company shall furnish to the Holders a certificate
signed by the President or Chairperson of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than sixty (60) days after receipt of the
request of the Holder or Holders under this Section 3.4; provided that such
right to delay a request shall be exercised by the Company no more than twice in
any one-year period, (iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected two registrations on
Form S-3 for the Holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock or Series E Preferred Stock or two registrations on
Form S-3 for the Holders of Series D Preferred Stock pursuant to this Section
3.4, or (v) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance. In
addition, the Company shall not be required to effect a registration pursuant to
this Section 3.4 if within thirty (30) days receipt of a written request from
Investors pursuant to this Section 3.4, the Company gives notice to the Holders
of the Company's intention to make a public offering of the Company's common
stock within sixty (60) days.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders.
3.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 3.2 or any registration under Section 3.3 or Section 3.4 herein shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for the Registration Expenses of
any registration proceeding begun pursuant to Sections 3.2 or 3.4, the request
of which has been subsequently withdrawn by the Initiating Holders, Requesting
Holders, Requisite Series D Investors or Requisite Junior Investors, as
applicable, unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders, Requesting Holders,
Requisite Series D Investors or Requisite Junior Investors, as applicable, were
not aware at the time of such request or (b) the Initiating Holders, Requesting
Holders, Requisite Series D Investors, or Requisite Junior Investors, as
applicable, agree to forfeit their right to one requested registration pursuant
to Section 3.2 or Section 3.4, as applicable. If the Holders are required to pay
the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to this Section 3.5, then the Holders shall not forfeit their rights
pursuant to Section 3.2 or Section 3.4 to a demand registration or registration
on Form S-3, respectively.
3.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
7.
<PAGE> 8
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
3.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 3 shall terminate and be of no further force and
effect upon the earlier of (a) seven years after the date
8.
<PAGE> 9
following the closing of the Company's Initial Offering or (b) as to any Holder,
when the Company's shares are publicly traded on a national market and such
Holder is able to sell all of his shares under Rule 144 within any ninety (90)
day period.
3.8 DELAY OF REGISTRATION: FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 3.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 3 that the selling Holders
shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be required to effect the registration of their
Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 3.2 or Section 3.4 if, due to the
operation of subsection 3.8(b) the number of shares or the anticipated aggregate
offering price of the Registrable Securities to be included in the registration
does not equal or exceed the number of shares or the anticipated aggregate
offering price required to originally trigger the Company's obligation to
initiate such registration as specified in Section 3.2 or Section 3.4, whichever
is applicable.
3.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 3.2, 3.3 or 3.4:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers and directors of
each Holder, any underwriter (as defined under the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Securities Exchange Act of 1934, as
amended, (the "1934 ACT"), against any losses, claims, damages, or liabilities
(joint or several) to which they may become subject under the Securities Act,
the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"VIOLATION") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 3.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs solely in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Holder, partner, officer, director,
underwriter or controlling person of such Holder.
9.
<PAGE> 10
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's partners,
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other Holder
may become subject under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs solely in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 3.9(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 3.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 3.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 3.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 3.9.
(d) If the indemnification provided for in this Section 3.9
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the Violation relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
10.
<PAGE> 11
(e) The foregoing indemnity agreements of the Company and
Holders are subject to the condition that, insofar as they relate to any
Violation made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the registration statement
in question becomes effective or the amended prospectus filed with the SEC
pursuant to SEC Rule 424(b) (the "FINAL PROSPECTUS"), such indemnity agreement
shall not inure to the benefit of any person if a copy of the Final Prospectus
was furnished to the indemnified party and was not furnished to the person
asserting the loss, liability, claim or damage at or prior to the time such
action is required by the Securities Act.
(f) The obligations of the Company and Holders under this
Section 3.9 shall survive the completion of any offering of Registrable
Securities in a registration statement and otherwise.
3.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of Registrable Securities;
provided, however, that no such transferee or assignee shall be entitled to
registration rights under Sections 3.2, 3.3 or 3.4 hereof unless it acquires at
least the greater of ten percent (10%) of such Holder's Registrable Securities
or twenty five thousand (25,000) shares of Registrable Securities (as adjusted
for stock splits and combinations) and the Company shall, within twenty (20)
days after such transfer, be furnished with written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration fights are being assigned. Notwithstanding the foregoing,
rights to cause the Company to register securities may be assigned to any
subsidiary, parent, general partner or limited partner of a Holder.
3.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section
3 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of at least seventy-five
percent (75%) of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 3.11 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 3, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
3.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of
Investors holding at least a majority of the Registrable Securities, enter into
any agreement with any holder or prospective holder of any securities of the
Company providing for the granting to such holder of registration rights
superior to those granted to the Holders pursuant to this Section 3, or of
registration rights pursuant to Sections 3.2, 3.3 or 3.4.
3.13 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of common stock (or other securities) of the Company, an Investor, a
Founder or a Warrant Holder shall not sell or otherwise transfer, dispose of,
make any short sale of, grant any option for the purpose of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any
common stock (or other securities) of the Company held by such Investor, Founder
or Warrant Holder (other than those included in the registration) for a period
specified by the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act relating to the Initial Offering and not to exceed
ninety (90) days following a subsequent underwritten registration, provided that
all officers, key employees and directors of the Company enter into similar
agreements. The obligations described in this Section 3.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form
11.
<PAGE> 12
S-4 or similar forms that may be promulgated in the future. The Company may
impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day or ninety (90) day period, as applicable.
SECTION 4. COVENANTS OF THE COMPANY.
4.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) The Company will furnish each Investor as soon as
practicable after the end of each fiscal year of the Company, and in any event
within ninety (90) days thereafter, a consolidated balance sheet of the Company,
as at the end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all prepared
in accordance with generally accepted accounting principles and setting forth in
each case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a balance sheet of the Company as of the end of each such
quarterly period, and a statement of income and a statement of cash flows of the
Company for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need to be attached to such statements and year-end audit
adjustments may not have been made.
(d) The Company will furnish each Investor (i) at least
thirty (30) days prior to the beginning of each fiscal year an annual budget of
sales and expenses for such fiscal year; and (ii) within twenty (20) days after
the end of each month, an unaudited balance sheet and statements of income and
cash flows, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made, but such statement shall
set forth applicable budget figures and variances from budget.
4.2 INSPECTION RIGHTS. Each Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, all at such reasonable times and as often as may
be reasonably requested; provided, however, that the Company shall not be
obligated under this Section 4.2 with respect to a competitor of the Company or
with respect to information which the Board of Directors determines in good
faith is confidential and should not, therefore, be disclosed.
4.3 CONFIDENTIALITY. Each Investor agrees that it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Investor may obtain from the Company, and which
the Company has prominently marked "confidential," "proprietary" or "secret" or
has otherwise identified as being such or if due to its character or nature, a
reasonable person in a like
12.
<PAGE> 13
position and under like circumstances would treat the information as
confidential, proprietary or secret, pursuant to financial statements, reports
and other materials submitted by the Company as required hereunder, or pursuant
to visitation or inspection rights granted hereunder unless such information is
or becomes known to the Investor from a source other than the Company which, to
such Investor's knowledge, is not under any confidentiality obligation, whether
imposed by law or contract or is or becomes publicly known without any breach of
this Section 4.3, or unless the Company gives its written consent to the
Investor's 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 an Investor's counsel or accountant, or to
an officer, director or partner of an Investor, provided that the Investor shall
inform the recipient of the confidential nature of such information, and shall
instruct the recipient to treat the information as confidential.
4.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Shares, all common stock issuable from time to time upon such conversion.
4.5 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it
will operate in a manner such that it will not become a "United States real
property holding corporation" ("USRPHC") as that term is defined in Section
897(c)(2) of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder. The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
thirty (30) days of a request from an Investor or any of its partners, the
Company will inform the requesting party, in the manner set forth in Reg.
Section 1.897- 2(h)(1) or any supplementary or successor provision thereto,
whether that party's interest in the Company constitutes a United States real
property interest (within the meaning of Internal Revenue Code Section 897(c)(1)
and the regulations thereunder) and whether the Company has provided to the
Internal Revenue Service all required notices as to its USRPHC status.
4.6 TERMINATION OF COVENANTS. All covenants of the Company contained
in Section 4 of this Agreement shall expire and terminate as to each Investor
immediately after the time of effectiveness of the Company's Initial Offering.
4.7 OBSERVER RIGHTS. Technology Funding Venture Partners V, An
Aggressive Growth Fund, L.P. and Rodale Press, Inc., shall have the right to
have a representative (the "REPRESENTATIVE") attend all meetings of the Board of
Directors in a nonvoting observer capacity, to receive notice of such meetings
and to receive the information provided by the Company to the Board of
Directors; provided, however, that the Representative and each person having
access to any of the information provided by the Company to the Board of
Directors must agree to hold in confidence and trust and to act in a fiduciary
manner with respect to all information so received during such meetings or
otherwise (which agreement shall be presumed by their attendance at any such
meeting or their acceptance of any such information); provided further, that the
Company reserves the right not to provide information and to exclude the
Representative from any meeting or portion thereof if delivery of such
information or attendance at such meeting by such Representative would result in
disclosure of trade secrets to such Representative or would adversely affect the
attorney-client privilege between the Company and its counsel.
13.
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4.8 CERTAIN COVENANTS RELATING TO SBA MATTERS.
(a) USE OF PROCEEDS. The investment proceeds from each
Investor which is a licensed Small Business Investment Company (an "SBIC
INVESTOR") (the "PROCEEDS") shall be used by the Company for its growth,
modernization or expansion. The Company shall provide each SBIC Investor and the
Small Business Administration (the "SBA") reasonable access to the Company's
books and records for the purpose of confirming the use of Proceeds.
(b) BUSINESS ACTIVITY. For a period of one year following
the date hereof, the Company shall not change the nature of its business
activity if such change would render the Company ineligible as provided in 13
C.F.R. Section 107.720.
(c) COMPLIANCE. So long as any SBIC Investor holds any
securities of the Company, the Company will at all times comply with the
non-discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
(d) INFORMATION FOR SBIC INVESTOR. Within forty-five (45)
days after the end of each fiscal year and at such other times as an SBIC
Investor may reasonably request, the Company shall deliver to such SBIC Investor
a written assessment, in form and substance satisfactory to such SBIC Investor,
of the economic impact of such SBIC Investor's financing specifying the
full-time equivalent jobs created or retained in connection with such
investment, and the impact of the financing on the Company's business in terms
of profits and on taxes paid by the Company and its employees. Upon request, the
Company agrees to promptly provide each SBIC Investor with sufficient
information to permit such Investor to comply with their obligations under the
Small Business Investment Act of 1958, as amended, and the regulations
promulgated thereunder and related thereto; provided, however, each SBIC
Investor agrees that it will protect any information which the Company labels as
confidential to the extent permitted by law. Any submission of any financial
information under this Section shall include a certificate of the company's
president, chief executive officer, treasurer or chief financial officer.
(e) NUMBER OF HOLDERS OF VOTING SECURITIES. So long as any
SBIC Investor holds any securities purchased pursuant to the Purchase Agreement
or issued by the Company with respect thereto, the Company shall notify each
SBIC Investor (i) at least fifteen (15) days prior to taking any action after
which the number of record holders of the Company's voting securities would be
increased from fewer than fifty (50) to fifty (50) or more, and (ii) of any
other action or occurrence after which the number of record holders of the
Company's voting securities was increased (or would increase) from fewer than
fifty (50) to fifty (50) or more, as soon as practicable after the Company
becomes aware that such other action or occurrence has occurred or is proposed
to occur.
SECTION 5. RIGHTS OF FIRST REFUSAL.
5.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities (as hereinafter
defined) that the Company may, from time to time, propose to sell and issue
after the date of this Agreement, other than the Equity Securities excluded by
Section 5.6 hereof. Each Investor's pro rata share, for purposes of this right
of first refusal, is equal to the ratio of the number of Shares (including all
shares of common stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to the total number of Shares (including all shares of common
stock issued or issuable upon conversion of the Shares) held by all Investors.
The term "EQUITY SECURITIES" shall mean (a) any stock or similar security of the
Company, (b) any security convertible, with or without
14.
<PAGE> 15
consideration, into any stock or similar security (including any option to
purchase such a convertible security), (c) any security carrying any warrant or
right to subscribe to or purchase any stock or similar security or (d) any such
warrant or right.
5.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal or state securities laws by virtue of such offer or sale.
5.3 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Section 4 shall not apply to and shall terminate
upon the closing of the Company's Initial Offering.
5.4 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of
the Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Investors who do so elect
and shall offer such Investors the right to acquire such unsubscribed shares
("SUBSCRIPTION NOTICE"). The Investors shall have five days after receipt of the
Subscription Notice to notify the Company of its election to purchase all or a
portion thereof of the unsubscribed shares. If the Investors fail to exercise in
full the rights of first refusal, the Company shall have ninety (90) days
thereafter to sell the Equity Securities in respect of which the Investors'
rights were not exercised, at a price and upon terms and conditions no more
favorable to the purchasers thereof than specified in the Company's notice to
the Investors pursuant to Section 5.2 hereof. If the Company has not sold such
Equity Securities within such ninety (90) days, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Investors in the manner provided above.
5.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
of each Investor under this Section 5 may be transferred to any constituent
partner or affiliate of such Investor, to any successor in interest to all or
substantially all the assets of such Investor, or to a transferee who acquires
the greater of ten percent (10%) of the Investor's Registrable Securities or
twenty-five thousand (25,000) shares (as adjusted for stock splits, combinations
and the like) of Registrable Securities, provided that such transferee agrees in
writing to be bound by the provisions of this Agreement.
5.6 EXCLUDED SECURITIES. The rights of first refusal established by
this Section 5 shall have no application to any of the following Equity
Securities:
(a) shares of common stock issuable or issued to employees,
officers, directors or consultants of the Company directly (or pursuant to stock
purchase or option plans), which number shall not include additional shares of
common stock reissued to employees, officers, directors or consultants of the
Company after any repurchase of shares of common stock issued to or held by
employees, officers, directors or consultants of the Company upon termination of
their employment or services pursuant to any agreement providing for such
repurchases;
(b) stock issued pursuant to any rights, agreements or
warrants outstanding as of the date hereof;
15.
<PAGE> 16
(c) any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) any Equity Securities that are issued by the Company as
part of an underwritten public offering referred to in
Section 5.3 hereof;
(e) shares of common stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;
(f) shares of common stock issued upon conversion of the
preferred stock of the Company;
(g) shares of Securities (as hereinafter defined in Section
6 hereof); or
(h) any Equity Securities issued pursuant to any equipment
leasing arrangement, bank financing, licenses or non-financial business
arrangements.
SECTION 6. PARTICIPATION RIGHTS.
6.1 PARTICIPATION RIGHTS. Each Investor shall have a participation
right to purchase its pro rata share of all Securities (as hereinafter defined)
that the Company may, from time to time, propose to sell or issue pursuant to
Section 6.2 or Section 7.1 hereof in connection with the Company's right to
purchase shares of Women.com Networks LLC (the "LLC") (as defined in the
Liability Company Agreement of Women.com Networks LLC by and between Women.com
Networks and Hearst HomeArts, Inc. dated January 27, 1999 (the "LLC AGREEMENT")
attached hereto as EXHIBIT B and for purposes of this Agreement the "SHARES," as
defined in such LLC Agreement, shall be hereinafter defined as the "LLC SHARES")
(individually, a "PARTICIPATION RIGHT" and collectively, the "PARTICIPATION
RIGHTS"). Each Investor's pro rata share, for purposes of these Participation
Rights and the Capital Call (as defined below), shall be equal to the ratio of
the number of Shares (including all shares of common stock issued or issuable
upon conversion of the Shares) which such Investor is deemed to hold immediately
prior to the issuance of such Securities to the total number of Shares
(including all shares of common stock issued or issuable upon conversion of the
Shares) held by all Investors. The Investors herein agree to vote their Shares
(including all shares of common stock issued upon conversion of the Shares) to
approve the issuance of the Securities and to approve all amendments to existing
agreements and agreements required to effectuate such issuance, including, but
not limited to, approving an amendment to the Company's Amended and Restated
Articles of Incorporation in order to authorize such Securities. The term
"SECURITIES" for purposes of this Agreement shall mean the preferred security
that the Company will propose to sell in connection with the purchase of the LLC
Shares at such time as the Company receives a Participation Notice (as
hereinafter defined in Section 6.2 hereof) or receives notice of a Capital Call
from the Management Committee of the LLC.
6.2 EXERCISE OF RIGHTS. In the event that the Company receives a
written notice from the LLC (the "PARTICIPATION NOTICE") setting forth the
amount of the LLC Shares which the LLC proposes to sell or issue, the price
(before any commission or discount) at which such LLC Shares are proposed to be
issued (or, in the case of an underwritten or privately placed offering in which
the price is not known at the time the Participation Notice is given, the method
for determining such price and an estimate thereof), and all other relevant
information as to such proposed transaction as may be necessary for the Members
(as defined in the LLC Agreement) to determine whether or not to exercise the
rights granted in Section 8.04 of such LLC Agreement or receives notice of a
Capital Call by the Management
16.
<PAGE> 17
Committee of the LLC pursuant to Section 3.12 of the LLC Agreement, then the
Company shall propose to sell an equivalent number of Securities to the
Investors at the same price per share upon which the LLC Shares shall be sold to
the Company. The Company shall deliver a written notice to each of the Investors
within three days of receipt of the Participation Notice or the notice of a
Capital Call, as applicable, describing the Securities, the price and the terms
and conditions upon which the Company proposes to issue the same (the "COMPANY
Notice"). Each Investor shall have seven days from the giving of such Company
Notice to agree to purchase its pro rata share of the Securities for the price
and upon the terms and conditions specified in the Company Notice by giving
written notice to the Company and stating therein the quantity of Securities to
be purchased by such Investor (the "EXERCISE NOTICE"). Pursuant to such Exercise
Notice, the Investor shall state the aggregate amount of Securities that the
Investor elects to purchase in such sale of Securities; provided, however, if
Investors subscribe for a number of Securities in excess of the aggregate amount
proposed to be sold by the Company in such transaction, the Investors shall be
cut back proportionally based on their pro rata share percentages determined in
accordance with the ratios specified in Section 6.1 hereof. Each Exercise Notice
shall be irrevocable, subject to the conditions of closing of the transaction
giving rise to the Participation Rights, as provided for in Section 8.04 of the
LLC Agreement, or the conditions to a Capital Call as described in Section 3.12
of the LLC Agreement and Section 7.1 herein. The Company shall utilize the
proceeds from the sale of such Securities to purchase corresponding LLC Shares
on the terms specified in such Participation Notice within the requisite
timeframe specified in Section 8.04 of the LLC Agreement or the terms of the
Capital Call, as applicable. Notwithstanding the foregoing, the Company shall
not be required to offer or sell such Securities to any Investor who would cause
the Company to be in violation of applicable federal or state securities laws by
virtue of such offer or sale.
6.3 TIMING OF SALE. If, with respect to any Company Notice, the
Investors fail to exercise in full their Participation Rights with respect to
any offering of Securities, the Company shall have eleven (11) days thereafter
to sell the Securities in respect of which the Investors' rights were not
exercised, at a price and upon terms and conditions no more favorable to the
purchasers thereof than specified in the Company Notice to the Investors
pursuant to Section 6.2 hereof. If the Company has not sold such Securities
within such eleven (11) day period, the Company shall not thereafter issue or
sell any Securities without first offering such securities to the Investors in
the manner provided above.
6.4 TERMINATION. Such Participation Rights shall not apply to, and
shall terminate upon the closing of, the Initial Public Offering (as defined in
the LLC Agreement).
SECTION 7. CAPITAL CALLS.
7.1 OPERATION OF CAPITAL CALLS. Upon a request from the Management
Committee of the LLC pursuant to Section 3.12 of the LLC Agreement for an
additional capital contribution from the Company (the "CAPITAL CALL"), the
Company agrees to take the following actions. Upon receipt of such request for
additional capital, the Company shall send a written notice to the Investors
within three days of receipt of the notice of the Capital Call stating the
amount requested by the Management Committee and the purpose of such Capital
Call (the "CALL NOTICE") as described in Section 6.2 hereof. The Investors shall
have seven days from the giving of such Call Notice to notify the Company of how
much capital they would be willing to contribute in connection with such Capital
Call (the "COMMITTED AMOUNT") in accordance with the requirements of Section 6.2
hereof. The Company shall notify the Management Committee of the Committed
Amount; provided, however, the Company shall not commit funds in excess of such
Committed Amount to the LLC and shall not agree to transfer the Committed Amount
to the LLC without additional LLC Shares being issued to the Company in
connection with such contribution of any Committed Amount as described in
Section 6.2 hereof. In conjunction with the
17.
<PAGE> 18
issuance of LLC Shares to the Company in connection with such Capital Call, the
Company shall issue Securities to the participating Investors in accordance with
Sections 6.1 and 6.2 hereof. If the Investors do not agree to contribute any
funds to the LLC pursuant to such Capital Call, the Company, as a Member of the
LLC, shall not approve any capital contribution requested by the Management
Committee of the LLC, which requires a pro rata contribution by the Company with
the other Members of such LLC.
SECTION 8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within the State
of California.
8.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
8.3 SUCCESSORS AND ASSIGNS. Except in connection with a merger or
sale of substantially all the assets of the Company, or as otherwise expressly
provided herein, this Agreement, and the rights and obligations hereunder, may
not be assigned by any party hereto without the prior written consent of the
Company, the Founders and the holders of at least a majority in interest of the
Shares. The provisions hereof shall inure to the benefit of, and be binding
upon, the successors, permitted assigns, heirs, executors, and administrators of
the parties hereto; provided, however, that prior to the receipt by the Company
of adequate written notice of the transfer of any Registrable Securities
specifying the full name and address of the transferee, the Company may deem and
treat the person listed as the holder of such shares in its records as the
absolute owner and holder of such shares for all purposes, including the payment
of dividends or any redemption price.
8.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
8.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement
may be amended or modified only upon the written consent of the Company and the
holders of at least a majority of the Shares (including any common stock of the
Company issued upon the conversion of the Shares). In addition, any amendment
that adversely affects the rights of any Founder shall require the written
consent of such Founder.
(b) Except as otherwise expressly provided, the obligations
of the Company and the rights of the Holders and the Founders under this
Agreement may be waived only with the written consent of the Company and the
holders of at least a majority of the Shares (including any common stock of the
Company issued upon the conversion of the Shares). In addition, any waiver that
adversely affects the rights of any Founder shall require the written consent of
the Founder.
18.
<PAGE> 19
(c) Any amendment or waiver effected in accordance with this
Section 8.5 shall be binding upon each Holder, its successors and assigns, the
Company and each Founder, its successors and assigns.
(d) The Company, the Founders and the Holders which are
parties to the Prior Agreement, agree that such Prior Agreement is hereby
terminated and superseded by the terms hereof. Without limiting the generality
of the foregoing, the rights of first refusal and the Participation Rights
specified in Section 6.2 and the notice of requirements of Sections 5, 6 and 7
hereof with regard to any issuances of Series E Preferred Stock are hereby
waived.
8.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any party hereto, upon any
breach, default or noncompliance of any other party hereto under this Agreement
shall impair any such right, power, or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent, or approval of
any kind or character on any party's part of any breach, default or
noncompliance under the Agreement or any waiver on such party's part of any
provisions or conditions of this Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, by law, or otherwise afforded to the
parties hereto, shall be cumulative and not alternative.
8.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex; (c) five days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) one day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the party to be notified at the
address as set forth on the signature page hereof with regard to the Company and
the Founders, and on EXHIBIT A hereto with regard to the Investors and Warrant
Holders or at such other address as such party may designate by ten days advance
written notice to the other parties hereto.
8.8 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right of such prevailing party under or with respect
to this Agreement, including without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation,
all fees, costs and expenses of appeals.
8.9 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
8.10 PRONOUNS. All pronouns contained herein and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the parties hereto may require.
8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
19.
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTORS' RIGHTS AGREEMENT as of the date first above written.
COMPANY: WOMEN.COM NETWORKS
By: /s/ MARLEEN MCDANIEL
---------------------------------
Marleen McDaniel, President
/s/ ELLEN PACK
FOUNDER(S): ---------------------------------
Ellen Pack
/s/ MARLEEN MCDANIEL
---------------------------------
Marleen McDaniel
INVESTOR(S): ---------------------------------
(Name of Entity, if applicable)
By:
---------------------------------
(Signature)
Title:
---------------------------------
WARRANT HOLDER(S): ---------------------------------
(Name of Entity, if applicable)
By:
---------------------------------
(Signature)
Title:
---------------------------------
20.
<PAGE> 21
================================================================================
WOMEN.COM NETWORKS
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
MAY 7, 1999
================================================================================
<PAGE> 22
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT..................1
1.1 Amendment and Restatement.....................................1
SECTION 2. GENERAL.......................................................2
2.1 Definitions...................................................2
SECTION 3. REGISTRATION; RESTRICTIONS ON TRANSFER........................3
3.1 Restrictions on Transfer......................................3
3.2 Demand Registration...........................................4
3.3 Piggyback Registrations.......................................5
3.4 Form S-3 Registration.........................................6
3.5 Expenses of Registration......................................7
3.6 Obligations of the Company....................................7
3.7 Termination of Registration Rights............................8
3.8 Delay of Registration: Furnishing Information.................9
3.9 Indemnification...............................................9
3.10 Assignment of Registration Rights............................11
3.11 Amendment of Registration Rights.............................11
3.12 Limitation on Subsequent Registration Rights.................11
3.13 "Market Stand-Off" Agreement.................................11
SECTION 4. COVENANTS OF THE COMPANY.....................................12
4.1 Basic Financial Information and Reporting....................12
4.2 Inspection Rights............................................12
4.3 Confidentiality..............................................12
4.4 Reservation of Common Stock..................................13
4.5 Real Property Holding Corporation............................13
4.6 Termination of Covenants.....................................13
4.7 Observer Rights..............................................13
4.8 Certain Covenants Relating to SBA Matters....................14
SECTION 5. RIGHTS OF FIRST REFUSAL......................................14
5.1 Subsequent Offerings.........................................14
5.2 Exercise of Rights...........................................15
5.3 Termination of Rights of First Refusal.......................15
</TABLE>
i.
<PAGE> 23
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
5.4 Issuance of Equity Securities to Other Persons...............15
5.5 Transfer of Rights of First Refusal..........................15
5.6 Excluded Securities..........................................15
SECTION 6. PARTICIPATION RIGHTS.........................................16
6.1 Participation Rights.........................................16
6.2 Exercise of Rights...........................................16
6.3 Timing of Sale...............................................17
6.4 Termination..................................................17
SECTION 7. CAPITAL CALLS................................................17
7.1 Operation of Capital Calls...................................17
SECTION 8. MISCELLANEOUS................................................18
8.1 Governing Law................................................18
8.2 Survival.....................................................18
8.3 Successors and Assigns.......................................18
8.4 Separability.................................................18
8.5 Amendment and Waiver.........................................18
8.6 Delays or Omissions..........................................19
8.7 Notices......................................................19
8.8 Attorneys' Fees..............................................19
8.9 Titles and Subtitles.........................................19
8.10 Pronouns.....................................................19
8.11 Counterparts.................................................19
</TABLE>
ii.
<PAGE> 24
EXHIBIT A
SCHEDULE OF INVESTORS AND WARRANT HOLDERS
MediaOne Interactive Services, Inc.
188 Inverness Drive West, Suite 600
Englewood, CO 80112
El Dorado Ventures III, L.P.
El Dorado Technology IV, L.P.
2400 Sand Hill Road
Suite 100
Menlo Park, 94025
AVI Capital, L.P.
Associated Venture Investors III, L.P.
AVI Silicon Valley Partners, L.P.
One First Street, Suite 12
Los Altos, CA 94022
Technology Funding Partners III, L.P.
Technology Funding Venture Partners IV, an Aggressive Growth Fund, L.P.
Technology Funding Venture Partners V, an Aggressive Growth Fund, L.P.
2000 Alameda de las Pulgas, Suite 250
San Mateo, CA 94403
HC Crown Corp.
2501 McGee, Box 419580
Kansas City, MO 64141
Karen & Dan Lynch Family Trust
25660 Lalanne Court
Los Altos Hills, CA 94022
Charles Splaine
15951 Los Gatos Boulevard
Los Gatos, CA 95032
Lore McGovern
811 Chiltern Road
Hillsborough, CA 94010
Ellen E. Pack
Women.com Networks
1820 Gateway Drive, Suite 100
San Mateo, CA 94404
EXHIBIT A-1
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
GC&H Investments
One Maritime Plaza, 20th Floor
San Francisco, CA 94111-3580
Lawrence Owen Brown, Brooks H. Brown,
Trustees of the Lawrence Owen Brown Family Trust
U/D/T dated 10/30/87
10753 Farwell Avenue
Saratoga, CA 95070
John Marman
21 Halmark Circle
Menlo Park, CA 94025
Carol Ann Bartz, Trustee of the Carol Ann Bartz Trust dated October 14, 1997
c/o AutoDesk
111 McInnis Parkway
San Rafael, CA 94903
Dorothy Pack
12 Herkimer Road
Scarsdale, NY 10583
William B. Elmore and Mary Jane Elmore, Trustees of the
Elmore Living Trust UTA dated 07/27/90
c/o Foundation Capital
75 Willow Road, Suite 103
Menlo Park, CA 94025
David H. Parks
1281 Windimer Drive
Los Altos, CA 94024
K. Flynn McDonald
Vector Fund Management
1 Embarcadero Center
Suite 3820
San Francisco, CA 94111
ABS Employees' Venture Fund Limited Partnership
375 West Padonia Road
Timonium, MD 21093
Achiever, Inc.
c/o International Trade & Investment
Box N-1201-Marlborough Hse
Cumberland St.
Nassau, Bahamas
EXHIBIT A-2
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
Alfred J. Anzalone Limited Family Partnership
7893 West Mesa Vista Avenue
Las Vegas, NV 89113-1572
Charles C. Baum
c/o United Holdings, Inc.
2545 Wilkens Avenue
Baltimore, MD 21223-3333
Betts Family, L.C.
1619 Wythe Road
Lynchburg, VA 24501
W. Earle Betts III
1619 Wythe Road
Lynchburg, VA 24501
Sidney Brown
24 Holly Oak Drive
Voorhees, NJ 08043-1533
Timothy Bright
c/o Standard Mortgage Holding Company
300 Plaza, One Shell Square
New Orleans, LA 70139
John D. Craft, Jr.
3640 Edinborough Drive
Rochester Hills, MI 48306-3632
J&T Investments
c/o John D. Crawford and Thomas Keefe
11817 Canon Boulevard, Suite 600
Newport News, VA 23606
Jack Dane
1719 Green Street
San Francisco, CA 94123
Daniel F. Dent
2 East Read Street, 6th Floor
Baltimore, MD 21202
Orrin Devinsky
97 Westview Road
Short Hills, NJ 07078-1268
EXHIBIT A-3
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 27
Debra Diamond & Associates, Inc.
c/o Dauphin Capital Partners
1921 West Joppa Road
Baltimore, MD 21204-1848
3GT Investment Partnership
845 Larch Avenue
Elmhurst, IL 60126-1196
Edward M. Dunn
17518 Woodcamp Road
Mt. Airy, MD 21771-3226
The Hyman Dushman Family Trust
7608-B Lexington Club Boulevard
Del Ray Beach, FL 33446-3413
D.W.B. Associates
1619 Wythe Road
Lynchburg, VA 24501
George Erdi and Maria Erdi
2 Longspur
Portola Valley, CA 94028
Essex High Technology Fund, L.P.
c/o Essex Investment Management Company
125 High Street, 29th Floor
Boston, MA 02110-2702
Essex High Technology Fund (Bermuda), L.P.
c/o Essex Investment Management Company
125 High Street, 29th Floor
Boston, MA 02110-2702
Fanaroff Investment Partnership
5809 Nicholson Lane, Apt. 1009
Rockville, MD 20852
Stanford C. Finney, Jr.
8201 Preston Road, Suite 400
Dallas, TX 75225
David A. Friedman, Trustee, 1993 Revocable Trust
2637 Larkin Street
San Francisco, CA 94109
EXHIBIT A-4
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 28
Jay H. Gershberg
c/o Bagel Bros.
6000 North Bailey Avenue, Suite 2D
Amherst, NY 14226-5102
Robert S. Gershberg
c/o Bagel Bros.
6000 North Bailey Avenue, Suite 2D
Amherst, NY 14226-5102
Heather Gilker
7303 Tokalm Drive
Dallas, TX 75214
Maresol L.P.
c/o Henry Gonsalves
7 Great Meadows Lane
Lincoln, RI 02865
Greenwood Equities, LLC
c/o Piper & Marbury
36 S. Charles Street
Baltimore, MD 21201
Attn: Stanard T. Klinefelter
Charles R. Hart, Jr.
c/o Hart & Watters
12400 Wilshire Boulevard, Suite 500
Los Angeles, CA 90025
H & K Partnership
c/o Morris Helman
7100 Rutherford Road
Baltimore, MD 21244-2702
JPK Partners
c/o Argonaut Securities Co.
1155 Battery Street, LS7
San Francisco, CA 94111
Attn: Peter Haas, Jr.
James W. Johnston
c/o Stonemaker Ent., Inc.
380 Knollwood Street, Suite 570
Winston-Salem, NC 27103
EXHIBIT A-5
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 29
Klaus Kretschmer
46 Brook Way
Demarest, NJ 07627
Albert Lamar
5901 Garfield Street
New Orleans, LA 70115
Lincoln Trust Company
P.O. Box 5831
Denver, CO 80217
Attn: Tamara V. Armour
H. Mark Lunenburg
11 Whitehall Place
Farmington, CT 06032
Dan Lynch
25660 La Lanne Court
Los Altos Hills, CA 94022
Montague-Betts Company
1619 Wythe Road
Lynchburg, VA 24501
Attn: W. Earle Betts III
Philip Monego, Sr.
811 Revere Way
Woodside, CA 94062
William A. Newsom
c/o Newsom Associates
3717 Buchanan Street, 2nd Floor
San Francisco, CA 94123
Albert and Pearl Nipon
15 W. Old Gulph Road
Gladwyne, PA 19035
Northport Private Equity, LLC
122 S. Michigan Avenue, Suite 1700
Chicago, IL 60603
Attn: David T. Shelby
Loren Pack
215 East 68th Street, Apt. 29G
New York, NY 10021
EXHIBIT A-6
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 30
Russell and Sherry Paterra, as Community Property
16 Craig Avenue
Piedmont, CA 94611
G. Richard Patton
2035 St. Andrews Drive
Nevillewood, PA 15142-1012
Phoenix Small Cap Fund
56 Prospect Street
Hartford, CT 06115
Attn: Tom Gilbert
Donald L. Poarch
1041 Conrad Saver
Houston, TX 77043
Prism IV Investment Partnership
1300 York Road, Suite 180
Lutherville, MD 21093
Attn: Charles Freeland
Rainbow Trading Partners, Ltd.
8201 Preston Road, Suite 400
Dallas, TX 75225
Attn: Stanford C. Finney, Jr.
Rainbow Trading Venture Partners, L.P.
8201 Preston Road, Suite 400
Dallas, TX 75225
Attn: Stanford C. Finney, Jr.
Howard E. Rachofsky
c/o Regal Capital
8201 Preston Road, Suite 400
Dallas, TX 75225
Kevin P. Reilly, Sr.
Post Office Box 66613
Baton Rouge, LA 70896
Sean Reilly
Post Office Box 66338
Baton Rouge, LA 70896
EXHIBIT A-7
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 31
Rodale Press, Inc.
33 East Minor Street
Emmaus, PA 18098
Attn: Barbara Newton
Rita Rome
1428 Colton Road
Gladwyne, PA 19035
Aloysius D. Rossi
c/o Young Estates
Post Office Box 490
Drums, PA 18222
David J. Rossi
141 Moseywood Road
Post Office Box 495
Lake Harmony, PA 18624
Michael Rubin
1840 Aloha Lane
Gladwyne, PA 19035
Ronald D. Sippel
1312 Church Street
Evanston, IL 60201-3508
Bryan Splaine
15951 Los Gatos Boulevard
Los Gatos, CA 95032
The Springs Company
P. O. Drawer 460
104 East Springs Street
Lancaster, SC 29720
Attn: William G. Taylor
Standard Mortgage Holding Corporation
300 Plaza, One Shell Square
New Orleans, LA 70139
Attn: Edgar Bright
Presley and Antonia Taylor III
2408 Rutland Road
Davidsonville, MD 21035
Tennyson Private Placement Opportunity Fund, LLP
c/o Walpert Smullian & Blumenthal
EXHIBIT A-8
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 32
29 West Susquehanna Avenue, 4th Floor
Baltimore, MD 21204
Attn: Alfred M. Walpert
TriVentures
410-17th Street, Suite 1705
Denver, CO 80202
Dyan Triffo
c/o BT Alex. Brown Incorporated
1990 Beach Street, #304
San Francisco, CA 94123
Turtle & Company
Jonathan Cohen and Eleanor Friedman-Cohen
c/o Nuland and Arshad, Inc.
176 Federal Street, 5th Floor
Boston, MA 02210-2209
Attn: James Nuland
Mary Colleen Underhill
1901 Stonegate Road
Anchorage, KY 40223
Wakefield Partners, L.P.
10 Avon Meadow Lane
Avon, CT 06001-3737
Attn: Steven W. Ballentine
Warburg Pincus Institutional Fund, Inc. - Small Companies Growth Portfolio
466 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Steve Lurito
Warburg Pincus Post-Venture Capital Fund, Inc.
466 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Steve Lurito
Warburg Pincus Trust, Inc. Post-Venture Capital Portfolio
466 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Steve Lurito
EXHIBIT A-9
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 33
Willou & Co.
P.O. Box 10856
Greenville, SC 29603
Attn: Richard L. King
Women, LLC
514 North Crain Highway
Glen Burnie, MD 21061
Attn: Joel D. Fedder
Women's Growth Capital Fund I, LLP
1029 - 31st Street, NW
Washington, DC 20007
Attn: Wendee Kanarek
John Papazian
118 Pea Place
Kula, HI 96790
EXHIBIT A-10
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 34
EXHIBIT B
LIMITED LIABILITY COMPANY AGREEMENT OF WOMEN.COM NETWORKS LLC BETWEEN HEARST
HOMEARTS, INC. AND WOMEN.COM NETWORKS DATED JANUARY 27, 1999
EXHIBIT B-1
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 1
EXHIBIT 10.1.1
WOMEN.COM NETWORKS
AMENDED AND RESTATED 1998 EQUITY INCENTIVE PLAN
APPROVED BY THE BOARD OF DIRECTORS AND ADOPTED APRIL 2, 1998
APPROVED BY SHAREHOLDERS ON MAY 31, 1998
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS ON MAY 26, 1998
AMENDED AND RESTATED 1998 EQUITY INCENTIVE PLAN APPROVED BY SHAREHOLDERS ON
SEPTEMBER 15, 1998
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS ON NOVEMBER 13, 1998
AMENDED AND RESTATED 1998 EQUITY INCENTIVE PLAN APPROVED BY SHAREHOLDERS ON
DECEMBER 17, 1998
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS ON MARCH 31, 1999
AMENDED AND RESTATED 1998 EQUITY INCENTIVE PLAN APPROVED BY SHAREHOLDERS ON
MARCH 31, 1999
AMENDED AND RESTATED BY THE BOARD OF DIRECTORS ON MAY _________, 1999
AMENDED AND RESTATED 1998 EQUITY INCENTIVE PLAN APPROVED BY THE SHAREHOLDERS ON
__________, 1999
TERMINATION DATE: APRIL 1, 2008
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
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(d) "COMMITTEE" means a committee of one or more Directors appointed by
the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Women.com Networks, a California corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market System or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were
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reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, a person
who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated
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corporation" receiving compensation for prior services (other than benefits
under a tax qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently receiving direct or
indirect remuneration from the Company or an "affiliated corporation" for
services in any capacity other than as a Director or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this Women.com Networks Amended and Restated 1998
Equity Incentive Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(dd) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock Award shall
be granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
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(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan
to a Committee or Committees of one (1) or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (1) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (2) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (ii)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the shares that may be issued pursuant to
Stock Awards shall not exceed in the aggregate eight million eight hundred
twenty-two thousand five hundred (8,822,500) shares of Common Stock less the
number of shares issued or issuable pursuant to the exercise of options granted
under the Company's 1994 Stock Option Plan on the date of such proposed
issuance.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted Stock), the
shares not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. If any Common Stock acquired pursuant to
the exercise of an Option shall for any reason be repurchased by the Company
under an unvested share repurchase option provided under the Plan, the shares
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The shares subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
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(d) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares issuable upon exercise of all
outstanding Options and the total number of shares provided for under any stock
bonus or similar plan of the Company shall not exceed the applicable percentage
as calculated in accordance with the conditions and exclusions of Section
260.140.45 of Title 10 of the California Code of Regulations, based on the
shares of the Company which are outstanding at the time the calculation is
made.(1)
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants. However, Stock Awards
may not be granted to any of the following persons: (i) any officer, member of
the Board of Directors or employee of The Hearst Corporation or (ii) any
officer, member of the Board of Directors or employee of any affiliate of The
Hearst Corporation other than the Company.
(b) TEN PERCENT SHAREHOLDERS.
(i) A Ten Percent Shareholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Shareholder
shall not be granted a Nonstatutory Stock Option unless the exercise price of
such Option is at least (i) one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Shareholder
shall not be granted a restricted stock award unless the purchase price of the
restricted stock is at least (i) one hundred percent (100%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be eligible to
be granted Options covering more than six hundred thousand (600,000) shares of
the Common Stock during any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, this subsection 5(c)
shall not apply until (i) the earliest of: (1) the first material modification
of the Plan (including any increase in the number of shares reserved for
issuance under the Plan in accordance with Section 4); (2)
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(1) Section 260.140.45 generally provides that the total number of shares
issuable upon exercise of all outstanding options (exclusive of certain rights)
and the total number of shares called for under any stock bonus or similar plan
shall not exceed a number of shares which is equal to 30% of the then
outstanding shares of the issuer (convertible preferred or convertible senior
common shares counted on an as if converted basis), exclusive of shares subject
to promotional waivers under Section 260.141, unless a percentage higher than
30% is approved by at least two-thirds of the outstanding shares entitled to
vote.
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the issuance of all of the shares of Common Stock reserved for issuance under
the Plan; (3) the expiration of the Plan; or (4) the first meeting of
shareholders at which Directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
(d) CONSULTANTS.
(i) Prior to the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is not exempt
under Rule 701 of the Securities Act ("Rule 701") because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by Rule 701, unless
the Company determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities Act as well as
comply with the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not
be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a Form S-3 Registration Statement) or
(B) does not require registration under the Securities Act in order to comply
with the requirements of the Securities Act, if applicable, and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.
(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are
available to consultants and advisors only if (i) they are natural persons; (ii)
they provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or (for Rule 701 purposes only) majority-owned subsidiaries of the
issuer's parent; and (iii) the services are not in connection with the offer or
sale of securities in a capital-raising transaction, and do not directly or
indirectly promote or maintain a market for the issuer's securities.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares purchased on exercise of each type of Option. The
provisions of separate Options need not be identical, but each Option shall
include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not
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less than one hundred percent (100%) of the Fair Market Value of the shares
subject to the Option on the date the Option is granted. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise price lower
than that set forth in the preceding sentence if such Option is granted pursuant
to an assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
shares subject to the Option on the date the Option is granted. The exercise
price of each Nonstatutory Stock Option granted on or after the Listing Date
shall be not less than eighty-five percent (85%) of the Fair Market Value of the
shares subject to the Option on the date the Option is granted. Notwithstanding
the foregoing, a Nonstatutory Stock Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of shares acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by (1) delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or (3) in any
other form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and, to the extent provided
in the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to
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the Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee
who is not an Officer, Director or Consultant shall provide for vesting of the
total number of shares of Common Stock at a rate of at least twenty percent
(20%) per year over five (5) years from the date the Option was granted, subject
to reasonable conditions such as continued employment; and
(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than thirty (30)
days, unless such termination is for cause), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which, for Options granted prior to the Listing Date, shall
not be less than six (6) months) or (ii) the expiration of the term of
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the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which, for Options granted prior to the Listing Date, shall not be
less than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option.
Subject to the "Repurchase Limitation" in subsection 10(h), any unvested shares
so purchased may be subject to an unvested share repurchase option in favor of
the Company or to any other restriction the Board determines to be appropriate.
(n) RIGHT OF REPURCHASE. Subject to the "Repurchase Limitation" in
subsection 10(h), the Option may, but need not, include a provision whereby the
Company may elect, prior to the Listing Date, to repurchase all or any part of
the vested shares acquired by the Optionholder pursuant to the exercise of the
Option.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares exercised pursuant to the
Option. Except as expressly provided in this subsection 6(o), such right of
first refusal shall otherwise comply with any applicable provisions of the
Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however,
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that the designation of any Re-Load Option as an Incentive Stock Option shall be
subject to the one hundred thousand dollar ($100,000) annual limitation on the
exercisability of Incentive Stock Options described in subsection 10(d) and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and the "Section 162(m) Limitation" on
the grants of Options under subsection 5(c) and shall be subject to such other
terms and conditions as the Board may determine which are not inconsistent with
the express provisions of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in
consideration for past services actually rendered to the Company or an Affiliate
for its benefit.
(ii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock awarded under the stock bonus agreement
may, but need not, be subject to a share repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may reacquire any or all of the
shares of Common Stock held by the Participant which have not vested as of the
date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. For a stock bonus award made before the
Listing Date, rights to acquire shares under the stock bonus agreement shall not
be transferable except by will or by the laws of descent and distribution and
shall be exercisable during the lifetime of the Participant only by the
Participant. For a stock bonus award made on or after the Listing Date, rights
to acquire shares under the stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the stock
bonus agreement, as the Board shall determine in its discretion, so long as
stock awarded under the stock bonus agreement remains subject to the terms of
the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. Subject to the provisions of subsection
5(b) regarding Ten Percent Shareholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the Board shall
determine and designate in such restricted stock purchase agreement. For
restricted stock awards made prior to the Listing Date, the purchase price shall
not be less than eighty-five
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percent (85%) of the share's Fair Market Value on the date such award is made or
at the time the purchase is consummated. For restricted stock awards made on or
after the Listing Date, the purchase price shall not be less than eighty-five
percent (85%) of the share's Fair Market Value on the date such award is made or
at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) VESTING. Subject to the "Repurchase Limitation" in
subsection 10(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. Subject
to the "Repurchase Limitation" in subsection 10(h), in the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the restricted stock
purchase agreement.
(v) TRANSFERABILITY. For a restricted stock award made before
the Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. For a restricted stock award made on or after the
Listing Date, rights to acquire shares under the restricted stock purchase
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock purchase agreement, as the
Board shall determine in its discretion, so long as shares awarded under the
restricted stock purchase agreement remains subject to the terms of the
restricted stock purchase agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any shares issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of shares under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell shares upon exercise of such Stock Awards unless and until such authority
is obtained.
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9. USE OF PROCEEDS FROM SHARES.
Proceeds from the sale of shares pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of shares with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring shares under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the shares
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the shares. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of shares under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the shares.
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(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of shares
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the Participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) INFORMATION OBLIGATION. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to Participants at
least annually. This subsection 10(g) shall not apply to key Employees whose
duties in connection with the Company assure them access to equivalent
information.
(h) REPURCHASE LIMITATION. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at the time
of repurchase or at not less than the original purchase price. To the extent
required by Section 260.140.41 and Section 260.140.42 of Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer, Director or Consultant shall be upon the terms described
below:
(i) FAIR MARKET VALUE. If the repurchase option gives the
Company the right to repurchase the shares upon termination of employment at not
less than the Fair Market Value of the shares to be purchased on the date of
termination of Continuous Service, then (i) the right to repurchase shall be
exercised for cash or cancellation of purchase money indebtedness for the shares
within ninety (90) days of termination of Continuous Service (or in the case of
shares issued upon exercise of Stock Awards after such date of termination,
within ninety (90) days after the date of the exercise) or such longer period as
may be agreed to by the Company and the Participant (for example, for purposes
of satisfying the requirements of Section 1202(c)(3) of the Code regarding
"qualified small business stock") and (ii) the right terminates when the shares
become publicly traded.
(ii) ORIGINAL PURCHASE PRICE. If the repurchase option gives
the Company the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to repurchase at the
original purchase price shall lapse at the rate of at least twenty percent (20%)
of the shares per year over five (5) years from the date the Stock Award is
granted (without respect to the date the Stock Award was exercised or became
exercisable) and (ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for the shares within ninety (90)
days of termination of Continuous Service (or in the case of shares issued upon
exercise of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company and the Participant (for example, for purposes of satisfying the
requirements of Section 1202(c)(3) of the Code regarding "qualified small
business stock").
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the shares
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the
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Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to subsection 4(a) and the maximum
number of securities subject to award to any person pursuant to subsection 5(c),
and the outstanding Stock Awards will be appropriately adjusted in the class(es)
and number of securities and price per share of stock subject to such
outstanding Stock Awards. The Board, the determination of which shall be final,
binding and conclusive, shall make such adjustments. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER.
(i) In the event of (1) a sale, lease or other disposition of
all or substantially all of the assets of the Company, (2) a merger or
consolidation in which the Company is not the surviving corporation or (3) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation may
assume any Stock Awards outstanding under the Plan or may substitute similar
stock awards (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan).
(ii) Whether or not the surviving corporation or acquiring
corporation assumes such Stock Awards or substitutes similar stock awards for
those outstanding under the Plan, with respect to Stock Awards held by
Participants whose Continuous Service has not terminated, then (1) at least
thirty (30) days prior to such event the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and any reacquisition or repurchase rights held by the
Company with respect to such Stock Awards shall lapse, (2) the Board promptly
shall give such Participants written notice of such occurrence within no more
than two (2) days of such acceleration of Stock Awards or the lapsing of such
reacquisition or repurchase rights, and (3) such Participants may pay the
exercise price of such Stock Awards pursuant to the following deferred payment
alternative:
(1) Not less than one hundred percent (100%) of the
aggregate exercise price, plus accrued interest, shall be due four (4) years
from date of exercise or, at the Company's election, upon termination of the
Participant's Continuous Service.
(2) Interest shall be compounded at least annually
and shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
portion of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(3) If the Company is then incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall be made in cash and not by deferred payment.
(4) In order to elect the deferred payment
alternative, the Participant must, as a part of his or her written notice of
exercise, give notice of the election of this deferred payment
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alternative and, in order to secure the payment of the deferred exercise price
to the Company thereunder, if the Company so requests, must tender to the
Company a promissory note and a security agreement covering the purchased shares
of Common Stock, both in form and substance satisfactory to the Company, or such
other or additional documentation as the Company may request.
(iii) In the event the surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.
(d) CHANGE IN CONTROL--SECURITIES ACQUISITION. After the Listing Date,
in the event of an acquisition by any person, entity or group within the meaning
of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty percent
(50%) of the combined voting power entitled to vote in the election of Directors
(except that in the case of The Hearst Corporation and its subsidiaries, the
percentage shall be eighty percent (80%)), then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, prior to such
event the vesting of such Stock Awards (and, if applicable, the time during
which such Stock Awards may be exercised) shall be accelerated in full, and any
reacquisition or repurchase rights held by the Company with respect to such
Stock Awards shall lapse.
(e) EXCESS PARACHUTE PAYMENTS.
(i) If any benefit received or to be received by a Participant
pursuant to the acceleration of the vesting and/or exercisability of a Stock
Award, or the lapsing of any reacquisition or repurchase rights held by the
Company with respect to a Stock Award, would constitute an "excess parachute
payment" subject to excise tax under Section 4999 of the Code (the "Excise
Tax"), the amount or benefit to be received by such person shall be reduced if
such reduction, taking into account all applicable federal, state and local
income and employment taxes and the Excise Tax, results in a greater after-tax
benefit for such person. The determination by the Company's independent auditors
("Accountants") of any required reduction pursuant to this subsection 11(e)(i)
shall be conclusive and binding upon such person.
(ii) For purposes of making the calculations required by
subsection 11(e)(i), the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of the Code. The Company and
such Participants shall furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under subsection 11(e)(i). The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by subsection 11(e)(i).
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent
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shareholder approval is necessary to satisfy the requirements of Section 422 of
the Code, Rule 16b-3 or any Nasdaq or securities exchange listing requirements.
(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the shareholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.
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EXHIBIT 10.1.2
WOMEN.COM NETWORKS
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY BOARD OF DIRECTORS _______________ , 1999
APPROVED BY STOCKHOLDERS _______________ , 1999
TERMINATION DATE: NONE
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Rights to purchase Shares granted under
the Plan be considered options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Code.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.
(e) "COMPANY" means Women.com Networks, a Delaware corporation.
(f) "DIRECTOR" means a member of the Board.
(g) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(h) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.
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(i) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.
(j) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
(k) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(l) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(m) "OFFERING" means the grant of Rights to purchase Shares under the Plan
to Eligible Employees.
(n) "OFFERING DATE" means a date selected by the Board for an Offering to
commence.
(o) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(p) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
(q) "PLAN" means this 1999 Employee Stock Purchase Plan.
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(r) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(s) "RIGHT" means an option to purchase Shares granted pursuant to the
Plan.
(t) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(u) "SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
(v) "SHARE" means a share of the common stock of the Company.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be
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<PAGE> 4
to the Committee or such a subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate One Million (1,000,000) Shares.
If any Right granted under the Plan shall for any reason terminate without
having been exercised, the Shares not purchased under such Right shall again
become available for the Plan.
(b) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.
5. GRANT OF RIGHTS; OFFERING.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase Shares under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an
earlier-granted Right (or a Right with a lower exercise price, if two Rights
have identical grant dates) will be exercised to the fullest possible extent
before a later-granted Right (or a Right with a higher exercise price if two
Rights have identical grant dates) will be exercised.
6. ELIGIBILITY.
(a) Rights may be granted only to Employees of the Company or, as the
Board may designate as provided in subparagraph 3(b), to Employees of an
Affiliate; provided, however, that Rights may not be granted to (i) officers,
directors, and employees of The Hearst Corporation or (ii) officers, directors
and employees of affiliates of The Hearst Corporation other than the Company.
Except as provided in subparagraph 6(b), an Employee shall not be eligible to be
granted Rights under the Plan unless, on the Offering Date, such Employee has
been in the employ of the Company or the Affiliate, as the case may be, for such
continuous period preceding such grant as the Board may
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<PAGE> 5
require, but in no event shall the required period of continuous employment be
equal to or greater than two (2) years.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the "Offering
Date" of such Right for all purposes, including determination of the exercise
price of such Right;
(ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if such
Rights, together with any other Rights granted under all Employee Stock Purchase
Plans of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such Eligible Employee's rights to purchase Shares of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such Shares (determined
at the time such Rights are granted) for each calendar year in which such Rights
are outstanding at any time.
(e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
7. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted the Right to purchase up to the number of
Shares purchasable either:
(i) with a percentage designated by the Board not exceeding fifteen
percent (15%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period
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<PAGE> 6
which begins on the Offering Date (or such later date as the Board determines
for a particular Offering) and ends on the date stated in the Offering, which
date shall be no later than the end of the Offering; or
(ii) with a maximum dollar amount designated by the Board that, as
the Board determines for a particular Offering, (1) shall be withheld, in whole
or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.
(d) The purchase price of Shares acquired pursuant to Rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Purchase Date.
8. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An Eligible Employee may become a Participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of the
Offering. A
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<PAGE> 7
Participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the Participant has not
already had the maximum permitted amount withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board in the Offering. Upon such withdrawal from the Offering by
a Participant, the Company shall distribute to such Participant all of his or
her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Shares for the Participant) under the
Offering, without interest unless otherwise specified in the Offering, and such
Participant's interest in that Offering shall be automatically terminated. A
Participant's withdrawal from an Offering will have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan
but such Participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. The Company
shall distribute to such terminated Employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire Shares for the terminated Employee) under the Offering, without
interest unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.
9. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional Shares shall be issued
upon the exercise of Rights granted under the Plan unless specifically provided
for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount, if
any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of
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<PAGE> 8
Shares that is equal to the amount required to purchase one or more whole Shares
on the final Purchase Date of the Offering shall be distributed in full to the
Participant at the end of the Offering, without interest. If the accumulated
payroll deductions have been deposited with the Company's general funds, then
the distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
(c) No Rights granted under the Plan may be exercised to any extent unless
the Shares to be issued upon such exercise under the Plan (including Rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act and the Plan is in material compliance with all applicable
state, foreign and other securities and other laws applicable to the Plan. If on
a Purchase Date in any Offering hereunder the Plan is not so registered or in
such compliance, no Rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be delayed until
the Plan is subject to such an effective registration statement and such
compliance, except that the Purchase Date shall not be delayed more than twelve
(12) months and the Purchase Date shall in no event be more than twenty-seven
(27) months from the Offering Date. If, on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered and in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire Shares) shall be distributed to the Participants, without interest
unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.
11. USE OF PROCEEDS FROM SHARES.
Proceeds from the sale of Shares pursuant to Rights granted under the Plan
shall constitute general funds of the Company.
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<PAGE> 9
12. RIGHTS AS A STOCKHOLDER.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, Shares subject to Rights granted under
the Plan unless and until the Participant's Shares acquired upon exercise of
Rights under the Plan are recorded in the books of the Company.
13. ADJUSTMENTS UPON CHANGES IN SECURITIES.
(a) If any change is made in the Shares subject to the Plan, or subject to
any Right, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of Shares subject to the Plan pursuant to subparagraph 4(a), and the
outstanding Rights will be appropriately adjusted in the class(es), number of
Shares and purchase limits of such outstanding Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction that does not involve the receipt of consideration by the
Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1)
any surviving or acquiring corporation shall assume Rights outstanding under the
Plan or shall substitute similar rights (including a right to acquire the same
consideration paid to Stockholders in the transaction described in this
subparagraph 13(b)) for those outstanding under the Plan, or (2) in the event
any surviving or acquiring corporation refuses to assume such Rights or to
substitute similar rights for those outstanding under the Plan, then, as
determined by the Board in its sole discretion such Rights may continue in full
force and effect or the Participants' accumulated payroll deductions (exclusive
of any accumulated interest which cannot be applied toward the purchase of
Shares under the terms of the Offering) may be used to purchase Shares
immediately prior to the transaction described above under the ongoing Offering
and the Participants' Rights under the ongoing Offering thereafter terminated.
14. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code,
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<PAGE> 10
stockholder approval within twelve (12) months before or after the adoption of
the amendment is required where the amendment will:
(i) Increase the amount of Shares reserved for Rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.
15. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who is
to receive any Shares and/or cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the Participant of such Shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a Participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Company shall deliver such Shares and/or cash to
the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
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<PAGE> 11
16. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares subject to the Plan's reserve, as increased and/or adjusted from time
to time, have been issued under the terms of the Plan. No Rights may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
17. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board, which date may be prior to the
effective date set by the Board.
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<PAGE> 1
EXHIBIT 10.1.3
WIRE NETWORKS, INC.
1994 STOCK OPTION PLAN
AMENDED ON MARCH 14, 1997
AND JULY 16, 1997
1. PURPOSE.
The Wire Networks, Inc. 1994 Stock Option Plan (the "Plan") is
intended to provide to officers, directors, key employees and consultants of the
corporation an opportunity to acquire a proprietary interest in the corporation,
to encourage such key individuals to remain in the employ of or to contract with
the corporation, and to attract and retain new employees, consultants, and
directors with outstanding qualifications. Pursuant to the Plan, the corporation
may grant to officers, directors, consultants, and key employees of the
corporation options to purchase shares of common stock of the corporation upon
such terms and conditions as provided herein.
2. DEFINITIONS.
(a) "Affiliate" shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations that includes the Corporation
if each of such corporations, other than the last corporation in the chain, owns
at least 50% of the total voting power of one of the other corporations.
(b) "Board" shall mean the Board of Directors of the
Corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986 as
amended.
(d) "Committee" shall mean the committee appointed by the Board
to administer the Plan, or if no such committee is appointed, the Board.
(e) "Common Stock" shall mean the voting common stock of the
Corporation.
(f) "Consultant" shall mean any person who, or any employee of
any firm which, is engaged by the Company or any Affiliate to render consulting
services and is compensated for such consulting services, and any non-employee
director of the Company whether compensated for such services or not.
(g) "Corporation" shall mean Wire Networks, Inc., a California
corporation.
(h) "Effective Date" shall mean October 5, 1994.
(i) "Employee" shall mean any individual who is employed, within
the meaning of Section 3401 of the Code and the regulations thereunder, by the
Corporation or by any Affiliate. For purposes of the Plan and only for purposes
of the Plan, and in regard to Nonstatutory Stock Options but not for Incentive
Stock Options, a Consultant or director of the
1.
<PAGE> 2
Corporation or any Affiliate shall be deemed to be an Employee, and service as
Consultant or director with the Corporation or any Affiliate shall be deemed to
be an Employee, and service as a Consultant or director with the Corporation or
any Affiliate shall be deemed to be employment, but no Incentive Stock Option
shall be granted to a Consultant or director who is not an employee of the
Corporation or any Affiliate within the meaning of Section 3401 of the Code and
the regulations thereunder. In the case of a non-employee director or
Consultant, the provisions governing when a termination of employment has
occurred for purposes of the Plan shall be set forth in the written stock option
agreement between the Optionee and the corporation, or, if not so set forth, the
Committee shall have the discretion to determine when a termination of
"employment" has occurred for purposes of the Plan.
(j) "Escrow Agent" shall mean the person selected by the
Corporation, if any, to hold the stock certificates representing Shares issued
in the name of an Optionee pursuant to such Optionee's exercise of an Option.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(l) "Exercise Price" shall mean the price per Share at which an
Option may be exercised, as determined by the Committee and as specified in the
Optionee's stock option agreement.
(m) "Fair Market Value" shall mean the value of each Share as
determined by the Board.
(n) "Incentive Stock Option" shall mean an Option of the type
described in Section 422(b) of the Code.
(o) "Joint Escrow Instructions" shall mean joint escrow
instructions entered into between Optionee and the Corporation in such form as
may be approved by the Committee from time to time.
(p) "Nonstatutory Stock Option" shall mean an Option of the type
not described in Section 422(b) or 423(b) of the Code.
(q) "Option" shall mean an option to purchase Common Stock
granted pursuant to the Plan.
(r) "Optionee" shall mean any person who holds an Option
pursuant to the Plan.
(s) "Plan" shall mean this stock option plan as it may be
amended from time to time.
(t) "Purchase Price" shall mean at any particular time the
Exercise Price times the number of Shares for which an Option is being
exercised.
(u) "Share" shall mean one share of authorized Common Stock.
2.
<PAGE> 3
3. ADMINISTRATION.
(a) The Committee.
(i) The Board may administer the Plan or appoint a
Committee to administer the Plan. The Committee shall consist of not less than
two members who may also be members of the Board. Members of the Board or the
Committee who are either eligible for Options or have been granted Options may
vote on any matters affecting the administration of the Plan or the grant of any
Options pursuant to the Plan, except that no such member shall act upon the
granting of an Option to himself or herself, but any such member may be counted
in determining the existence of a quorum at any meeting of the Committee and
shall be excluded in determining unanimity of an act in writing, for any action
which is taken with respect to the granting of an Option to such member.
(ii) If the Corporation registers any class of any
equity security pursuant to Section 12 of the Exchange Act from the effective
date of such registration until six months after the termination of such
registration, the Plan shall be administered by a Committee of directors which
shall consist of not less than two members, who during the one year prior to
service as an administrator of the Plan, shall not have been granted or awarded
equity securities pursuant to the Plan or any other plan of the Corporation or
any of its Affiliates except as permitted under Rule 16b-3 under the Exchange
Act which provides that participation in a formula plan meeting the conditions
of Rule 16(b)(3)(c)(2)(ii) or in an ongoing securities acquisition plan meeting
the conditions in Rule 16(b)(3)(d)(2)(i) shall not disqualify a member of the
Committee from serving as an administrator of the Plan. In addition, an election
to receive an annual retainer fee in either cash or an equivalent amount of
securities, or partly in cash and partly in securities, shall not disqualify a
member of the Committee from serving as an administrator of the Plan.
The Board may from time to time designate individuals as ineligible to
participate in the Plan for a specified period in order to become eligible to be
a member of the Committee.
(b) Powers of the Committee.
Subject to the provisions of the Plan, the Committee shall have
the authority, in its discretion and on behalf of the Corporation:
(i) to grant Options;
(ii) to determine the Exercise Price per Share of
Options to be granted;
(iii) to determine the Employees to whom, and the time
or times at which, Options shall be granted and the number of Shares for which
an Option will be exercisable;
(iv) to interpret the Plan;
(v) to prescribe, amend, and rescind rules and
regulations relating to the Plan;
3.
<PAGE> 4
(vi) to determine the terms and provisions of each
Option granted and, with the consent of the holder thereof, modify or amend each
Option;
(vii) to accelerate or defer, with the consent of the
Optionee, the exercise date of any Option;
(viii) to authorize any person to execute on behalf of
the Corporation any instrument required to effectuate the grant of an Option
previously granted by the Committee;
(ix) with the consent of the Optionee, to reprice,
cancel and regrant, or otherwise adjust the Exercise Price of an Option
previously granted by the Committee; and
(x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Board's Determination of Fair Market Value.
The Board shall have the authority to determine, upon review of
relevant information, the Fair Market Value of the Common Stock, subject to the
provisions of the Plan and irrespective of whether the Board has appointed a
Committee to administer the Plan. The Board may delegate this authority to the
Committee.
(d) Committee's Interpretation of the Plan.
The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted hereunder shall be final and
binding on all parties claiming an interest in an Option granted under the Plan.
No member of the Committee shall be liable for any action or determination made
in good faith with respect to the Plan or any Option.
(e) All Committee Actions to be in Writing.
Any and all actions of the Committee taken in exercise of the
powers granted to it in this Section 3 shall be in writing.
4. PARTICIPATION.
(a) Eligibility.
The Optionees shall be such persons as the Committee may select
from among the Employees, provided that Consultants are not eligible to receive
Incentive Stock Options.
(b) Ten Percent Shareholders.
Any Employee who owns Stock possessing more than 10% of the
total combined voting power of all classes of outstanding stock of the
Corporation or any Affiliate shall not be eligible to receive an Option unless:
4.
<PAGE> 5
(i) the Exercise Price of the Shares subject to such
Option when granted is at least 110% of the Fair Market Value of such Shares,
and
(ii) such Option by its terms is not exercisable after
the expiration of five years from the date of grant.
(c) Stock Ownership.
For purposes of Paragraph 4(b), in determining stock ownership,
an Employee shall be considered as owning the stock owned, directly or
indirectly, by or for his or her brothers and sisters, spouse, ancestors, and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate, or trust shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries,
respectively. Stock with respect to which such Employee or any other person
holds an option shall be disregarded.
(d) Outstanding Stock.
For purposes of Section 4(b), the term "outstanding stock" shall
include all stock actually issued and outstanding immediately after the grant of
the Option to the Optionee but shall not include any share for which an Option
is exercisable by any person.
5. STOCK.
(a) Shares Subject to This Plan.
The aggregate number of Shares which may be issued upon exercise
of Options under the Plan shall not exceed 1,972,500, subject to adjustment
pursuant to Section 9 hereof.
(b) Options Not to Exceed Shares Available.
The number of Shares for which an Option is exercisable at any
time shall not exceed the number of Shares remaining available for issuance
under the Plan. If any Option expires or is terminated, the number of Shares for
which such Option was exercisable may be made exercisable pursuant to other
Options under the Plan. If the Corporation reacquires any Shares pursuant to
Sections 11 or 12, hereof, such Shares may again be made exercisable pursuant to
an Option. The limitations established by this Section 5(b) shall be subject to
adjustment in the manner provided in Section 9 hereof upon the occurrence of an
event specified therein.
6. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement.
Options shall be evidenced by written stock option agreements
between the Optionee and the Corporation in such form as the Committee shall
from time to time determine. No Option or purported Option shall be a valid and
binding obligation of the Corporation unless so evidenced in writing.
5.
<PAGE> 6
(b) Number of Shares.
Each stock option agreement shall scare the number of Shares for
which the Option is exercisable and shall provide for the adjustment thereof in
accordance with Section 9 hereof.
(c) Vesting.
An Optionee may not exercise his or her Option for any Shares
until the option, in regard to such Shares, has vested. Each stock option
agreement shall include a vesting schedule which shall show when the Option
becomes exercisable provided, each Option shall vest at a race of twenty-five
percent (25%) per year over a period of four (4) years. The vesting schedule
shall not impose upon the Corporation or any Affiliate any obligation to retain
the Optionee in its employ or under contract for any period or otherwise change
the employment-at-will status of an Optionee who is an employee of the
Corporation or any Affiliate.
(d) Lapse of Options.
Each stock option agreement shall state the time or times when
the Option covered thereby lapses and becomes unexercisable in part or in full.
An Option shall lapse on the earliest of the following events (unless otherwise
determined by the Committee and reflected in an option agreement):
(i) The tenth anniversary of the date of granting the
Option;
(ii) The first anniversary of the Optionee's death;
(iii) The first anniversary of the date the Optionee
ceases to be an Employee due to total and permanent disability, within the
meaning of Section 22(e)(3) of the Code;
(iv) On the date provided in Section 6(h)(i), unless
with respect to a Nonstatutory Stock Option, the Committee otherwise extends
such period before the applicable expiration date;
(v) On the date provided in Section 9 for a transaction
described in such Section;
(vi) The date the Optionee files or has filed against
him or her a petition in bankruptcy; or
(vii) The expiration date specified in an Optionee's
stock option agreement.
(e) Exercise Price.
Each stock option agreement shall state the Exercise Price for
the Shares for which the Option is exercisable. Subject to Section 4(b), the
Exercise Price of an Incentive
6.
<PAGE> 7
Stock Option and a Nonstatutory Stock Option shall, when granted, be not less
than 100% and 85% of the Fair Market Value of the Shares for which the Option is
exercisable, respectively, and not less than the par value of the Shares.
(f) Medium and Time of Payment.
The Purchase Price shall be payable in full in cash upon the
exercise of an Option but the Committee may allow the Optionee to pay the
Purchase Price:
(i) by surrendering Shares in good form for transfer,
owned by the Optionee and having a Fair Market Value on the date of exercise
equal to the Purchase Price;
(ii) by delivery of a full recourse promissory note
("Note") made by the Optionee in the amount of the Purchase Price, bearing
interest, compounded semiannually, at a rate not less than the rate determined
under Section 7872 of the Code to insure that no "foregone interest," as defined
in such section, will accrue, together with the delivery of a duly executed
standard form security agreement securing the Note by pledge of the Shares
purchased; or
(iii) in any combination of such consideration or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under applicable law as long as the sum of the cash so paid,
the Fair Market Value of the Shares so surrendered, and the amount of any Note
equals the Purchase Price.
The Committee or a stock option agreement may prescribe
requirements with respect to the exercise of Options, including the submission
by the Optionee of such forms and documents as the Committee may require and,
the delivery by the optionee of cash sufficient to satisfy applicable
withholding requirements. The Committee may vary the exercise requirements and
procedures from time to time to facilitate, for example, the broker-assisted
exercise of options.
(g) Nontransferability of Options.
During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee or the Optionee's conservator or legal
representative and shall not be assignable or transferable except pursuant to a
qualified domestic relations order as defined by the Code. In the event of the
Optionee's death, the option shall not be transferable by the Optionee other
than by will or the laws of descent and distribution.
(h) Termination of Employment Other than by Death or Disability.
(i) If an Optionee ceases to be an Employee for any
reason other than his or her death or disability, the Optionee shall have the
right, subject to the provisions of this Section 6, to exercise any Option held
by the Optionee at any time within thirty (30) days after his or her termination
of employment, but not beyond the otherwise applicable term of the Option and
only to the extent that on such date of termination of employment the Optionee's
right to exercise such option had vested.
7.
<PAGE> 8
(ii) For purposes of this Section 6(h), the employment
relationship shall be treated as continuing intact while the Optionee is an
active employee of the corporation or any Affiliate, or is on military leave,
sick leave, or other bona fide leave of absence to be determined in the sole
discretion of the Committee. The preceding sentence notwithstanding, in the case
of an Incentive Stock Option, employment shall be deemed to terminate on the
date the Optionee ceases active employment with the Corporation or any
Affiliate, unless the Optionee's reemployment rights are guaranteed by statute
or contract.
(i) Death of Optionee.
If an Optionee dies while an Employee, or after ceasing to be an
Employee but during the period while he or she could have exercised an Option
under Section 6(h), any Option granted to the Optionee may be exercised, to the
extent it had vested at the time of death and subject to the Plan, at any time
within 12 months after the Optionee's death, by the executors or administrators
of his or her estate or by any person or persons who acquire the Option by will
or the laws of descent and distribution, but not beyond the otherwise applicable
term of the Option.
(j) Disability of Optionee.
If an Optionee ceases to be an Employee due to becoming totally
and permanently disabled within the meaning of Section 22(e)(3) of the Code, any
Option granted to the Optionee may be exercised to the extent it had vested at
the time of cessation and, subject to this Plan, at any time within 12 months
after the Optionee's termination of employment, but not beyond the otherwise
applicable term of the Option.
(k) Rights as a Shareholder.
An Optionee, or a transferee of an Optionee, shall have no
rights as a shareholder of the Corporation with respect to any Shares for which
his or her Option is exercisable until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends, ordinary
or extraordinary or whether in currency, securities, or other property,
distributions, or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 9 hereof.
(l) Modification, Extension, and Renewal of Options.
Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options or accept the cancellation of outstanding
Options for the granting of new Options in substitution therefor.
Notwithstanding the preceding sentence, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option previously granted.
(m) Other Provisions.
The stock option agreements authorized under the Plan may
contain such other provisions which are not inconsistent with the terms of the
Plan, including, without limitation, restrictions upon the exercise of the
Option, as the Committee shall deem advisable.
8.
<PAGE> 9
7. $100,000 PER YEAR LIMITATION ON VESTING OF ISOS.
To the extent that the Fair Market Value of Shares (determined
for each Share as of the date of grant of the Option covering such Share)
subject to Options granted under this Plan (or any other plan of the Corporation
or any Affiliate) which are designated as Incentive Stock Options and which
become exercisable by an Optionee for the first time during a single calendar
year exceeds $100,000, the Option(s) (or portion thereof) covering such Shares
shall be recharacterized (to the extent of such excess over $100,000) as a
Nonstatutory Stock Option. In determining which Option(s) shall be treated as
Nonstatutory Stock Options under the preceding sentence, the Options shall be
taken into account in the order granted, with the result that a later granted
Option shall be recharacterized as a Nonstatutory Stock Option prior to such
recharacterization of a previously granted Option.
8. TERM OF PLAN.
Options may be granted pursuant to the Plan until ten years
following the Effective Date, and all Options which are outstanding on such date
shall remain in effect until they are exercised or expire by their terms. The
Plan shall expire for all purposes on the date 20 years following the Effective
Date.
9. RECAPITALIZATION, TAKEOVERS, AND LIQUIDATIONS.
(a) Reorganizations.
The number of Shares covered by the Plan, as provided in Section
5 hereof, and the number of Shares for which each Option is exercisable shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from the payment of a Common Stock dividend, a stock split, a
reverse stock split or any other event which results in an increase or decrease
in the number of issued Shares effected without receipt of consideration by the
Corporation, and the Exercise Price shall be proportionately increased in the
event the number of Shares subject to such Option are decreased and shall be
proportionately decreased in the event the number of Shares subject to such
Option are increased. For the purposes of this paragraph, conversion of any
convertible securities of the Corporation shall not be deemed to have been
"effected without receipt of consideration." Adjustments shall be made by the
Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Corporation
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) Liquidation.
In the event of the dissolution or liquidation of the
Corporation, each Option shall terminate immediately prior to the consummation
of such action. The Committee shall notify the Optionee not less than fifteen
(15) days prior to the proposed consummation of a pending dissolution or
liquidation, and the Option shall be exercisable as to all Shares which are
vested prior to expiration until immediately prior to the consummation of such
action.
9.
<PAGE> 10
(c) Merger.
In the event of (i) a proposed merger of the Corporation with or
into another corporation, as a result of which the Corporation is not the
surviving corporation and (ii) the Option is not assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of the
successor corporation, then in such case each Option shall terminate immediately
prior to the consummation of such transaction. The Committee shall notify the
Optionee not less than fifteen (15) days prior to the proposed consummation of
such transaction, and the option shall be exercisable as to all Shares which are
vested prior to expiration and until immediately prior to the consummation of
such transaction.
(d) Determination by Committee.
All adjustments described in this Section 9 shall be made by the
Committee, whose determination shall be conclusive and binding on all persons.
(e) Limitation on Rights of Optionee.
Except as expressly provided in this Section 9, no Optionee
shall have any rights by reason of any payment of any stock dividend, stock
split or reverse stock split or any other increase or decrease in the number of
shares of stock of any class, or by reason of any reorganization, consolidation,
dissolution, liquidation, merger, exchange, split-up or reverse split-up, or
spin-off of assets or stock of another corporation. Any issuance by the
Corporation of Shares, Options or securities convertible into Shares or Options
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of the Shares for which an option is
exercisable. Notwithstanding the foregoing, if the Corporation shall enter into
a transaction affecting the Corporation's capital stock or distributions to the
holders of its capital stock for which a revision in the terms of each Option is
not required pursuant to this Section 9, the Committee shall have the right, but
not the obligation, to revise the terms of each Option in a manner the
Committee, in its sole discretion, deems fair and reasonable given the
transaction involved. If necessary or appropriate in connection with such
transaction, the Committee may declare that any Option shall terminate as of a
date fixed by the Committee and give each Optionee the right to exercise his
Option in whole or in part, including exercise as to Shares to which the Option
would not otherwise be exercisable.
(f) No Restriction on Rights of Corporation.
The grant of an Option shall not affect or restrict in any way
the right or power of the Corporation to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure, or to merge or
consolidate, or to dissolve, liquidate, sell, or transfer all or any part of its
business or assets.
10. SECURITIES LAW REQUIREMENTS.
(a) Legality of Issuance.
No Share shall be issued upon the exercise of any Option unless
and until the Corporation has determined that:
10.
<PAGE> 11
(i) The Corporation and the Optionee have taken all
actions required to exempt the issuance of the Shares from the registration
requirements under the Securities Act of 1933, as amended (the "Act"), or the
Corporation and the Optionee shall determine that the registration requirements
of the Act do not apply to such exercise;
(ii) Any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and
(iii) Any other applicable provision of state or Federal
law has been satisfied.
(b) Restrictions on Transfer; Representations of Optionee;
Legends.
Regardless of whether the offering and sale of Shares has been
registered under the Act or has been registered or qualified under the
securities laws of any state, the Corporation may impose restrictions upon the
sale, pledge, or other transfer of such Shares including the placement of
appropriate legends on stock certificates, if, in the judgment of the
Corporation and its counsel, such restrictions are necessary or desirable in
order to achieve compliance with the provisions of the Act, the securities laws
of any state, or any other law. If the sale of Shares is not registered under
the Act and the Corporation shall determine that the registration requirements
of the Act apply to such sale, but an exemption is available which requires an
investment representation or other representation, the Optionee shall be
required, as a condition to purchasing Shares by exercise of his or her Option,
to represent that such Shares are being acquired for investment, and not with a
view to the sale or distribution thereof, except in compliance with the Act, and
to make such other representations as are deemed necessary or appropriate by the
Corporation and its counsel. Stock certificates evidencing Shares acquired
pursuant to an unregistered transaction to which the Act applies shall bear a
restrictive legend substantially in the following form and such other
restrictive legends as are required or deemed advisable under the Plan or the
provisions of any applicable law:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED
UNDER THE SECURITIES LAWS OF ANY STATE. THESE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY
DISTRIBUTION THEREOF, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
UNDER THE ACT AND/OR QUALIFICATION UNDER ANY APPLICABLE STATE SECURITIES
LAWS, OR WITHOUT AN OPINION OF COUNSEL ACCEPTABLE TO THE CORPORATION AND
ITS COUNSEL THAT SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED."
The Corporation shall also place legends on stock certificates representing its
right of repurchase under Section 11 hereof and the right of first refusal under
Section 12 hereof. Any determination by the Corporation and its counsel in
connection with any of the matters set forth in this Section l0 shall be
conclusive and binding on all persons.
11.
<PAGE> 12
(c) Registration or Qualification of Securities.
The Corporation may, but shall not be obligated to, register or
qualify the sale of Shares under the Act or any other applicable law. In
connection with any such registration or qualification, the Corporation shall
provide each Optionee with such information required pursuant to all applicable
laws and regulations.
(d) Exchange of Certificates.
If, in the opinion of the Corporation and its counsel, any
legend placed on a stock certificate representing Shares sold hereunder is no
longer required, the Optionee or the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
11. RIGHT OF REPURCHASE.
(a) Repurchase Right.
At the Committee's discretion, Shares issued pursuant to the
exercise of an Option may be subject to a right, but not an obligation, of
repurchase by the Corporation (the "Right of Repurchase"), at the price
specified in Section 11(b), if the Optionee ceases to be an Employee for any
reason ("Employment Termination") at any time after the grant of the Option
pursuant to which such Shares were issued. Shares issued by the Corporation
shall only be transferable by the Optionee subject to the Right of Repurchase,
and the Corporation shall legend the Right of Repurchase on the stock
certificates evidencing such Shares and shall take such other steps as it deems
necessary to ensure compliance with this restriction. The Corporation's rights
under this Section 11(a) shall be freely assignable, in whole or in part.
(b) Repurchase Price.
The price per Share at which the Corporation may exercise the
Right of Repurchase under Section 11(a) (the "Repurchase Price") shall be the
higher of the Exercise Price of each Share as paid by the Optionee, or Fair
Market Value of the Shares on the date the Corporation sends the notice to the
Optionee of its exercise of its Right of Repurchase pursuant to Section 11(a).
(c) Repurchase Procedure.
The Corporation may exercise its Right of Repurchase by sending
a written notice to the Optionee and to the Escrow Agent, if any, of its taking
such action and specifying the number of Shares being repurchased. The
Corporation's Right of Repurchase shall terminate if not exercised by written
notice from the Corporation to the Optionee within ninety (90) days of the date
on which the Corporation learns of the Employment Termination or the last date
any Option granted to such Optionee is exercised, which ever is later. If the
Corporation exercises its Right of Repurchase, the Optionee, or if applicable,
the Escrow Agent, shall deliver to the Corporation every stock certificate
representing the Shares being repurchased, together with appropriate Assignments
Separate from Certificates, and the Corporation shall then promptly pay
12.
<PAGE> 13
the total Repurchase Price in cash to the Optionee, or if applicable, to the
Escrow Agent, for delivery to the Optionee.
(d) Election to Defer Purchase of Incentive Stock Option Shares.
(i) Notwithstanding the preceding provisions of this
Section 11, an Optionee whose Shares were issued pursuant to an Incentive Stock
Option may elect to defer the Corporations repurchase of such Shares pursuant to
this Section 11 until the holding period requirements of Section 422(a) of the
Code are met. Such election shall be in writing in such formal the Committee may
require and shall be delivered to the Corporation and to the Escrow Agent by
certified mail no later than seven (7) days after the date on which the Optionee
receives notice that the Corporation elects to exercise the Right of Repurchase.
Such election shall pertain to all such Shares issued to the Optionee and shall
be irrevocable.
(ii) With respect to an Optionee who makes the election
described in subsection 11(d)(i), the Corporation shall repurchase such Shares
on or before the date which is ninety (90) days following the earlier of the
date on which the Optionee dies or the date on which the holding period
requirements of Section 422(a) of the Code are met. The Repurchase Price of each
such Share determined under Section 11(b) shall be calculated by substituting
for the Optionee's Employment Termination date the earlier of the date on which
the Optionee dies or the date on which such holding period requirements are met.
(e) Escrow.
To facilitate the consummation of the Corporation's Right of
Repurchase under this Section 11, at the request of the Committee, the Optionee
and the corporation shall execute Joint Escrow Instructions and the Optionee
shill deliver and deposit with the Escrow Agent named in the Joint Escrow
Instructions two "Assignments Separate from Certificate," together with all
certificates evidencing the Shares of Common Stock issued to the Optionee
pursuant to the Plan, duly endorsed in blank. The Escrow Agent shall hold such
documents and deliver the same to the corporation pursuant to the Joint Escrow
Instructions and in accordance with the terms of this Section 11, as applicable.
(f) Binding Effect.
The Corporation's Right of Repurchase shall inure to the benefit
of its successors and assigns and shall be binding upon any representative,
executor, administrator, heir, or legatee of the Optionee.
(g) Payment of Net Amount Owing.
Notwithstanding anything to the contrary contained herein, if
the Corporation determines to exercise its rights of repurchase pursuant to this
Section before any Shares have been issued as a result of an exercise of an
Option, in lieu of issuing any Shares, the Corporation shall have the right, but
not the obligation, to pay to the Optionee the not amount owing to the Optionee.
13.
<PAGE> 14
(h) Termination or Right of Repurchase.
Notwithstanding any other provision of this Section 11, in the
event that the Common Stock is listed on any United States securities exchange
or traded on any formal over-the-counter market in general use in the United
States at the time the Optionee would otherwise be required to transfer his or
her Shares, the Corporation shall no longer have the Right of Repurchase, and
the Optionee shall have no obligation to comply with this Section 11.
12. RIGHT OF FIRST REFUSAL.
(a) Right of First Refusal.
At the Committee's discretion, shares issued pursuant to the
exercise of an Option may be subject to a requirement that if an Optionee
proposes to sell, pledge, or otherwise transfer any Shares acquired pursuant to
exercise of an Option, or any interest in such Shares, to any person or entity,
the Corporation shall have a right of first refusal (the "Right of First
Refusal") with respect to such Shares. Any Optionee desiring to transfer Shares
subject to the Right of First Refusal shall give a written notice (the "Transfer
Notice") to the Corporation describing fully the proposed transfer, including
the number of Shares proposed to be transferred, the proposed transfer price,
and the name and address of the proposed transferee. The Transfer Notice shall
be signed both by the Optionee and by the proposed transferee and must
constitute a binding commitment of both parties to the transfer of the Shares.
The Corporation shall have the right to purchase the Shares subject to the
Transfer Notice on the terms of the proposal referred to in the Transfer Notice,
subject to any change in such terms permitted under Section 12(b) hereof by
delivery of a notice of exercise of the Right of First Refusal within 30 days
after the date the Transfer Notice is received by the Corporation. The
Corporation's rights under this Section 12(a) shall be freely assignable, in
whole or in part.
(b) Transfer of Shares.
If the Corporation fails to exercise the Right of First Refusal
within 30 days after the date on which it receives the Transfer Notice, the
Optionee may, not later than six months following receipt of the Transfer Notice
by the Corporation, consummate a transfer of the Shares subject to the Transfer
Notice on the terms and conditions described in the Transfer Notice. Any
proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by the Optionee,
shall again be subject to the Right of First Refusal and shall again require
compliance with the procedure described in Section 12(a). If the Corporation
exercises its Right of First Refusal, the Optionee shall immediately endorse and
deliver to the Corporation every stock certificate representing the Shares being
purchased, and the Corporation shall then promptly pay the purchase price in
accordance with the terms set forth in the Transfer Notice.
(c) Repurchase Payment.
The amount payable to an Optionee pursuant to the Corporation's
exercise of the Right of First Refusal shall be paid to the Optionee in
accordance with the terms and conditions of the Transfer Notice or may, at the
election of the Corporation, be paid in full in cash.
14.
<PAGE> 15
(d) Binding Effect.
The Corporation's Right of First Refusal shall inure to the
benefit of its successors and assigns and shall be binding upon any transferee
of the Shares, other than a transferee acquiring Shares in a transaction with
respect to which the Corporation failed to exercise its Right of First Refusal
(a "Free Transferee") or a transferee of a Free Transferee.
(e) Termination of Right of First Refusal.
Notwithstanding any other provision of this Section 12, if the
Common Stock is listed on any United States securities exchange or traded on any
formal over-the-counter market in general use in the United States at the tine
the Optionee desires to transfer his or her Shares, the Corporation shall no
longer have the Right of First Refusal, and the Optionee shall have no
obligation to comply with this Section 12.
13. EXERCISE OF UNVESTED OPTIONS.
The Committee may grant any Optionee the right to exercise any
Option prior to the complete vesting of such Option. Without limiting the
generality of the foregoing, the Committee may provide that if an Option is
exercised prior to having completely vested, the Shares issued upon such
exercise shall remain subject to vesting at the same rate as under the Option so
exercised and shall be subject to a right, but not an obligation, of repurchase
by the Corporation with respect to all unvested Shares if the Optionee ceases to
be an Employee for any reason. For the purposes of facilitating the enforcement
of any such right of repurchase, at the request of the Committee, the Optionee
shall enter into the Joint Escrow Instructions with the Corporation and deliver
every certificate for his or net unvested Shares with a stock power executed in
blank by the Optionee and by the Optionee's spouse, if required for transfer.
14. AMENDMENT OF THE PLAN.
The Board or the Committee may, from time to time, terminate,
suspend or discontinue the Plan, in whole or in part, or revise or amend it in
any respect whatsoever including, but not limited to, the adoption of any
amendment(s) deemed necessary or advisable to qualify the Options under rules
and regulations promulgated by the Securities and Exchange Commission with
respect to Employees who are subject to the provisions of Section 16 of the
Securities Exchange Act of 1934, as amended, or to correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any Option granted
thereunder, without approval of the shareholders of the Corporation, but without
the approval of the Corporation's shareholders, no such revision or amendment
shall:
(i) Increase the number of Shares subject to the Plan,
other than any increase pursuant to Section 9;
(ii) Materially modify the requirements as to
eligibility for participation in the Plan;
(iii) Materially increase the benefits accruing to
Optionees under the Plan;
15.
<PAGE> 16
(iv) Extend the term of the Plan; or
(v) Amend this Section 14 to defeat its purpose.
No amendment, termination or modification of the Plan shall affect any Option
theretofore granted in any material adverse way without the consent of the
Optionee.
15. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common
Stock pursuant to the exercise of an Option shall be used for general corporate
purposes.
16. APPROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the affirmative vote of
the holders of a majority of all classes of the outstanding shares present and
entitled to vote at the first meeting of shareholders of the Corporation
following the adoption of the Plan or by written consent, and in no event later
than one (1) year following the Effective Date. Prior to such approval, Options
may be granted but shall not be exercisable. Any amendment described in Section
14(i) to (iv) shall also be subject to approval by the Corporation's
shareholders.
17. WITHHOLDING OF TAXES.
In the event the Corporation or an Affiliate determines that it
is required to withhold Federal, state, or local taxes in connection with the
exercise of an Option or the disposition of Shares issued pursuant to the
exercise of an Option, the Optionee or any person succeeding to the rights of
the Optionee, as a condition to such exercise or disposition, may be required to
make arrangements satisfactory to the Corporation or the Affiliate to enable it
to satisfy such withholding requirements.
18. RIGHTS AS AN EMPLOYEE.
Neither the Plan nor any Option granted pursuant thereto shall
be construed to give any person the right to remain in the employ of the
Corporation or any Affiliate, or to affect the right of the Corporation or any
Affiliate to terminate such individual's employment at any time with or without
cause. The grant of an Option shall not entitle the Optionee to, or disqualify
the Optionee from, participation in the grant of any other Option under the Plan
or participation in any other benefit plan maintained by the Corporation or any
Affiliate.
19. DISAVOWAL OF REPRESENTATIONS, UNDERTAKINGS OR CREATION OF IMPLIED
RIGHTS.
In adopting and maintaining this Plan and granting options
hereunder, neither the Corporation nor any Affiliate makes any representations
or undertakings with respect to the initial qualification or treatment of
Options under federal or state tax or securities laws. The Corporation and each
Affiliate expressly disavows the creation of any rights in Employees, Optionees,
or beneficiaries of any obligations on the part of the Corporation, any
Affiliate or the Committee, except as expressly provided herein.
16.
<PAGE> 17
20. INSPECTION OF RECORDS.
Copies of the Plan, records reflecting each Optionee's Option,
and any other documents and records which an Optionee is entitled by law to
inspect shall be open to inspection by the Optionee and his or her duly
authorized representative at the office of the Committee at any reasonable
business hour.
21. INFORMATION TO OPTIONEES.
Each Optionee shall be provided with such information regarding
the Corporation as the Committee from time to time deems necessary or
appropriate; provided however, that each Optionee shall at all times be provided
with such information as is required to be provided from time to time pursuant
to applicable regulatory requirements, including, but not limited to, any
applicable requirements of the Securities and Exchange Commission, the
California Department of Corporations and other state securities agencies.
17.
<PAGE> 18
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
NONSTATUTORY STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this ___ day of
______________, 1994, pursuant to the Wire Networks, Inc. 1994 Stock Option Plan
(the "Plan"). The Committee administering the Plan has selected
_________________________ ("the Optionee") to receive the following grant of a
nonstatutory stock option ("Stock Option") to purchase shares of the common
stock of Wire Networks, Inc. (the "Corporation"), on the terms and conditions
set forth below to which Optionee accepts and agrees:
1. Stock options Granted:
<TABLE>
<S> <C>
No. of Shares Subject to Option... ________
Date of Grant..................... ________
Vesting Commencement Date......... ________
Exercise Price Per Share.......... ________
Expiration Date................... ________
</TABLE>
2. The Stock Option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the Corporation
specified in Section 1 hereof (the "Shares"). The Stock Option shall expire, and
all rights to exercise it shall terminate on the Expiration Date, except Chat
the stock Option may expire earlier as provided in the Plan. The number of
shares subject to the Stock Option granted hereunder shall be adjusted as
provided in the Plan. This Stock Option is intended by the Corporation and the
Optionee to be a Nonstatutory Stock Option and does not qualify for any special
tax benefits to the Optionee and is not subject to Section 7 of the Plan.
3. The Stock Option shall be exercisable in all respects in accordance
with the terms of the Plan which are incorporated herein by this reference.
Optionee acknowledges having received and read a copy of the Plan. All shares of
the Corporation's common stock issued pursuant to the exercise of this Stock
Option shall be subject to the Corporation's Right of Repurchase and Right of
First Refusal as set forth in Sections 11 and 12 of the Plan.
4. Optionee shall have the right to exercise the Stock Option in
accordance with the following schedule:
(a) The Stock Option may not be exercised in whole or in part at
any time prior to the end of the first 4 full calendar quarters following the
Vesting Commencement Date.
1.
<PAGE> 19
(b) Optionee may exercise the Stock Option as to 1/48 of the
Shares at the end of each full calendar month following the vesting Commencement
Date.
(c) The right to exercise the Stock Option shall be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may Optionee
exercise the Stock Option with regard to a fraction of a share, or for any share
for which the Stock Option is not exercisable.
5. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the
exercise of such Stock Option.
6. The Stock Option shall not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise is
otherwise exempt from the qualification requirements of such law. The Stock
Option is conditioned upon the Optionee's representation, which Optionee hereby
confirms as of the date hereof and which Optionee must confirm as of the date of
any exercise of all or any part of the Stock Option, that:
(a) Optionee understands that both this Stock Option and any
shares purchased upon its exercise are securities, the issuance of which require
compliance with state and Federal securities laws;
(b) Optionee understands that the securities have not been
registered under the Securities Act of 1933 (the "Act") in reliance upon a
specific exemption contained in the Act which depends upon Optionee's bona fide
investment intention in acquiring these securities; that Optionee's intention is
to hold these securities for Optionee's own benefit for an indefinite period;
that Optionee has no present intention of selling or transferring any part
thereof (recognizing that the Stock Option is not transferable) and that certain
restrictions may exist on transfer of the shares issued upon exercise of the
Stock Option;
(c) Optionee understands that the shares issued upon exercise of
this Stock Option, in addition to other restrictions on transfer, must be held
indefinitely unless subsequently registered under the Act, or unless an
exemption from registration is available; that Rule 701 and Rule 144, two
exemptions from registration which hay be available, are only available after
the satisfaction of certain conditions and require the presence of a U.S. public
market for such shares; that no certainty exists that a U.S. public market for
the shares will exist, and that otherwise Optionee may have to sell the shares
pursuant to another exemption from registration which exemption may be difficult
to satisfy; and
(d) The Corporation shall not be under any obligation to issue
any shares upon the exercise of this Stock Option unless and until the
Corporation has determined that:
(i) it and Optionee have taken all actions required to
register such shares under the Securities Act, or to perfect an exemption from
the registration requirements thereof;
2.
<PAGE> 20
(ii) any applicable listing requirement of any stock
exchange on which such shares are listed has been satisfied; and
(iii) all other applicable provisions of state and
Federal law have been satisfied.
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock
Option Agreement, in the case of the Corporation by its duly authorized officer,
as of the date and year written above.
OPTIONEE WIRE NETWORKS, INC.
By:_______________________________ By:_________________________________
(signature) (signature)
Its:________________________________
(Type or Print Name)
Address:__________________________
__________________________________
__________________________________
3.
<PAGE> 21
EXHIBIT B
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION AND
ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
INCENTIVE STOCK OPTION AGREEMENT
This Stock Option Agreement is made and entered into this ____ day of
____________, 1994, pursuant to the Wire Networks, Inc. 1994 Stock Option Plan
(the "Plan"). The Committee administering the Plan has selected _____________,
("the Optionee") to receive the following grant of an incentive stock option
("Stock Option") to purchase shares of the common stock of Wire Networks, Inc.
(the "Corporation"), on the terms and conditions set forth below to which
Optionee accepts and agrees:
1. Stock Options Granted:
<TABLE>
<S> <C>
No. of Shares Subject to Option... ________
Date of Grant..................... ________
Vesting Commencement Date......... ________
Exercise Price Per Share.......... ________
Expiration Date................... ________
</TABLE>
2. The stock option is granted pursuant to the Plan to purchase the
number of shares of authorized but unissued common stock of the Corporation
specified in Section 1 hereof (the "Shares"). The Stock option shall expire, and
all rights to exercise it shall terminate on the Expiration Date, except that
the Stock Option may expire earlier as provided in the Plan. The number of
shares subject to the Stock Option granted hereunder shall be adjusted as
provided in the Plan.
3. The Stock Option shall be exercisable in all respects in accordance
with the terms of the Plan which are incorporated herein by tail reference.
Optionee acknowledges having received and read a copy of the Plan. All shares of
the Corporation's common stock issued pursuant to the exercise of this Stock
Option shall be subject to the Corporation's Right of Repurchase and Right of
First Refusal as set forth in Sections 11 and 12 of the Plan.
4. Optionee shall have the right to exercise the Stock Option in
accordance with the following schedule:
(a) the Stock Option may not be exercised in whole or in part at
any time prior to the end of the first 4 full calendar quarters following the
Vesting Commencement Date.
(b) Optionee may exercise the Stock Option as to 1/48 of the
Shares at the end of each full calendar month following the Vesting Commencement
Date.
4.
<PAGE> 22
(c) The right to exercise the Stock Option shall be cumulative.
Optionee may buy all, or from time to time any part, of the maximum number of
shares which are exercisable under the Stock Option, but in no case may Optionee
exercise the Stock Option with regard to a fraction of a share, or for any share
for which the Stock Option is not exercisable.
5. The Optionee agrees to comply with all laws, rules, and regulations
applicable to the grant and exercise of the Stock Option and the sale or other
disposition of the common stock of the Corporation received pursuant to the
exercise of such Stock Option.
6. The Stock Option shall not become exercisable unless and until the
shares exercisable under the Stock Option have been qualified under the
California Corporate Securities Law of 1968 pursuant to a permit application
filed with the California Department of Corporations or unless the exercise is
otherwise exempt from the qualification requirements of such law. The Stock
Option is conditioned upon the Optionee's representation, which Optionee hereby
confirms as of the date hereof and which Optionee must confirm as of the date of
any exercise of all or any part of the Stock Option, that:
(a) Optionee understands that both this Stock Option and any
shares purchased upon its exercise are securities, the issuance of which require
compliance with state and Federal securities laws;
(b) Optionee understands that the securities have not been
registered under the Securities Act of 1933 (the "Act") in reliance upon a
specific exemption contained in the Act which depends upon Optionee's bona fide
investment intention in acquiring those securities; that Optionee's intention is
to hold these securities for Optionee's own benefit for an indefinite period;
that Optionee has no present intention of selling or transferring any part
thereof (recognizing that the Stock Option is not transferable) and that certain
restrictions may exist on transfer of the shares issued upon exercise of the
Stock Option;
(c) Optionee understands that the shares issued upon exercise of
this Stock Option, in addition to other restrictions on transfer, must be held
indefinitely unless subsequently registered under the Act, or unless an
exemption from registration is available; that Rule 701 and Rule 144, two
exemptions from registration which may be available, are only available after
the satisfaction of certain conditions and require the presence of a U.S. public
market for such shares; that no certainty exists that a U.S. public market for
the shares will exist, and that otherwise Optionee may have to sell the shares
pursuant to another exemption from registration which exemption may be difficult
to satisfy; and
(d) The Corporation shall not be under any obligation to issue
any shares upon the exercise of this Stock Option unless and until the
Corporation has determined that:
(i) it and Optionee have taken all actions required to
register such shares under the Securities Act, or to perfect an exemption from
the registration requirements thereof;
(ii) any applicable listing requirement of any stock
exchange on which such shares are listed has been satisfied; and
5.
<PAGE> 23
(iii) all other applicable provisions of state and
Federal law have been satisfied.
IN WITNESS WHEREOF, each of the parties hereto has executed this Stock
Option Agreement, in the case of the Corporation by its duly authorized officer,
as of the date and year written above.
OPTIONEE WIRE NETWORKS, INC.
By:_______________________________ By:_________________________________
(signature) (signature)
Its:________________________________
(Type or Print Name)
Address:__________________________
__________________________________
__________________________________
6.
<PAGE> 1
EXHIBIT 10.2
MAGAZINE CONTENT LICENSE AND HOSTING AGREEMENT
THIS MAGAZINE CONTENT LICENSE AND HOSTING AGREEMENT (the "Agreement") is
made and entered into as of the 27th day of January, 1999 (the "Effective
Date"), by and between WOMEN.COM NETWORKS, LLC a Delaware limited liability
company ("Women.com, LLC"), and HEARST COMMUNICATIONS, INC., a Delaware
corporation ("Hearst").
RECITALS
WHEREAS, Women.com, LLC is in the business of, among other things,
developing and maintaining a network of interrelated Web sites, which Web sites
contain content focused primarily on topics of interest to women.
WHEREAS, Hearst is the sole and exclusive owner of certain magazines
that contain content focused primarily on topics of interest to women, each of
which magazines currently maintains, or intends to develop and maintain, an
affiliated Web site.
WHEREAS, Women.com, LLC and Hearst mutually desire: (i) to incorporate
the magazine Web sites into the network of sites maintained by Women.com, LLC;
(ii) for Women.com, LLC to provide Internet hosting services for all such
magazine Web sites, and to produce certain of such sites; and (iii) that
Women.com, LLC have the right to use and publish content from the magazines on
and in connection with the Women.com, LLC network.
NOW, THEREFORE, in consideration of the mutual covenants and
representations set forth herein, the parties hereby agree as follows.
AGREEMENT
1. DEFINITIONS.
1.1 "ADVERTISEMENT" means any banner advertisements, site sponsorship
arrangements, performance-based advertising, referrals, click-throughs, leads
and bounties, and all other similar activities which do not produce revenues
through direct selling, sold with respect to any Magazine Site.
1.2 "CONTENT" means the text, pictures, sound, video, graphical elements
and other data contained in any Web site, excluding all Marks.
1.3 THE "COPYRIGHT ACT" means Title 17 of the United States Code, as
amended from time-to-time, or any successor statute thereto.
1.
<PAGE> 2
1.4 "DERIVATIVE WORK" is original Content contained on a Network site
that is based upon Hearst Content or Magazine Content, such as a translation,
musical arrangement, dramatization, fictionalization, motion picture version,
sound recording, art reproduction, abridgment, condensation, or any other form
in which a work may be recast, transformed, or adapted.
For purposes of this Agreement, excerpts made pursuant to Section 3.3 or
formatting revisions to Hearst Content made by Women.com, LLC in the normal
course of producing or hosting any Magazine Site shall not be deemed a
Derivative Work.
1.5 THE "HEARST CONTENT" means the Content that is proprietary to Hearst
or its third party licensors, which Content Hearst provides for inclusion on any
Magazine Site, whether before or after the Effective Date. As used in this
Agreement, "Hearst Content" specifically excludes Derivative Works.
1.6 "HOSTING SERVICES" means those Internet hosting services to be
performed by Women.com, LLC on behalf of Hearst under the terms of this
Agreement, all as more fully described on Exhibit A.
1.7 "INTERNET" means that certain worldwide system of computer networks,
conceived by the Advanced Research Projects Agency of the United States
Government in 1969 and originally known as ARPANet, which is as of the Effective
Date a public, cooperative and self-sustaining facility accessible to millions
of people worldwide, and is distinguished by its use of TCP/IP protocols, and
hypertext links, and incorporates, among other features, the World Wide Web.
1.8 THE "MAGAZINES" means the U.S. edition of each of the following
print publications (so long as such publications are published by Hearst):
Harper's Bazaar; Cosmopolitan; Country Living; Country Living Gardener; Country
Living's Healthy Living; Good Housekeeping; House Beautiful; Redbook; Town &
Country; and Victoria, each of which is wholly owned by Hearst. If following the
Effective Date, Hearst becomes the sole owner of any other magazine(s), such
magazine(s) may be added to the foregoing list upon the mutual agreement of the
parties. Further, the parties may, by mutual written agreement, add any or all
of the international versions of any of the foregoing Magazines to the scope of
this Agreement. The "Magazines" shall also include Marie-Claire (which is
operated as a joint venture between Hearst and Marie-Claire Album S.A., if
following the Effective Date Hearst obtains the consent of Marie-Claire Album
S.A. to include Marie-Claire within the scope of this Agreement, which consent
Hearst agrees to use commercially reasonable efforts to obtain.
1.9 "MAGAZINE CONTENT" means any and all content (other than advertising
and advertorials) published in any of the Magazines, whether prior to or
following the Effective Date, and including, by way of example and without
limitation, articles, reportage, features, editorials, letters to the editor,
reviews and commentary, provided, however, that Magazine Content shall only
include material with respect to which Hearst owns sufficient electronic rights
to license the use and display of such material for use on the Network.
2.
<PAGE> 3
1.10 "MAGAZINE SITE" means the U.S. edition of a Web site that is
provided by or on behalf of Hearst as an on-line version of a Magazine and/or is
maintained as an on-line adjunct to a Magazine, including all Hearst Content
contained on such site. If following the Effective Date, Hearst becomes the sole
owner of any other magazine(s) which are appropriate for incorporation in the
Network or obtains the consent of Marie-Claire Album S.A. as described in
Section 1.7, the related Magazine Site(s) may be added to the scope of this
Agreement upon the mutual written agreement of the parties. Notwithstanding
anything contained herein to the contrary, in no event shall bazaar411.com be
deemed to be a Magazine Site for purposes of this Agreement.
1.11 "MARK" means any and all trademarks, trade names, service marks,
trade dress, logos, URLs, or identifying slogans of a party, whether or not
registered.
1.12 "NET ADVERTISING REVENUES" means gross revenues recognized by
Women.com, LLC from the sale of Advertisements on (a) the Magazine Sites, (b)
any page of the Network that primarily contains Hearst Content (other than
teasers), and (c) any other page of the Network on which any article or feature
that is Hearst Content is reproduced or duplicated substantially in its
entirety, less agency fees (which shall not exceed [*] of gross revenues from
the sale of Advertisements), commissions (which shall not exceed eight percent
(8%) of gross revenues from the sale of Advertisements), credits due to
cancellations, and provision for bad debt.
1.13 THE "NETWORK" means that network of Web sites operated by
Women.com, LLC and each bearing the Women.com, LLC brand and directly linked to
the Network Portal Site, including any Web sites that may be added to the
Network during the term of this Agreement.
1.14 "NETWORK PORTAL SITE" means the portal site for the Network, which
site is currently located at www.women.com, or any successor URL.
1.15 "PRODUCTION SERVICES" means those Magazine Site production services
to be performed by Women.com, LLC on behalf of Hearst under the terms of this
Agreement, all as more fully described on Exhibit B.
1.16 "PROMOTIONAL ACTIVITY" means the placing of Advertisements, or the
provision of headlines or teasers (e.g. excerpts of Hearst Content or Magazine
Content).
1.17 THE "WEB" means the World Wide Web portion of the Internet.
1.18 "WOMEN.COM, LLC COMPETITOR" means: (a) any Women's Portal Site and
(b) [*]or (c) any channel or area of an online content aggregation service (such
as AOL, Compuserve, Yahoo, Excite, etc.), [*].
1.19 "WOMEN'S PORTAL SITE" means a Web site that is meant to function as
an anchor site or entry point for users to the Internet and offers a broad array
of resources and services such as articles, e-mail, discussion forums, search
engines, weather information, stock quotes, phone and map information, and
on-line shopping malls [*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3.
<PAGE> 4
2. INCORPORATION OF THE MAGAZINE SITES INTO THE NETWORK.
2.1 GENERAL. The incorporation of the Magazine Sites into the Network is
to be accomplished by way of the rights and obligations described in this
Agreement. In addition to such rights and obligations, the parties agree that
they shall, during the term of this Agreement, work together in good faith and
take whatever other actions are reasonably necessary or prudent to accomplish
the goals of this Agreement.
2.2 LINKING AND DISTRIBUTION.
(a) During the term of this Agreement, Women.com, LLC agrees that
it will place direct links to [*] Magazine Sites (to be mutually agreed upon by
Hearst and Women.com, LLC) on the Network. These links will be placed on the
homepage of the Network Portal Site if links to any non-Magazine Site appear on
such page. These links and additional links will also be placed individually or
grouped, throughout the Network on appropriate homepages and any other
appropriate pages on the Network, including, without limitation, any appropriate
pages where other relevant non-Magazine site links appear, and will be no less
favorable in terms of size, placement, rotation, prominence, frequency and ease
of use, than any other link, brand or name of any other site on the Network.
Without limiting the generality of the foregoing, in the event any Magazine Site
link or links appear on the Network together with any non-Magazine site link
that is in the form of a logo, such Magazine Site link or links shall also be in
the form of a logo. During the term of this Agreement, Hearst shall create and
place links to the Network Portal Site homepage from the homepage of each
Magazine Site (and elsewhere within each such Magazine Site, as the parties may
mutually determine).
(b) Women.com, LLC shall distribute the Magazine Sites throughout
the Network in a manner no less favorable than any other site on the Network.
2.3 BRANDING. Hearst shall prominently place Women.com, LLC's branding
above the fold, adjacent to the masthead on each Magazine Site. All Women.com,
LLC branding on each Magazine Site must comply with Women.com, LLC's branding
standards as communicated to Hearst from time to time, and shall be subject to
the prior approval of Women.com, LLC, which shall be deemed given if Women.com,
LLC does not respond within five (5) business days of receipt of request for
approval. Women.com, LLC shall provide navigation capabilities on the Network to
and from each of the Magazine Sites. Such navigation capabilities shall be at
least equal (including, without limitation, with respect to size, placement,
prominence, frequency and ease of use) to the navigation capabilities provided
by Women.com, LLC on the Network with respect to non-Magazine sites. Without
limiting the foregoing, navigation from the Network to each of the Magazine
Sites shall exist from every place on the Network where navigation to all other
non-Magazine site exists. In addition, where a navigational tool is used to link
to a majority of non-Magazine Sites exists, relevant Magazine Sites will also be
linked with such navigational tool. All Hearst and Magazine branding on the
Network must comply with applicable branding standards as communicated by Hearst
to Women.com, LLC from time to
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
4.
<PAGE> 5
time, and shall be subject to the prior approval of Hearst, which shall be
deemed given if Hearst does not respond within five (5) business days of receipt
of request for approval.
2.4 DEVELOPMENT SCHEDULE. Following the Effective Date, the parties
shall work together in good faith in order to complete all tasks necessary or
desirable to incorporate the Magazine Sites into the Network (the
"Implementation"). Within thirty (30) days following the Effective Date, the
parties shall develop a mutually acceptable schedule ("Schedule") that will
cover each party's respective tasks and obligations with respect to the
Implementation and establish a targeted launch date for each Magazine Site. Each
party shall assign a project manager to be the primary point of contact between
the parties with respect to such efforts. The parties agree to use commercially
reasonable efforts to complete their respective Implementation obligations with
respect to each Magazine Site by the launch date set forth for such in the
Schedule.
2.5 LICENSE. During the term of this Agreement, Hearst hereby grants to
Women.com, LLC a non-exclusive (except as provided in Section 2.7(a)),
royalty-free, worldwide license, with no right to sublicense or to sell, to:
(a) electronically reproduce and distribute, and publicly perform
and display the Hearst Content on the Web, all in connection with the Hosting
Services to be provided by Women.com, LLC pursuant to Section 3 and the
incorporation of the Magazine Sites into the Network as contemplated by this
Agreement; and
(b) electronically reproduce and distribute, and publicly perform
and display the Hearst Content both (i) on the Network, and (ii) otherwise on
the Web in connection with Women.com, LLC's fulfillment of its distribution
commitments to its on-line distribution partners (e.g. America OnLine); and
(c) electronically reproduce and distribute, and publicly perform
and display Magazine Content both (i) on the Network, and (ii) otherwise on the
Web in connection with Women.com, LLC's fulfillment of its distribution
commitments to its on-line distribution partners (e.g. America OnLine);
provided, that electronic publishing rights have been obtained by Hearst with
respect to such Magazine Content (it being understood that Hearst shall not have
any obligation to obtain such rights on behalf of Women.com, LLC); and provided,
further, that Hearst shall not be obligated to deliver to Women.com, LLC any
Magazine Content that was published, in print or electronically, prior to the
Effective Date, where the cost of delivery to Women.com, LLC would, in Hearst's
reasonable estimation, be economically impractical; and
(d) reproduce and distribute through any media now known or
hereafter developed excerpts of the Hearst Content in advertisements for and
marketing and promotional materials related to the Network and the Magazine
Sites; and
(e) subject to Section 8.2 and obtaining the written agreement of
Hearst, make Derivative Works, and to reproduce, publicly perform and display,
and distribute such Derivative Works through the Network and in any media now
known or hereafter developed; and
5.
<PAGE> 6
(f) electronically reproduce and distribute on the Web, and
publicly perform and display on the Web any banner advertisements delivered by
Hearst to Women.com, LLC for placement on the Magazine Site(s) and/or the
Network.
2.6 MAGAZINE SPECIFIC RESTRICTIONS. The rights granted pursuant to
Section 2.5 are subject to any guidelines that may be established by Hearst or
each Magazine from time-to-time with respect to Hearst Content or Magazine
Content. Further, Hearst and each Magazine shall have the right to request,
based on reasonable objections, the removal of, or editorial revisions to, any
of its Hearst Content or Magazine Content that is published through the Network.
Women.com, LLC agrees to take appropriate remedial action with respect to any
such request within twenty four (24) hours after receipt of such request;
provided, that after taking such remedial action, Women.com, LLC shall have the
right to appeal such request directly to the designated personnel at the
applicable Magazine.
2.7 ADDITIONAL RIGHTS AND RESTRICTIONS.
(a) EXCLUSIVITY. During the term of this Agreement, Hearst agrees
that it will not: (i) grant Internet distribution or Interact publication rights
to any of the Hearst Content or Magazine Content to any Women.com, LLC
Competitor including, without limitation, through a direct data feed, cobranding
arrangement, or premium placement arrangement; (ii) advertise or promote the
Magazine Sites on or in connection with any Women.com, LLC Competitor, or (iii)
license any of its Magazine Marks for use on the Web site of any Women.com, LLC
Competitor. Further, Hearst agrees that during the term of this Agreement (x) it
will not license to any Women.com, LLC Competitor the right to use, any URL
incorporating either the name of a Magazine or derivative or diminutive form of
the name of a Magazine (e.g. "Cosmo", "T&C", "Healthy Living", etc.) and (y) it
will not use any URL incorporating either the name of a Magazine or derivative
or diminutive form of the name of a Magazine except, (1) on a site that is part
of the Network, and (2) in connection with any projects with which Hearst or the
Magazines may become involved in compliance with Section 2.8(b).
(b) MAGAZINE-SPECIFIC OFFERINGS. Hearst agrees that during the
term of this Agreement, Women.com, LLC will have the right, subject to the
mutual agreement of the parties, to enter into arrangements specific to each
individual Magazine in order to: (i) develop Magazine-branded offerings to be
made available on areas of the Network other than the associated Magazine Site
and through product and service offerings of Women.com, LLC other than the
Network; and (ii) to distribute the Magazine Content to third parties on the
Web. Women.com, LLC shall have no right to sublicense or to sell the Hearst
Content or the Magazine Content to anyone without Hearst's prior written
consent.
(c) RIGHT OF FIRST OFFER. During the term of this Agreement,
Hearst agrees that Women.com, LLC shall have a right of first offer on all new
Internet-based development projects ("Projects") initiated by the Hearst
Magazine Group or any of the Magazines or Magazine Sites that are appropriate
for placement on the Network, based on the Network's demographics, Content and
similar factors. If Women.com, LLC expresses an interest in any such Project,
the Hearst Magazine Group (or the applicable Magazine or Magazine Site) shall
negotiate the terms of such Project with Women.com, LLC in good faith. In the
event the parties are not able to enter into a definitive agreement, letter of
intent, memorandum of understanding
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or like document within thirty (30) days (or such longer period as the parties
may agree to) following Women.com, LLC's receipt of notice of such Project from
the Hearst Magazine Group or the applicable Magazine or Magazine Site, the
Hearst Magazine Group (or the applicable Magazine or Magazine Site) shall have
the right to offer the Project to a third party; provided, however that prior to
executing a definitive agreement with such third party with respect to the
applicable Project, the Hearst Magazine Group (or the applicable Magazine or
Magazine Site) shall provide Women.com, LLC with a summary of the general terms
of the proposed agreement and discuss with Women.com, LLC ways in which
Women.com, LLC might participate in the Project.
2.8 RESERVATION OF RIGHTS BY HEARST.
(a) FOR PROMOTIONAL PURPOSES. Notwithstanding anything to the
contrary in this Agreement, Hearst retains the right to conduct Promotional
Activities with respect to each of the Magazine Sites in conjunction with any
party that is not a Women's Portal Site, provided that none of Hearst, the
Magazines or the Magazine Sites receives payments for those Promotional
Activities.
(b) OTHER ONLINE PROJECTS. Subject only to the requirements of
Section 2.7(c), Hearst retains the right on behalf of the Magazines to permit
the Magazines to enter into agreements of any nature with any third party that
is not a Women.com, LLC Competitor with respect to projects focused on specific
topics or applications.
2.9 EXCLUSIVITY OBLIGATIONS OF WOMEN.COM, LLC. Women.com, LLC hereby
agrees that during the term of this Agreement it will not, without the prior
written consent of Hearst, enter into any agreement to produce and/or include as
part of the Network any [*], if such [*] may reasonably be construed to be
competitive [*]. Notwithstanding the foregoing, nothing herein shall prohibit
Women.com, LLC from [*]
3. MAGAZINE SITE DEVELOPMENT AND MAINTENANCE.
3.1 HOSTING SERVICES. Hearst agrees that during the term of this
Agreement, Women.com, LLC will provide Internet Hosting Services for each
Magazine Site, regardless of the source of production of such site. In
connection therewith, and independent of the source of production of each
Magazine Site, Women.com, LLC will provide to Hearst during the term of this
Agreement Hosting Services with respect to each Magazine Site. Women.com, LLC
shall make the Hearst Content publicly available to Internet users on a basis
consistent with the performance standards set forth on Exhibit A, which may be
amended from time to time. Women.com, LLC shall upload all Hearst Content,
including updates. Women.com, LLC shall, using industry standard methods,
prevent unauthorized access to any shadow site of any Magazine Site, any
restricted areas of each Magazine Site and any databases or other sensitive
material generated from or used in conjunction with such Magazine Site, as
required by Hearst. Women.com, LLC agrees that Women.com, LLC will host selected
non-Magazine sites for Hearst during a transition period not to exceed ninety
(90) days from and after the Effective Date
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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(the "Transition Hosting Services"). Hearst agrees that it shall pay Women.com,
LLC the sum of [*] for each period of thirty (30) days during which Women.com,
LLC provides Transition Hosting Services. In the event the final period during
which Women.com, LLC provides Transition Hosting Services consists of fewer than
[*] days, then Hearst shall pay Women.com, LLC for such final period of
Transition Hosting Services at the rate of [*].
3.2 DELIVERY OF HEARST CONTENT. Except as set forth in Section 3.4,
Hearst will deliver, and will be solely responsible for providing, to Women.com,
LLC all of Hearst Content that Hearst intends to be published and distributed on
each Magazine Site. [At its option, Hearst may electronically transmit or upload
the Hearst Content directly to the Web site.] Unless otherwise agreed to by
Women.com, LLC, the Hearst Content will be in the format(s) specified by
Women.com, LLC in Exhibit A and conform to any other technical specifications
required by Women.com, LLC from time to time. Hearst will bear all costs
associated with the telecommunications and computer hardware, software and
services necessary to generate the Hearst Content and deliver it to Women.com,
LLC.
3.3 HEARST CONTENT CONTROL. Notwithstanding anything to the contrary
contained herein, Hearst retains complete editorial and creative control over
all aspects, including Content, of the Magazine Sites. Hearst will be solely
responsible for creating, managing, editing, reviewing, deleting and otherwise
controlling all Content, including the Hearst Content, Magazine Content and all
user-generated content, with respect to the Magazine Sites. Women.com, LLC shall
not supplement, modify, alter or excerpt the Hearst Content (other than
modifications strictly necessary to upload the Hearst Content to the Web site),
without Hearst's prior written consent; provided, however, that Women.com, LLC
may, without seeking Hearst's prior written consent, use reasonable excerpts of
the Hearst Content both on and off the Network in connection with its promotion,
marketing and advertising of the Magazine Sites and the Network and other
activities calculated to draw traffic to the Magazine Sites and the Network. No
article, excerpt or other subset of subject matter of the Hearst Content or
Magazine Content may be reproduced on the Network without the proper attribution
to the Magazine in which such Hearst Content or Magazine Content appeared in
print form and to the author or authors (where required) and the copyright owner
to the same extent and in the same manner set forth in the original form of the
Hearst Content or Magazine Content provided by Hearst. Hearst acknowledges that,
by only providing Hearst with the ability to publish and distribute its own
Hearst Content and the content of third parties, Women.com, LLC is acting as a
passive conduit for the distribution and publishing of such content. As a
conduit, Women.com, LLC will give Hearst complete discretion over all Content
reproduced on the Magazine Sites. Women.com, LLC has no obligation to Hearst,
and undertakes no responsibility, to review the Hearst Content or user-generated
content to determine whether any such content may incur liability to third
parties. Notwithstanding anything to the contrary contained herein, if
Women.com, LLC reasonably believes that any Hearst Content on a Magazine Site
may create liability for Women.com, LLC, Hearst agrees that, after prior notice
to Hearst (if reasonably possible under the circumstances), Women.com, LLC may
remove such Hearst Content and/or the applicable Web site(s) as Women.com, LLC
believes is prudent or necessary to minimize or eliminate Women.com, LLC's
potential liability.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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3.4 PRODUCTION SERVICES.
(a) From the date of this Agreement until such time when the
parties agree to the final terms of the Production Services to be provided
pursuant to Section 3.4(b), Women.com, LLC shall assume and perform all
obligations of the HomeArts business unit of the New Media and Technology
Division of Hearst ("HomeArts") to provide Production Services to the Magazine
Sites, in the manner provided by HomeArts at the date hereof. Women.com, LLC
shall be paid for: (i) Women.com, LLC staff employees -- [*] and (ii) for
subcontracted services, including but not limited to manuscripts, art,
photography, software development, and talent-[*]. All amounts paid to
Women.com, LLC shall be credited to amounts to be paid to Women.com, LLC
pursuant to Section 3.4(b).
(b) WORK ORDERS. Hearst hereby agrees to purchase from Women.com,
LLC and Women.com, LLC agrees to provide to Hearst, no fewer than [*] worth of
Production Services (including the Production Services provided under Section
3.4(a) above during the [*] of the term of this Agreement, and no fewer than [*]
worth of such services (including the Production Services provided under Section
3.4(a) above) during the [*] of the term of this Agreement. The precise
Production Services to be performed with respect to each Magazine Site shall be
determined by mutual agreement of the parties as soon as reasonably practicable
following the mutual execution of this Agreement and shall be consistent with
the performance standards set forth in Exhibit B. A written work order, signed
by both parties, shall be issued with respect to all Production Services to be
rendered. The parties acknowledge that as soon as reasonably possible following
the Effective Date, they shall identify those Magazine Sites for which
Women.com, LLC will have primary production responsibility during the term of
this Agreement, including any renewals thereof.
(c) PERFORMANCE STANDARDS. Hearst understands and agrees that any
Magazine Site that is not produced by Women.com, LLC must conform to the
technical and production standards as may be promulgated by Women.com, LLC from
time-to-time. Hearst shall be solely responsible for ensuring that such sites
meet such requirements, all at Hearst's sole cost and expense. All Magazine
Sites produced by Women.com, LLC pursuant to Section 3.5 shall conform to the
same technical and production standards as those imposed by Women.com, LLC with
respect to third party-produced Magazine Sites.
4. PROMOTION.
4.1 Both parties shall actively promote the rollout and availability of
the Magazine Sites via the Network. Hearst, for its part, agrees to provide the
cable and broadcast television and the print promotion described in Section 3.02
of the Limited Liability Company Agreement of Women.com, LLC. Further, the
parties shall from time-to-time work together in good faith to identify, develop
and pursue joint marketing and promotional activities that are designed to
enhance the value of the Magazine Sites and the Network. The parties shall
mutually agree on the budget, content and development schedule of any such
activities prior to the launch thereof.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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Each party shall assign a point of contact within such party's organization to
coordinate any joint marketing or promotional activities. Costs and expenses
incurred in support of such joint marketing and promotional activities shall be
determined by mutual agreement of the parties.
4.2 PRESS RELEASES. The parties shall issue a joint press release
describing the parties' relationship pursuant to this Agreement and any future
press releases relating to this Agreement, which press releases shall be
mutually approved in writing by the parties prior to any distribution thereof.
5. WOMEN.COM, LLC SOFTWARE AND TECHNOLOGY.
Hearst understand and agrees that Women.com, LLC, in performing its
obligations hereunder, may incorporate or use in connection with the Hosting
Services, Production Services and incorporation of the Magazine Sites into the
Network such software tools or programs or other technology that Women.com, LLC
has developed as of the Effective Date, or which Women.com, LLC may hereafter
develop ("Women.com, LLC Tools"). By way of example, Women.com, LLC Tools could
include without limitation toolbars for maneuvering between pages, search
engines, and Java applets. In the event any Women.com, LLC Tools are
incorporated by Women.com, LLC into or are used by Women.com, LLC in connection
with any Magazine Site, or any Women.com, LLC Tools are used to manipulate
Hearst Content for distribution on the Magazine Site or through the Network,
then Women.com, LLC hereby grants to Hearst during the terms of this Agreement a
worldwide, non-exclusive, nontransferable, royalty-free, free right to use the
Women.com, LLC Tools on and in connection with the Magazine Sites solely in
connection with such use. In the event Hearst would like to license any
Women.com, LLC Tools for any other purpose or after the termination of this
Agreement, Women.com, LLC agrees to negotiate such licenses in good faith with
Hearst; provided, however, that nothing herein shall be deemed to obligate
Women.com, LLC to enter into any such license in the event the parties are
unable to reach mutually agreeable terms within thirty (30) days of the
commencement of such negotiations, or in the event Women.com, LLC reasonably
believes that under such a license, Hearst would be able to use the Women.com,
LLC tools in a manner that may compete with any then-existing or reasonably
anticipated products and/or services of Women.com, LLC.
6. ADVERTISING.
6.1 NET REVENUE SPLIT. Women.com, LLC agrees that Hearst shall be
entitled to receive from Women.com, LLC no later than forty-five (45) days
following the termination of each calendar quarter a royalty (the "Royalty")
computed on Net Advertising Revenues from the preceding quarter. The Royalty
payable to Hearst shall be equal to [*] of the aggregate Net Advertising
Revenues from the applicable quarter, until such time as Hearst has recouped the
cumulative production costs incurred from and after the Effective Date in the
ongoing production of the Magazine Sites as set forth on Exhibit D, whether or
not such Magazine Sites are produced by Women.com, LLC, plus interest,
calculated at an annual rate equal to [*]. Thereafter, the Royalty shall equal
[*] of the aggregate Net Advertising Revenues from the applicable quarter, until
such time as the gross revenues recognized by Women.com, LLC in any period of
twelve (12) consecutive months exceed [*], whereupon the Royalty payable to
Hearst shall be
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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reduced to [*] of the aggregate Net Advertising Revenues from the
applicable quarter, until such time as the gross revenues recognized by
Women.com, LLC in any calendar year exceeds [*].
Thereafter, the Royalty payable to Hearst shall be reduced to six percent (6%)
of the aggregate Net Advertising Revenues from the applicable quarter through
and including the expiration or earlier termination of this Agreement.
6.2 SALES BY HEARST. Hearst may only sell Advertisements (which sales
are to be made by the Hearst Magazine Division) on the Magazine Sites with the
prior written approval of Women.com, LLC, which approval shall not be
unreasonably withheld. Women.com, LLC shall pay to Hearst a commission with
respect to such sales in an amount to be mutually agreed upon by the parties.
6.3 ADVERTISING POLICIES AND COOPERATION. In the allocation and sale of
Advertisements throughout the Network, Women.com, LLC agrees to treat the
Magazine Sites at least as favorably as the other non-Magazine sites. Women.com,
LLC agrees not to place any advertising on the Magazine Sites or any other place
on the Network where Hearst Content or Magazine Content appears that is in
violation of the then current and applicable advertising policies and standards
established by the applicable Magazine; provided, that such policies have been
communicated to Women.com, LLC in advance. Further, the parties agree to
coordinate their advertising sales efforts as permitted under this Agreement to
ensure that none of such efforts conflict with either party's contractual
arrangements with third parties.
7. E-COMMERCE.
Notwithstanding anything in this Agreement to the contrary, Hearst
reserves the right to sell goods and services on any Internet site or area,
including, without limitation, through the Magazine Sites, both directly and
through third party commerce partners ("e-commerce"), and in connection
therewith, Hearst retains the right to conduct Promotional Activities with
respect to such e-commerce; provided, however that for the benefit of Women.com,
LLC, Hearst agrees that all e-commerce shall be conducted in accordance with
applicable local, state and Federal law including, without limitation, consumer
protection laws. Further, with respect to e-commerce, the parties hereby agree
as follows:
7.1 MAGAZINE SUBSCRIPTIONS. Women.com, LLC shall be entitled to a
commission equal to [*] of gross revenues (less credit for
returns, and provision for bad debt) derived from the sale of Magazine
subscriptions made through the Network, whether or not such sales are made
through the Magazine Sites or any non-Magazine site of the Network, including,
without limitation, the Network Portal Site, and without regard to the entity
actually making such sale.
7.2 DIRECT SALES. Women.com, LLC shall be entitled to a commission equal
to [*] of gross revenues (less shipping and handling charges,
credit for returns, and provision for bad debt) derived from the direct sale of
goods and services on the Magazine Sites (other than Magazine subscriptions)
("Direct Sales"), i.e. where the applicable sale is made directly between the
customer and the applicable Hearst entity, and not between the customer and any
non-Hearst entity (e.g. Amazon.com, Music Boulevard, etc.). Unless otherwise
agreed to in writing by Women.com, LLC, it shall be the sole responsibility of
Hearst to provide all
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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services related to Direct Sales. Hearst will bear full responsibility for all
customer service, including without limitation, order processing, billing,
fulfillment, shipment, collection and other customer service associated with any
Direct Sales offered, sold or licensed through each Magazine Site, and
Women.com, LLC will have no obligations whatsoever with respect thereto. Hearst
will, using no less than industry standard methods for online-order fulfillment,
ensure that all Direct Sales are received, processed, fulfilled and delivered on
a timely and professional basis.
7.3 COMMERCE PARTNERS. The parties agree that for purposes of this
Agreement royalties paid to Hearst (or any entity that controls, is controlled
by, or under common control with Hearst (any such entity, a "Hearst Affiliate"))
by Hearst's third party commerce partners (e.g. Amazon.com), which royalties are
attributable to the sale of goods or services arising from traffic on the
Magazine Sites, shall be deemed to be performance-based advertising and,
consequently, shall contribute to Net Advertising Revenues. For purposes hereof,
the terms "controls", "is controlled by", and "under common control with" refer
to the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a business entity, whether through
ownership of voting securities, by contract, or otherwise.
7.4 PAYMENT. All amounts due Women.com, LLC from Hearst pursuant to this
Section 7 shall be paid on a quarterly basis within thirty (30) days following
the end of the quarter in which the applicable Commerce Revenues are generated
and shall be accompanied by a report detailing the calculation of the applicable
payment.
7.5 NON-MAGAZINE SITE TRANSACTIONS. Hearst understands and agrees that,
except as explicitly set forth in Section 6 or this Section 7, neither Hearst,
nor any Hearst Affiliate, shall be entitled to any commission, royalty or
payment of any sort by virtue of the sale of goods or services on the Network.
8. OWNERSHIP.
8.1 HEARST CONTENT AND MAGAZINE CONTENT. Title to and ownership of all
intellectual property rights embodied by or otherwise incorporated into the
Hearst Content and Magazine Content shall remain with Hearst and/or its third
party licensors, if any. Nothing herein shall be construed to grant to Hearst
any right, title or interest in or to any other Content that may be published on
or through the Network, including any Content supplied by Women.com, LLC for use
on or in connection with the Magazine Sites.
8.2 DERIVATIVE WORKS. Neither Women.com, LLC nor Hearst shall create a
Derivative Work without the prior agreement of the other of them, or the
applicable Magazine or Magazine Site. All Derivative Works made or developed by
Women.com, LLC as permitted by Section 2.5(e) shall be jointly owned by Hearst
and Women.com, LLC, each such work being a "joint work" as defined in Section
101 of the Copyright Act, and the parties shall be co-owners of the copyrights
in such works as set forth in Section 201(a) of the Copyright Act.
Notwithstanding anything contained herein or in the Copyright Act to the
contrary, the parties agree that neither party shall make any commercial use of
any Derivative Work without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed; provided, however, that
such consent may be conditioned upon the parties' reaching agreement with
respect to the accounting
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for and division of profits, if any, arising from such proposed use.
Notwithstanding the foregoing, during the term of this Agreement Women.com, LLC
may, without payment of any kind to Hearst, use any and all Derivative Works in
any manner that it is permitted to use the Hearst Content and Magazine Content
pursuant to the terms of Section 2.5.
8.3 WOMEN.COM, LLC TOOLS. All Women.com, LLC Tools, including all
intellectual property rights and other proprietary rights embodied therein or
otherwise applicable thereto, are and shall remain the sole and exclusive
property of Women.com, LLC and/or its licensors. All rights not specifically
granted to Hearst herein with respect to the Women.com, LLC Tools are retained
by Women.com, LLC.
8.4 OTHER CONTENT. All Content used on or in connection with the Network
(inclusive of any Content that Women.com, LLC may provide for use on the
Magazine Sites), exclusive of the Hearst Content, Magazine Content and
Derivative Works, is and shall remain the sole and exclusive property of
Women.com, LLC and/or its third party licensors and content providers. Nothing
herein shall be construed to grant to Hearst any right, title or interest in or
to any such Content, and Hearst agrees that it shall not at any time make any
claim to any right, title or interest in or to the such Content.
8.5 URL'S. The Magazine Site URL's shall be the sole and exclusive
property of Hearst. The Network Portal Site URL is and shall remain the sole and
exclusive property of Women.com, LLC. All other Network URL's shall remain the
property of Women.com, LLC or its Network partners, as the case may be.
8.6 USER INFORMATION. The parties agree that any and all user data that
is collected through any user registration process (e.g. name, address, e-mail
address, etc.) ("User Data") on the Magazine Sites shall be jointly owned by
Women.com, LLC and Hearst; provided, however, that despite such joint ownership
each party shall be free to use such information without the consent of the
other party for any lawful purpose and in any lawful manner and free of any duty
to account to the other party for profits arising from such use. Further, the
parties agree that any and all other User Data shall be the sole and exclusive
property of Women.com, LLC and that Hearst shall have no right, title or
interest in or to such User Data. Each party agrees that it shall use any and
all User Data owned by such party only in a manner that is consistent with any
applicable privacy policy or other policy respecting the use of such
information. Women.com, LLC agrees that it will deliver all jointly-owned User
Data, in a mutually agreed upon format, to Hearst within thirty (30) following
the quarter in which such User Data is collected.
9. WARRANTIES.
9.1 HEARST WARRANTIES. Hearst hereby warrants to and for the benefit of
Women.com, LLC that Hearst shall not provide any Hearst Content to Women.com,
LLC or publish any Hearst Content that: (a) infringes on any third party's
copyright, patent, trademark, trade secret or other proprietary rights or rights
of publicity or privacy; (b) violates any law, statute, ordinance or regulation
(including without limitation the laws and regulations governing export
control); (c) is defamatory, trade libelous, unlawfully threatening or
unlawfully harassing; (d) is obscene or pornographic or contains child
pornography; (e) violates any laws regarding unfair competition,
antidiscrimination or false advertising, or (f) to the best of Hearst's
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knowledge, contains any viruses, trojan horses, worms, time bombs, cancelbots or
other computer programming routines that are intended to damage, detrimentally
interfere with, surreptitiously intercept or expropriate any system, data or
personal information. Furthermore, Hearst warrants that to the best of its
knowledge, based on representations and warranties made by third parties,
technology used or supplied by or on behalf of Hearst pursuant to this Agreement
(exclusive of technology supplied by Women.com, LLC) ("Hearst Technology") shall
be Year 2000 Compliant. As used in this Section 9.1, "Year 2000 Compliant" means
that the Hearst Technology is designed to be used prior to, during and after the
calendar Year 2000 A.D., and will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap-year calculations and will not malfunction, cease
to function, or provide invalid or incorrect results as a result of date/time
data; provided that all other hardware, software or firmware used in conjunction
with the Hearst Technology properly exchange accurate and properly formatted
date data with the Hearst Technology being evaluated for Year 2000 Compliance.
Hearst agrees to use commercially reasonable practices (including without
limitation periodic inspections of each Magazine Site) to ensure that
user-generated content published or distributed on such Magazine Sites does not
create liability for Women.com, LLC.
9.2 WOMEN.COM, LLC WARRANTIES. Women.com, LLC hereby warrants to and for
the benefit of Hearst that Women.com, LLC shall not use any Content excluding
Hearst Content or Magazine Content in any manner that (a) infringes on any third
party's copyright, patent, trademark, trade secret or other proprietary rights
or rights of publicity or privacy; (b) violates any law, statute, ordinance or
regulation (including without limitation the laws and regulations governing
export control); (c) is defamatory, trade libelous, unlawfully threatening or
unlawfully harassing; (d) is obscene or pornographic or contains child
pornography; (e) violates any laws regarding unfair competition,
antidiscrimination or false advertising; or (f) to the best of Women.com, LLC's
knowledge, contains any viruses, trojan horses, worms, time bombs, cancelbots or
other computer programming routines that are intended to damage, detrimentally
interfere with, surreptitiously intercept or expropriate any system, data or
personal information. Furthermore, Women.com, LLC warrants that to the best of
its knowledge, based on representations and warranties made by third parties,
the software, hardware and equipment (the "Information Technology") owned,
leased or licensed by Women.com, LLC on the date hereof is Year 2000 Compliant.
As used in this Section 9.2, "Year 2000 Compliant" means the Information
Technology is designed to be used prior to, during and after the calendar Year
2000 A.D., and the Information Technology used during each such time period will
accurately receive, provide and process date/time data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
20th and 21st centuries, including the years 1999 and 2000, and leap-year
calculations and will not malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data; provided that all other
hardware, software or firmware used in conjunction with the Information
Technology properly exchange accurate and properly formatted date data with the
Information Technology being evaluated for Year 2000 Compliance. Women.com, LLC
agrees to use commercially reasonable practices (including without limitation
periodic inspections of the Network) to ensure that user-generated content
published or distributed on Network sites (other than the Magazine Sites) does
not create liability for Hearst.
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9.3 RECOURSE AND REMEDIES. Each party agrees that its sole and exclusive
remedy for a breach of any warranty made by the other party pursuant to this
Section 9 shall be indemnification as set forth in Section 11 hereof.
10. TRADEMARKS.
Each party acknowledges and agrees for all purposes that all Marks
associated with the other party and/or the other party's services, products,
literature, promotional materials or otherwise, whether or not registered,
constitute the other party's exclusive property. Each party ("Licensor") hereby
grants to the other party ("Licensee") a non-exclusive, non-transferable,
non-assignable, royalty-free license to use those Marks of Licensor set forth on
Exhibit C solely for purposes of performing Licensee's obligations under this
Agreement including, without limitation, in connection with any advertising,
marketing and promotional activities undertaken and materials developed pursuant
to this Agreement. All uses by Licensee of Licensor's Marks shall be in
accordance with such quality control standards as the Licensor may promulgate
from time to time, and Licensee agrees to refrain from all uses of Licensor's
Marks to which Licensor objects. All uses of Licensor's Marks by Licensee,
including all goodwill arising therefrom shall inure solely to the benefit of
Licensor. All promotional literature and other materials prepared by either
party in connection with its promotional obligations hereunder shall bear
appropriate copyright and/or trademark notices as prescribed by the party whose
content or branding is included therein. Licensee agrees it will not use,
register or attempt to register in any jurisdiction, or otherwise appropriate or
adopt any name, mark or logo that is confusingly similar to Licensor's Marks.
Licensor retains all rights with respect to Licensor's Marks that are not
specifically granted to Licensee herein. At no time during the term of the
Agreement or thereafter shall Licensee attack, challenge or file any application
with respect to any Licensor Mark.
11. INDEMNITY.
11.1 Hearst agrees to defend, indemnify and hold harmless Women.com, LLC
and its directors, officers, agents and employees from and against any and all
claims, suits, damages, losses, costs, liabilities, expenses and fees (including
without limitation reasonable attorneys' and expert witnesses' fees) incurred or
arising from (a) any breach of the warranties set forth in Section 9.1, (b) any
Hearst Content, Magazine Content, or user-generated content on the Magazine
Sites, except to the extent arising from Women.com, LLC's unauthorized or
unapproved use of Hearst Content or Magazine Content on the Magazine Sites, or
(c) e-commerce conducted on any Magazine Site. Women.com, LLC may, at its own
expense, participate in any defense or settlement negotiations with respect to
any claim to which it is entitled to indemnification with counsel of its own
choosing. Hearst agrees not to enter into any settlement of any claim without
the prior written consent of Women.com, LLC, which consent shall not be
unreasonably withheld or delayed.
11.2 Women.com, LLC agrees to defend, indemnify and hold harmless Hearst
and its directors, officers, agents and employees from and against any and all
claims, suits, damages, losses, costs, liabilities, expenses and fees (including
without limitation reasonable attorneys' and expert witnesses' fees) incurred or
arising from (a) any breach of the warranties set forth in Section 9.2, (b) any
Content (excluding Hearst Content, Magazine Content or user-generated
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content on the Magazine Sites) created, developed, published or distributed by
Women.com, LLC (c) the manner in which Women.com, LLC uses any of the Hearst
Content or Magazine Content on the Network, other than on the Magazine Sites and
(d) e-commerce conducted other than on a Magazine Site. Hearst may, at its own
expense, participate in any defense or settlement negotiations with respect to
any claim to which it is entitled to indemnification with counsel of its own
choosing. Women.com, LLC agrees not to enter into any settlement of any claim
without the prior written consent of Hearst, which consent shall not be
unreasonably withheld or delayed.
12. LIMITATIONS ON LIABILITY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT (INCLUDING BUT NOT LIMITED TO SUCH DAMAGES
ARISING FROM TORT, INCLUDING NEGLIGENCE AND STRICT LIABILITY, BREACH OF CONTRACT
OR WARRANTY), INCLUDING WITHOUT LIMITATION DAMAGES FOR INTERRUPTED
COMMUNICATIONS, LOST DATA OR LOST PROFITS, EVEN IF SUCH PARTY HAS BEEN ADVISED
OF (OR KNOWS OR SHOULD KNOW OF) THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY.
13. TERM AND TERMINATION.
13.1 THE TERM. This Agreement shall be effective from and after the
Effective Date for a period of six consecutive years (the "Initial Term").
Following the Initial Term, this Agreement shall automatically renew for three
consecutive terms of six (6) years each (each, a "Renewal Term"); provided that
prior to the commencement of each Renewal Term the parties shall reach agreement
as to any modifications to be made to the royalties or commissions to be paid
hereunder. In the event the parties do not reach such agreement, the applicable
Renewal Term shall, nevertheless, commence on a month-to-month basis under the
then-existing terms of the Agreement until such time as the parties agree to any
new terms or either party provides the other with no less than ninety (90) days
notice of termination of this Agreement.
13.2 TERMINATION FOR CAUSE. In the event either party materially
breaches this Agreement, the other party may terminate this Agreement by
providing the breaching party with no fewer than ninety (90) days notice of
termination; provided, that in the event of breaches capable of cure, the
breaching party shall have the right to cure the default within such period (or
such longer period as then non-breaching party may agree to in writing) and
thereby forestall termination of this Agreement.
13.3 EFFECT OF TERMINATION. Upon the expiration or termination of this
Agreement, Women.com, LLC shall (i) download all Hearst Content and Magazine
Content to a medium of Hearst's choosing and deliver such Hearst Content and
Magazine Content to Hearst within five (5) business days following such
expiration or termination, (ii) immediately cease using the Hearst Content and
Magazine Content, including but not limited to, all electronic copies and
reproductions on the Network, (iii) within forty-five (45) days of such
termination, pay to Hearst any amounts of Royalty that as of the effective date
of termination were due and owed to Hearst pursuant to this Agreement and (iv)
after receipt by Hearst of the Hearst Content and Magazine
16.
<PAGE> 17
Content in the manner requested, upon the direction of Hearst, delete all Hearst
Content and Magazine Content from the entire Network, including the Magazine
Sites and any other place in which such Content appears as promptly as
practicable.,
13.4 SURVIVAL. The terms of Sections 1, 8, 9, 11, 12, 13.3, 13.4, 14,
15, and 16 shall survive the expiration or earlier termination of this Agreement
for any reason.
14. CONFIDENTIAL INFORMATION.
14.1 DEFINITION OF CONFIDENTIAL INFORMATION. "Confidential Information"
as used in this Agreement shall mean any and all technical and non-technical
information of a party (the "Disclosing Party") to this Agreement (including,
without limitation, patents, copyrights and works of authorship, trade secrets,
and proprietary information, techniques, sketches, drawings, models, inventions,
know-how, processes, apparatus, equipment, algorithms, software programs, and
software source documents) related to the current, future and proposed business,
products and services of such party, and its suppliers and customers, and
includes, without limitation, information concerning development, design details
and specifications, engineering, customer lists, business forecasts, sales, and
marketing plans and any other similar information or data which is disclosed to
the other party (the "Recipient") or to which the Recipient otherwise gains
access as a result of performing under this Agreement. "Confidential
Information" also includes proprietary or confidential information of any third
party that may disclose such information to the Disclosing Party in the course
of the Disclosing Party's business. Confidential Information does not include
information, technical data or know-how which: (i) is in the Receiving Party's
possession at the time of disclosure as shown by the Receiving Party's files and
records immediately prior to the time of disclosure; (ii) before or after it has
been disclosed to the Receiving Party, enters the public domain, not as a result
of any action or inaction of the Receiving Party; (iii) is approved for release
by written authorization of the Disclosing Party; (iv) is disclosed to the
Receiving Party by a third party not in violation of any obligation of
confidentiality; or (v) is independently developed by the Receiving Party
without reference to the Disclosing Party's Confidential Information.
14.2 USE AND DISCLOSURE. The Receiving Party agrees not to use the
Confidential Information of the Disclosing Party for any purpose except to the
extent necessary to fulfill its obligations under this Agreement. The Receiving
Party agrees not to copy, alter, modify, disassemble, reverse engineer or
&compile any of the materials comprising Confidential Information, unless
permitted in writing by the Disclosing Party. The Receiving Party agrees not to
disclose the Confidential Information to any third parties or to any of its
employees, contractors or agent except those of whom who have a need to know the
Disclosing Party's Confidential Information to enable the Receiving Party to
fulfill its obligations under this Agreement; provided, that such parties shall
be made aware that such Confidential Information is confidential to the
Disclosing Party and shall be under a written contractual restriction on
nondisclosure and proper treatment of Confidential Information that is
consistent with and no less restrictive than the terms of this Section 15.
Notwithstanding the foregoing, the Receiving Party may disclose the Disclosing
Party's Confidential Information to the extent required by a valid order of a
court or other governmental body or by applicable law; provided, however, that
the Receiving Party will use all reasonable efforts to notify the Disclosing
Party of the obligation to make such disclosure in advance so that the
Disclosing Party will have a reasonable
17.
<PAGE> 18
opportunity to object to such disclosure. The Receiving Party agrees that it
shall treat the Confidential Information with the same degree of care as it
accords its own Confidential Information of a similar nature; provided that in
no event shall the Receiving Party exercise less than reasonable care to protect
the Disclosing Party's Confidential Information. The Receiving Party agrees to
advise the Disclosing Party in writing of any misappropriation or misuse by any
person of the Disclosing Party's Confidential Information of which the Receiving
Party may become aware. The Receiving Party will not communicate any information
to the Disclosing Party in violation of the proprietary rights of any third
party.
14.3 RETURN OF MATERIALS. Any Confidential Information furnished to the
Receiving Party, and all copies thereof, at the earlier of the Disclosing
Party's request, or the termination of the business relationship between the
Disclosing Party and the Receiving Party, at the Disclosing Party's option, will
either be: (i) promptly returned to the Disclosing Party; or (ii) destroyed by
the Receiving Party (with the Receiving Party providing written certification of
such destruction to the Disclosing Party).
15. BOOKS AND RECORDS.
15.1 RECORDS. Each party shall during the term of this Agreement and for
a period of three years thereafter, keep and maintain full and complete records
and books of account, maintained in accordance with generally accepted
accounting principals, related to its activities under this Agreement
("Records") including, without limitation, relating to any payments of any kind
to be made to the other party pursuant to this Agreement.
15.2 AUDIT RIGHT. During the term of this Agreement and for a period of
three years thereafter, each party shall have the right, on no more than one
occasion in any consecutive twelve (12) month period, to audit, or to engage a
third party auditor, reasonably acceptable to the other party, to audit the
Records of the other party to ensure compliance with the terms of this Agreement
and the accuracy of all amounts paid to the auditing party pursuant to this
Agreement; provided, that the auditing party provide the other party with no
fewer than fifteen (15) days notice of such audit and conducts such audit in a
manner calculated to minimize interference with the other party's business.
Unless otherwise agreed to by the parties, any such audit shall be conducted on
the audited party's premises. The auditing party shall bear the cost of the
audit; provided, however, that in the event the audit reveals an underpayment to
the auditing party in excess of five percent (5%), the audited party shall
reimburse the auditing party for the cost of the audit.
16. GENERAL PROVISIONS.
16.1 TAXES. Each party shall be responsible for, and shall indemnify and
hold the other party harmless from and against, any and all taxes, customs,
duties or other amounts that may be imposed by any governmental authority on any
amount paid to such party by the other party hereunder, except for taxes based
upon the other party's net income or gross receipts.
16.2 LATE PAYMENTS. Each party reserves the right to charge the other
party interest at the lower of 1 1/2% per month or the highest rate permissible
under applicable law on any amount due such party from the other party under
this Agreement, which amount is not paid when due.
18.
<PAGE> 19
16.3 GOVERNING LAW/JURISDICTION/VENUE. This Agreement will be governed
and interpreted in accordance with the laws of the State of New York as applied
to agreements made, entered into and performed entirely in New York and solely
by New York residents. The parties hereby agree that all causes of action
brought in connection with this Agreement shall be brought in the State or
Federal Courts located in New York County, New York, and each party hereby
irrevocably consents to the personal jurisdiction of such courts for such
purpose.
16.4 EXPENSES. Unless otherwise set forth herein to the contrary, each
party shall be solely responsible for payment of any expenses such party incurs
in connection with its performance under this Agreement.
16.5 SEVERABILITY; WAIVER. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated in any way. The
parties agree to replace any invalid provision with a valid provision that most
closely approximates the intent and economic effect of the invalid provision.
The waiver by either party of a breach of any provision of this Agreement will
not operate or be interpreted as a waiver of any other or subsequent breach.
16.6 HEADINGS. Headings used in this Agreement are for reference
purposes only and in no way define, limit, construe or describe the scope or
extent of such section, or in any way affect this Agreement.
16.7 SUCCESSORS AND ASSIGNS. The parties' rights and obligations will
bind and inure to the benefit of their respective successors, heirs, executors
and administrators and permitted assigns. Women.com, LLC may subcontract all or
any portion of its service obligations hereunder; provided that Women.com, LLC
remains primarily responsible for such subcontracted service obligations and
that Hearst reserves the right to remove and/or have a subcontractor replaced if
Hearst is not reasonably satisfied with such subcontractor's performance.
16.8 ATTORNEYS' FEES. If any legal action is brought to construe or
enforce any provision of this Agreement, the prevailing party shall be entitled
to receive its reasonable attorneys' fees and court costs in addition to any
other relief it may receive.
16.9 FORCE MAJEURE. If the performance of this Agreement, or any
obligation hereunder, except the making of payments hereunder, is prevented,
restricted or interfered with by any act or condition whatsoever beyond the
reasonable control of the affected party, the party so affected, upon giving
prompt notice to the other party, shall be excused from such performance to the
extent of such prevention, restriction or interference.
16.10 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors, and no agency, partnership, joint venture or
employee-employer relationship is intended or created by this Agreement.
16.11 NOTICE. Any notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given: upon
personal delivery; if sent by telephone
19.
<PAGE> 20
facsimile, upon confirmation of receipt; if sent by electronic mail, upon
confirmation of delivery; or if sent by certified or registered mail, postage
prepaid, five (5) days after the date of mailing.
16.12 MODIFICATIONS. This Agreement may only be modified or revised by a
written agreement or amendment hereto that is executed by both of the parties.
16.13 ENTIRE AGREEMENT. This Agreement, including the Exhibits attached
hereto, sets forth the complete and final statement of the agreement between the
parties with respect to the subject matter hereof, and supersedes any and all
oral or written agreements, negotiations or understandings between the parties
as to such subject matter. Any terms on any Hearst work order that purport to
modify the terms of this Agreement, or that are in addition to or different from
the terms of this Agreement shall be void and of no force or effect,
notwithstanding Women.com, LLC's provisions of the services requested in such
work order, unless specifically agreed to in writing by Women.com, LLC.
Wheresoever the terms of any mutually executed work order differ from or
conflict with the terms of this Agreement, the terms of the work order shall
prevail, but only to the extent of the specific project covered by such work
order.
IN WITNESS WHEREOF, each of the parties hereto have executed this
Agreement as of the date first written above.
WOMEN.COM, LLC: HEARST:
By: /s/ Marleen R. McDaniel By: /s/ Alfred C. Sikes
-------------------------- ----------------------------
Marleen R. McDaniel Alfred C. Sikes
Title: President Title: Vice President
Street Address: Street Address:
1820 Gateway Drive 959 Eighth Avenue
Suite 100 New York, NY 10019
San Mateo, CA 94404
Mail Address: Mail Address:
1820 Gateway Drive 959 Eighth Avenue
Suite 100 New York, NY 10019
San Mateo, CA 94404
Fax: 650-378-6511 Fax: 212-582-7739
E-Mail: E-Mail: [email protected]
20.
<PAGE> 21
Exhibit A
HOSTING SERVICES
Hearst agrees that during the term of this Agreement, Women.com, LLC
will provide Internet hosting services for each Magazine Site, regardless of the
source of production of such site.
Women.com, LLC shall provide Internet hosting services that are equal
to, or improve on, the quality of Internet hosting services currently available
to the Magazines through the Internet hosting facility maintained for the Hearst
New Media and Technology Center ("Hearst New Media") at Exodus Communication's
Internet Data Center in Jersey City, New Jersey. The specific hardware
configuration, software and connectivity shall be mutually agreed upon by the
parties as soon as reasonably practicable following the Effective Date.
Hosting services provided by Women.com, LLC to Hearst shall be fully
managed services that conform to Network operational standards established by
Women.com, LLC. Fully managed means that, in addition to providing all hardware,
software, connectivity and bandwidth required to insure that Hearst Content is
publicly available to Internet users, Women.com, LLC will provide appropriate
monitoring of all systems, and full systems' administration support for all
Magazine Sites hosted by Women.com, LLC.
Women.com, LLC shall, using industry standard methods, prevent
unauthorized access to any production system, Magazine Site, any restricted area
of a Magazine Site and any database or other sensitive material generated from
or used in conjunction with a Magazine Site, as required by Hearst. As part of
this security consideration, Women.com, LLC shall have periodic security audits
performed by an independent third party, the frequency of which audits shall be
mutually agreed upon.
Women.com, LLC will provide and fully manage both live servers and
staging servers used for the production of Magazine Sites, whether Content is
produced by Women.com, LLC or a third party. Women.com, LLC shall also put in
place and support promotion scripts for the timely updating of Content to the
sites by production teams employed to produce Magazine Sites, whether at
Women.com, LLC or at third party location. The specific requirements for
promotion of Content shall be mutually agreed to as soon as reasonably
practicable following the Effective Date.
Women.com, LLC shall insure that the best commercially available service
level agreement is in place for hosting services provided to Hearst and the
Magazines. In particular, the terms of the Women.com, LLC service level
agreement shall be at least as favorable to Hearst as the service level
agreement which is currently in place between Exodus Communications and Hearst
New Media, including, without limitation, the terms regarding remedies for
interruption of services.
As part of its hosting services, Women.com, LLC shall make available to
the Magazine Sites all core functionality of the Network, whether the Content
for the Magazine Sites is produced by Women.com, LLC or a third party. The scope
of this functionality shall be mutually agreed as soon as reasonably practicable
following the Effective Date. Core
A-1.
<PAGE> 22
functionality of the Network shall include, but not be limited to, all
functionality currently available to the Magazines through the HomeArts Network,
e.g., engineering functionality (i.e. registration, ad management, surveys,
polls, quizzes, use of relational database systems, user profiling,
personalization techniques for delivery of content or advertising, and standard
user tracking reports made available to Magazines in an online format), and
third party functionality (i.e. search, chat, forums, email, listserve, ad
serving, and third party auditing).
Additionally, Women.com, LLC shall make available to the Magazine Sites
any new functionality at the time it is introduced to the Network; provided,
that some production or third party fees may arise for the Magazine Sites if
they choose to implement the functionality offered.
Hearst agrees that all Magazine Sites, whether produced by Women.com,
LLC or a third party, shall be produced in compliance with Network standards.
Women.com, LLC will make available to Hearst documentation of Network standards
and permit Hearst to provide the documentation to all third parties producing
Content for Magazine Sites.
Women.com, LLC shall provide Magazine Site-specific maintenance and end
user support, periodic technical consulting as required by Hearst, and technical
phone support for any third parties contracted to produce Content for Magazine
Sites that will be hosted by Women.com, LLC.
A-2.
<PAGE> 23
Exhibit B
PRODUCTION SERVICES
Women.com, LLC will collaborate with designated Magazines in the
development of a Magazine Web strategy, plan and budget.
Women.com, LLC will make available Production Services to Hearst upon
request at rates pre-established for the [*] of the Agreement. The rates shall
be mutually agreed upon as soon as possible following the Effective Date;
however, the basis for the rate structure shall be as follows: (i) for
Women.com, LLC staff employees -- [*]; and (ii) for subcontracted services,
including but not limited to manuscripts, art, photography, software
development, and talent -- [*].
The number of sites to be produced by Women.com, LLC and the development
plan and budget for those sites will be mutually agreed upon as soon as
reasonably practicable following the Effective Date.
Women.com, LLC will provide full Production Services for the selected
Magazine Sites. These services shall include, but shall not be limited to:
1. overall management and direction of the site;
2. creation of editorial features for the site, including original and
interactive Content;
3. software/coding support for all features;
4. conversion of Hearst Content to HTML or other formats
appropriate for Web presentation, as designated by Hearst;
5. all site quality control;
6. interactive design and navigation;
7. all graphic design work and conversions, including art, photos
and illustration;
8. rich media production support; and
9. all production tools, processes, and systems necessary to support
production personnel, which are part of the Network standard,
including template-based production systems, e.g., Inso Dynabase,
used to streamline or automate production. The production tools,
processes and systems that are part of the Network standard shall
be available and supported for all Magazine Site
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
B-1.
<PAGE> 24
production whether provided by Women.com, LLC or a third party,
so long as the Magazine Site is hosted by Women.com, LLC.
The management of the Hearst Magazine Division and its representatives
will be viewed by Women.com, LLC as a "customer" of Women.com, LLC and as such
will provide ongoing input and direction to Women.com, LLC regarding all aspects
of the Magazine Sites.
Hearst will secure electronic rights and inform Women.com, LLC regarding
any limitations to these rights for content supplied by Hearst for inclusion on
the Magazine Sites. The formats in which Hearst will deliver content to
Women.com, LLC and the methods of transmission or transport, and timing, will be
mutually agreed during the production planning process.
In supporting Women.com, LLC's production of Magazine Sites, the
editorial staff of the applicable Magazines will:
1. provide all appropriate content in formats to be mutually agreed;
2. provide ongoing direction to and liaison with Women.com, LLC, and
3. be responsible for final approval of their brand's on-line
representation.
In providing these Production Services, Women.com, LLC will assign
dedicated personnel for the production of Magazine Sites, including editorial,
creative, production and technical support to production. The exact structure of
the terms will be mutually agreed between Women.com, LLC and the Magazines. As
part of that organizational structure, primary points of contact and liaison
will also be established between Women.com, LLC and the Magazines to facilitate
efficient communications between Hearst and Women.com, LLC regarding production
of the Magazine Sites.
For Magazine Sites not produced by Women.com, LLC, Women.com, LLC will
provide management and technical resources to ensure the efficient integration
of the site into the Network. These services shall include:
1. ongoing assistance in the efficient application of Network standards
and tools;
2. assistance in the development of special features;
3. assistance in marketing and distribution programs; and
4. support for other needs as appropriate.
B-2.
<PAGE> 25
EXHIBIT C
TRADEMARKS
I. Women.com, LLC Marks:
II. Hearst Marks:
C-1.
<PAGE> 26
I - HEARST TRADEMARKS
REGISTRATION TRADEMARKS
[*]
APPLIED FOR
[*]
COMMON LAW
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 27
EXHIBIT D
RECOUPABLE MAGAZINE-SPECIFIC INITIAL PRODUCTION COSTS
Up to [*] of production costs may be recouped on account of the first year of
the term of the Agreement. For each subsequent year of the term, such amount
shall equal [*] of the recoupable production costs for the prior year of the
term
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
D-1.
<PAGE> 1
EXHIBIT 10.3
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (this "Agreement"), made as of the 19th day of
August, 1997 by and between WIRE NETWORKS, INC., a California corporation ("WNI"
or the "Company") and GRAPHICS INTERNATIONAL, INC., D/B/A HALLMARK CONNECTIONS,
a California corporation ("Hallmark"), (Hallmark and WNI are sometimes referred
to herein collectively as the "Parties" and individually as a "Party").
WHEREAS, WNI has developed informational websites, and desires to
further develop a mini-site and websites in conjunction with Hallmark; and
WHEREAS, Hallmark, through an affiliated corporation, HC Crown Corp.
(the "Hallmark Affiliate"), desires to purchase and WNI desires to sell an
ownership interest in WNI; and
WHEREAS, the Parties are, together with certain other investors in the
Series C Preferred Stock financing of WNI and concurrently with the execution of
this Agreement, entering or have entered into that certain Series C Preferred
Stock Purchase Agreement dated as of July 9, 1997, a copy of which is attached
hereto as Exhibit A, an Amended and Restated Investors Rights Agreement, a copy
of which is attached hereto as Exhibit B, an Amended and Restated Co-Sale and
Voting Agreement, a copy of which is attached hereto as Exhibit C, a form of
Warrant, a copy of which is attached hereto as Exhibit D, and other documents
necessary to consummate this transaction, (collectively, these documents shall
be referred to as the "Transaction Documents"); and
WHEREAS, the Parties desire to set forth the terms and conditions of and
certain understandings with respect to the acquisition by the Hallmark Affiliate
of an ownership interest in WNI.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties hereby agree as follows:
1. HALLMARK AFFILIATE'S PURCHASE OF AN INTEREST IN COMPANY.
(a) HALLMARK AFFILIATE'S PURCHASE. Subject to the terms and conditions
of this Agreement, the other Transaction Documents and any other agreement
governing the relationship between the Parties, Hallmark hereby agrees to cause
the Hallmark Affiliate to purchase one million three hundred fifteen thousand
seven hundred ninety (1,315,790) shares of
1.
<PAGE> 2
Series C Convertible Preferred Stock (the "Stock") of WNI at a total purchase
price of four million one dollars and 60/100 ($4,000,001.60) (the "Proceeds"),
or three dollars and 4/100 ($3.04) per share (the "Series C Stock Price"). In
full consideration of such subscription and payment, and the other transactions
contemplated hereby and in the Transaction Documents, WNI hereby accepts such
purchase and upon payment therefore, shall issue to the Hallmark Affiliate the
Stock.
(b) The Company will also grant to the Hallmark Affiliate warrants (the
"Series C Warrants") to acquire at the Series C Stock Price, as adjusted
pursuant to the term of the Series C Warrants, up to eight hundred eighty-seven
thousand six hundred sixty five (887,665) shares of Series C Convertible
Preferred Stock (the "Warrant Stock") of the Company. Upon exercise of fifty
percent (50%) of the Series C Warrants, Hallmark will be entitled to appoint one
(1) additional director to the Board of Directors of the Company.
(c) WNI shall allocate [*] of the Proceeds ("Allocated Funds") over a
period of [*] ("Term") for the development of websites for Hallmark. WNI will
allocate [*] of the Allocated Funds to the development of a mini-site for
Hallmark currently titled [*] ("Mini-Site"). WNI will host this Mini-Site on one
of WNI's websites and Hallmark will appear as the exclusive sponsor of this
Mini-Site. WNI will complete the development of the Mini-Site within 6 months of
the date hereof. WNI will allocate [*] of the Allocated Funds to other websites
to be mutually agreed upon by WNI and Hallmark. These co-branded websites will
sell advertising in accordance with Hallmark's standard advertising guidelines
which shall be delivered to WNI as soon as possible in conjunction with the
development of the websites which accept advertising. Hallmark reserves the
right to require the withdrawal of the use of its name(s) and sponsorship within
48 business hours upon a clear deviation from such advertising guidelines. WNI
will receive revenues generated from these properties as defined in Section
1(e).
(d) If WNI fails to spend all of the Allocated Funds as set forth above
within the [*], Hallmark will have the option of (a) allocating the
unused portion of the funds for usage on the Mini-Site at an amount of [*]
per year for as long as it takes for the unused portion to be spent (in the
event that the Mini-Site is not active at the end of the two year term, the
funds will be allocated against another active site approved by Hallmark created
at the same dollar amounts) or (b) having the unused amount returned to the
Hallmark Affiliate without decreasing the equity interest of the Hallmark
Affiliate in the Company if and only if WNI fails to make a minimum of 4
commercially reasonably proposals to Hallmark with regard to new projects which
are consistent with Hallmark's image and strategy. In addition, if WNI does not
launch the Mini-Site within [*] of the date hereof, Hallmark will have the
option of re-allocating the unused portion of the [*] to another project or
have the unused amount returned to Hallmark without decreasing Hallmark's equity
interest in the Company.
(e) Hallmark will retain the copyright and all other rights to the
content on all Hallmark sites created pursuant to the terms of this Agreement
(the "Content"), including the Mini-Site, during the Term and in perpetuity
thereafter, provided, however; WNI shall have an exclusive license to use any
such Content during the Term solely for purposes of the internet.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
2.
<PAGE> 3
However, Hallmark will be obligated to pay WNI, in perpetuity, for use of this
Content as follows: for all Advertising Revenues (defined as advertising
revenues after sales commissions and agency fees) and Ancillary Revenues
(defined as all revenues generated from a source other than advertising revenue)
generated ("Total Revenues") from use of the Content or unique concepts
developed by WNI on behalf of Hallmark, Hallmark will pay WNI [*] of the Total
Revenues until all of WNI's production costs are reimbursed. Once WNI has been
fully reimbursed, WNI will receive [*] of the net profit collected from any use
of the Content off the web, [*] of the net profit for any product sold on the
web and [*] of all other revenues collected on the web. WNI recognizes that net
profit may not be the best way to divide funds and commits to evaluating other
revenue sharing options on a case by case basis. During the Term, Hallmark shall
not enter into any agreement with any other party relating to the use of said
Content without WNI's prior written permission. During the Term and in
perpetuity, WNI will receive author attribution whenever the said Content is
used (unless WNI gives permission otherwise).
(f) In the event that Hallmark reasonably believes that WNI's actual
investment in producing the Content for these sites significantly varies from
the amount reported or either party believes that an error has occurred with
regard to revenue sharing, such party may, but no more than twice during any
twelve month period, at its own expense and upon ten (10) days prior written
notice to the other party (the "Audited Party"), designate independent auditors
or accountants (the "Auditor") to examine or audit the Audited Party's records
in a reasonable manner to verify the figures reported or amounts paid, as the
case may be. In the event that the Auditor determines that either (x) the actual
amount invested by the Audited Party is less than ninety percent (90%) of the
amount reported by the Audited Party, or (y) the amount paid by the Audited
Party is less than ninety percent (90%) of the actual amount owed by the Audited
Party, as the case may be, then such difference, plus the fees of the Auditor,
shall become immediately due and payable by the Audited Party upon written
notice to the Audited Party.
(g) Hallmark will have ongoing access and the right to use demographic
information/profiles and names that are collected with respect to the sites
created hereunder in all cases where the user is notified that this information
may be disseminated.
(h) The Hallmark.com site will be prominently linked to all sites
created hereunder in partnership with Hallmark and WNI. In addition, a minimum
of [*] Hallmark sites designated by Hallmark and approved by WNI will be
prominently linked to each site created hereunder. Additional links will be
added as mutually agreed upon.
(i) All Hallmark sites and all links to Hallmark sites created hereunder
will be subject to well-outlined taste and quality guidelines that Hallmark will
provide to WNI . Hallmark reserves the right to require withdrawal of the use of
its name(s) and sponsorship within 48 business hours upon a clear contravention
of such guidelines ("Contravention") and in any case, upon 30 days written
notice, which notice shall be given in the manner provided in Section 8(e) of
this Agreement. WNI will have 30 days to cure such a Contravention. In the event
that WNI does not cure the Contravention to Hallmark's satisfaction, the fund
re-allocation guidelines as defined in Section 1(d) will apply.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
3.
<PAGE> 4
(j) WNI will not enter any similar agreement with [*] and [*]. If Hallmark does
not agree with the use of pre-existing cards on the WNI sites (pre-dating the
signing of this agreement), there will be a 60 day negotiation / phase out
period before the cards are removed (or as long as advertising has been pre-sold
for the post-card areas).
2. TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS OF THE PARTIES. Any and all
trademarks, service marks, copyrights (including the Content) and trade names of
Hallmark and its affiliates are, and shall remain, the exclusive property of
Hallmark or its affiliates, as the case may be. Any and all trademarks, service
marks, copyrights and trade names of WNI are, and shall remain, the exclusive
property of WNI. WNI shall retain, obtain or acquire and thereafter preserve
(including, but not limited to, placing trademark notices on all Content,
advertising materials and any products which WNI may distribute), trademarks
and/or service marks in the name of WNI with respect to WNI's products.
3. CONFIDENTIALITY.
(a) NEW INITIATIVES. The Parties anticipate that, as long as Hallmark or
the Hallmark Affiliate holds the Stock, they may, from time to time, discuss,
and exchange with each other, ideas, concepts or information to be used in
connection with the creation or development of possible future initiatives,
ventures, products or services, not contemplated by this Agreement. The Parties
agree that this Agreement is in no way intended to limit such discussions or
exchanges and that such ideas, concepts or information referred to in the
previous sentence shall, without limitation, constitute Confidential Information
(as hereinafter defined).
(b) CONFIDENTIALITY. The Parties will each regard and preserve as
strictly confidential all information and material, including, but not limited
to, non-public information included as part of the transactions contemplated
hereby and by the other Transaction Documents and all other material or
information, including without limitation, customer or client information,
provided to one another in connection with the participation and development of
products, or services (hereinafter, "Confidential Information"). Each of the
Parties agrees that, except as provided in this Agreement or any other
Transaction Document or as otherwise agreed by them in writing, it shall not use
the Confidential Information of the other Party for its own benefit or for the
benefit of any third Person. Each of the Parties agrees not to interfere with,
circumvent, frustrate or otherwise impede in any manner the realization by WNI
of any of the objectives it seeks or benefits derived, or to be derived, from
any of such Confidential Information. The Parties further acknowledge and agree
that in the event of a breach or threatened breach of this Section 4, the
non-breaching Party or Parties may have no adequate remedy in money damages and,
accordingly, may be entitled to appropriate injunctive relief against such
breach. The Parties agree that they each will have no obligation in connection
with specific Confidential Information of any other Party to the extent, but
only to the extent that: (i) such Confidential Information is already known to
any of them, free from any obligation to keep such Confidential Information
confidential at the time it was obtained from any other Party; (ii) such
Confidential Information is or becomes publicly known in the trade or otherwise
through no wrongful act of the receiving
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
4.
<PAGE> 5
Party or any third Person owing a duty of confidentiality to the disclosing
Party; or (iii) such Confidential Information is rightfully received by the
receiving Party from a third Person without restriction and without breach of
this Agreement or any obligation of such third Person to the disclosing Party.
Upon the request of any of the Parties following the termination or expiration
of this Agreement as otherwise provided herein, all tangible and machine
readable copies of any Confidential Information of any other Party shall be
returned to such Party and Confidential Information relating to WNI shall be
returned to or remain with WNI. Should WNI cease to exist, and there is no
successor entity thereto, including a purchaser or other transferee of assets,
Hallmark shall have non-exclusive rights to such Confidential Information.
4. REPRESENTATIONS AND WARRANTIES.
(a) HALLMARK REPRESENTATIONS AND WARRANTIES. Hallmark represents and
warrants to WNI that:
(i) it is a corporation duly organized validly existing and in
good standing under the laws of the State of California;
(ii) it has all requisite corporate power and authority to enter
into this Agreement and the other Transaction Documents to which it is a party
and to carry out its obligations hereunder and thereunder;
(iii) this Agreement and the other Transaction Documents have
been duly authorized, executed and delivered by it and are a valid and binding
obligations of such Party enforceable in accordance with their terms;
(iv) the execution, delivery and performance of and compliance
with this Agreement and the other Transaction Documents do not and will not
conflict with, or constitute a default under, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of its properties or
assets, nor result in any violation of (A) any term of its certificate or
articles of incorporation or bylaws, (B) any term or provision of any mortgage,
indenture, contract, agreement, instrument, judgment or decree of such Party, or
(C) any order, statute, rule or regulation applicable to it, the violation of
which would have a material adverse effect on its ability to perform its
obligations under this Agreement or the other Transaction Documents to which it
is a party;
(v) the Hallmark Affiliate is acquiring the Stock for investment
for its own account and not with a view to, or for offer or sale in connection
with, any public distribution thereof and that it is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933;
(vi) it is not relying on any information provided by WNI with
respect to the tax and other economic considerations of an investment in the
Stock, and the undersigned has relied on the advice of, or has consulted with,
only the undersigned's own advisor(s); and
5.
<PAGE> 6
(vii) the representations and warranties made by it in this
Agreement, and in any certificate or schedule referenced hereby or attached
hereto, do not contain any statement which is false or misleading with respect
to any material fact and do not omit to state a material fact required to be
stated herein or therein or necessary in order to make the statements contained
herein or therein not materially false or misleading. The representations,
warranties and agreements of it contained herein are true and correct as of the
date hereof and may be relied upon by WNI, and it will notify WNI immediately of
any adverse change in any such representations and warranties which may occur
prior to the acceptance of the subscription and will promptly send WNI written
confirmation thereof. The representations, warranties and agreements of it
contained herein shall survive the execution and delivery of this Agreement and
the purchase of the Stock.
(b) COMPANY REPRESENTATIONS AND WARRANTIES. WNI represents and warrants
to Hallmark that:
(i) it is a corporation duly organized validly existing and in
good standing under the laws of the State of California;
(ii) it has all requisite corporate power and authority to enter
into this Agreement and the other Transaction Documents to which it is a party
and to carry out its obligations hereunder and thereunder;
(iii) this Agreement and the other Transaction Documents have
been duly authorized, executed and delivered by it and are valid and binding
obligations of such Party enforceable in accordance with their terms;
(iv) the execution, delivery and performance of and compliance
with this Agreement and the other Transaction Documents do not and will not
conflict with, or constitute a default under, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of its properties or
assets, nor result in any violation of (A) any term of its articles of
incorporation or bylaws, (B) any term or provision of any mortgage, indenture,
contract, agreement, instrument, judgment or decree of such Party, or (C) any
order, statute, rule or regulation applicable to it, the violation of which
would have a material adverse effect on its ability to perform its obligations
under this Agreement or the other Transaction Documents to which it is a party;
(v) it is not relying on any information provided by Hallmark
with respect to the tax and other economic considerations in connection with
this transaction, and has relied on the advice of, or has consulted with, only
its own advisor(s);
(vi) with the exception of Volpe, Welty & Company, there is no
investment banker, broker, finder or other intermediary which has been retained
by, or is authorized to act on behalf of, it, any shareholder of it or their
respective Affiliates who might be entitled to any fee or commission from WNI or
its Affiliates upon the consummation of the transactions contemplated hereby or
thereafter; and
6.
<PAGE> 7
(vii) the representations and warranties made by it in this
Agreement, and in any certificate or schedule referenced hereby or attached
hereto, do not contain any statement which is false or misleading with respect
to any material fact and do not omit to state a material fact required to be
stated herein or therein or necessary in order to make the statements contained
herein or therein not materially false or misleading. The representations,
warranties and agreements of it contained herein are true and correct as of the
date hereof and may be relied upon by Hallmark, and it will notify Hallmark
immediately of any adverse change in any such representations and warranties
which may occur prior to the acceptance of the subscription and will promptly
send Hallmark written confirmation thereof. The representations, warranties and
agreements of it contained herein shall survive the execution and delivery of
this Agreement and the purchase by Hallmark of the Stock.
5. INDEMNIFICATION.
(a) EACH PARTY (THE "INDEMNIFYING PARTY") shall indemnify, defend and
hold the other Party (including WNI), their respective officers, managers,
employees, shareholders, managers, members and agents (an "Indemnitee")
harmless, on an after tax basis, from any claims, actions, suits, demands,
liabilities, obligations, losses, damages, judgments or settlements of
whatsoever kind and nature, including any and all reasonable costs and expenses
related thereto including reasonable attorneys' fees (the "Claims"), directly or
indirectly arising from (i) any failure by the Indemnifying Party to comply with
or perform any of the terms of this Agreement, or (ii) a misrepresentation or
Material Breach of any representation, warranty, covenant, or agreement of the
Indemnifying Party contained in this Agreement, any Transaction Documents or any
other agreement, instrument, certificate or other document delivered by the
Indemnifying Party in connection with the transactions contemplated hereby.
(b) ASSERTION OF RIGHT OF INDEMNIFICATION. To assert its rights of
indemnification hereunder, an Indemnitee shall:
(i) promptly notify the Indemnifying Party in writing of any
Claim or legal proceedings which gives rise to such right;
(ii) afford the Indemnifying Party the opportunity to participate
in, or fully control, in its sole discretion, any proceeding and the compromise,
settlement, resolution or other disposition of such Claim or proceeding so long
as such settlement involves payment of money damages only and provides the
Indemnitees with a general release; and
(iii) fully cooperate with the Indemnifying Party, at the
Indemnifying Party's expense, in such Indemnifying Party's participation and
control of any proceeding and the compromise, settlement, resolution or other
disposition of such claim or proceeding; provided, however, that if such
compromise, settlement or resolution or other disposition could have an adverse
effect on the Indemnitee, the Indemnitee's consent to such compromise,
settlement, resolution or other disposition shall be required but shall not be
unreasonably withheld. The Indemnifying Party shall bear all out of pocket
expenses of the Indemnitee in connection with such cooperation.
7.
<PAGE> 8
6. LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER, IN ANY
CIRCUMSTANCES, FOR ANY LOSS OF BUSINESS OR PROFITS, OR FOR ANY CONSEQUENTIAL,
INCIDENTAL, PUNITIVE OR SIMILAR DAMAGES.
7. TERMINATION; SURVIVAL.
(a) TERMINATION. In the event of a Material Breach of any
representation, warranty or covenant contained in this Agreement or any
Transaction Document, the non-breaching Party may (reserving cumulatively all
other rights and remedies at law or in equity unless otherwise expressly stated
herein) terminate this Agreement with respect to the breaching Party by giving
twenty (20) days prior written notice to the breaching Party specifying such
breach. If within such twenty (20) day period, the breaching Party fails to
remedy any such breach, this Agreement shall terminate with respect to the
breaching Party without further act or notice and all of the rights and
obligations with respect to the breaching Party hereunder shall cease and
terminate except as otherwise provided herein, or in any other Transaction
Document.
(b) ADDITIONAL TERMINATION RIGHTS. This Agreement may be terminated by
either party:
(i) if the other Party is declared insolvent or bankrupt by a
court of competent jurisdiction;
(ii) if the other Party files or consents, by answer or
otherwise, to the filing against it of a petition for relief or reorganization
or arrangement under the insolvency or bankruptcy laws of any jurisdiction, and
any such petition is not dismissed within sixty (60) days, thereafter; or
(iii) if a trustee in bankruptcy or a receiver or similar entity
is appointed for the other Party or the other Party makes an assignment for the
benefit of its creditors, consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers for itself or for any substantial
part of its property, or enters into an agreement for the composition,
extension, or readjustment of substantially all of its obligations; or
(iv) if any governmental entity of competent jurisdiction shall
enter an order appointing any of the foregoing for such Party or with respect to
any substantial portion of its property, or seeking the dissolution, winding-up
or liquidation of such Party.
(c) SURVIVAL. The following Sections or provisions of this Agreement
shall survive any termination of this Agreement until the obligation of the
Parties set forth therein shall have been fully performed by the Parties: 2, 3,
5, 6, and 8(a), 8(c), 8(e), 8(f), 8(g), 8(h), 8(l) and 8(n).
8. GENERAL.
(a) INDEPENDENT CONTRACTOR. The Parties agree that each Party is an
independent contractor and that no Party is an agent of the other. No Party will
be entitled to compensation for its services hereunder except as expressly
provided herein, or in any separate agreements
8.
<PAGE> 9
entered into among the Parties and/or WNI from time to time. Each of the Parties
will be responsible for, among other things, payment of workers' compensation,
disability benefits, unemployment insurance, and for withholding income taxes
and social security for any of their respective employees that devote a portion
of their time to the business of WNI, unless and until any of such personnel
become employees of WNI. No Party will have any authority to make any agreements
or representations on behalf of any other Party or to hold itself out to be an
agent, or representative of any other Party.
(b) PUBLIC ANNOUNCEMENTS. The Parties will jointly coordinate press and
other public announcements of Hallmark's involvement in WNI in order to maximize
public, investor and advertiser interest. Such announcements may not be used
until WNI shall have received written notice from Hallmark that it may use such
announcements.
(c) ENTIRE AGREEMENT. This Agreement, together with the other
Transaction Documents, sets forth the entire agreement between the Parties in
connection with the subject matter hereof and incorporates, replaces, and
supersedes all prior agreements, promises, proposals, representations,
understandings and negotiations, written or not, between the Parties. The
making, execution, and delivery of this Agreement have been induced by no
representations, statements, warranties or agreements other than those expressed
herein and in the other Transaction Documents.
(d) FORCE MAJEURE. No Party will be liable for any delay or failure to
perform under this Agreement if, and to the extent, such failure is due to an
act of God, war, fire, national disaster, accident, act of government or other
similar cause beyond the control and without the fault or negligence of the
Party claiming excusable delay, and the Party claiming excusable delay uses its
best efforts to avoid or remove the cause of the delay. The Party claiming
excusable delay must promptly notify the other Party of such delay. If the delay
continues for more than thirty (30) days and involves a material obligation, the
Party not claiming excusable delay may terminate this Agreement by giving
fourteen (14) calendar days written notice to the other Party; provided that the
Agreement will not terminate if the Party claiming excusable delay substantially
performs the obligation which has been delayed within fourteen (14) days after
receipt of notice of such termination. Notwithstanding the foregoing, there
shall be no excusable delay pursuant to this Section 11 (d) applicable to any
obligation of payment hereunder.
(e) NOTICE. All notices shall be in writing and will be delivered
personally or sent by confirmed facsimile transmission, or overnight carrier at
the addresses specified below:
If to Hallmark: If to WNI:
Hallmark Cards Incorporated WIRE Networks, Inc.
2501 McGee, Box 419580 1820 Gateway Drive, Suite 150
Kansas City, Missouri 64141 San Mateo, California 94404
Fax (816) 274-5458 Fax (415) 378-6599
Attn: John McCallister Attn: Marleen McDaniel
9.
<PAGE> 10
Any Party may change the person or the address to which notices are directed by
giving written notice to the other Party in accordance with this Section.
Personally delivered or confirmed facsimile notices will be deemed given when
delivered. Notices sent by overnight carrier will be deemed given on the second
business day after dispatch. Notwithstanding the foregoing, notices of change of
address will be deemed given only upon receipt by the Party to which it is
directed.
(f) GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
California (without giving effect to principles of conflicts of law).
(g) MODIFICATION. No modification, amendment, supplement to or waiver of
any provision of this Agreement shall be binding upon the Parties unless made in
writing and duly signed by all of the Parties.
(h) WAIVER. A failure of any Party to exercise any right provided for
herein shall not be deemed to be a waiver of any right hereunder.
(i) SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement. Any unenforceable
provision will be replaced by a mutually acceptable provision which comes
closest to the intention of the Parties at the time the original provision was
agreed upon.
(j) HEADINGS. The headings of this Agreement are for purposes of
reference only and shall not in any way limit or otherwise affect the meanings
or interpretations of any of the terms hereof.
(k) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original, but all of which together shall constitute one and the same
agreement.
(l) ASSIGNMENT. This Agreement and the rights and obligations of the
Parties hereunder shall not be assigned or delegated by any Party to any other
Person without the prior written consent of the other Party, except that,
Hallmark shall have the right on notice to WNI, but without requiring WNI's
consent, to assign all of its respective rights hereunder to any Person to
which, Hallmark may transfer, assign or convey all or substantially all of the
business, assets or properties of Hallmark, or to any Person with which,
Hallmark may hereafter merge or consolidate, or in connection with a
reorganization transaction, and WNI shall have the right on notice to Hallmark,
to assign this Agreement without the consent of Hallmark in connection with a
sale of all or substantially all of WNI's assets, merger, consolidation or other
reorganization transaction.
(m) FURTHER ASSURANCES. The Parties agree to execute and deliver, or to
cause to be executed and delivered, such further instruments or documents, and
take such other actions as
10.
<PAGE> 11
may be reasonably required effectively to carry out the transactions
contemplated herein, in each case provided the same do not impose any additional
liabilities or obligations upon the Parties.
(n) DISPUTE RESOLUTION.
(i) Any claim, controversy or dispute, whether sounding in
contract, statute, tort, fraud, misrepresentation or other legal theory,
whenever brought and whether between the parties to this Agreement or between
one of the parties of this Agreement and the employees, agents or affiliated
businesses of the other party, shall be resolved by arbitration as prescribed in
this Section 8(n). The Federal Arbitration Act, 9 U.S.C. Section 1-15, not state
law, shall govern the arbitrability of all claims.
(ii) A single arbitrator engaged in the practice of law and
experienced in transactions of the sort contemplated hereby and by the
Transaction Documents shall conduct the arbitration under the then current rules
of the American Arbitration Association (AAA), unless otherwise provided herein.
The arbitrator shall be selected in accordance with AAA procedures from a list
of qualified people maintained by AAA. The arbitration shall be conducted in the
regional AAA office closest to the principal office of WNI, and all expedited
procedures prescribed by AAA rules shall apply.
(iii) Except as provided in Section 11(n)(v), the arbitrator
shall only have authority to award compensatory damages and shall not have
authority to award punitive damages, other non-compensatory damages or any other
form of relief. Each party shall bear its own costs and attorneys' fees and the
Parties shall share equally the fees and expenses of the arbitration; provided
that the arbitrator may provide for the reimbursement by one Party of the costs
and attorneys' fees of the other Party incurred in enforcing such Party's rights
under this Agreement. The arbitrator's decision and award shall be final and
binding, and judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof.
(iv) If any Party files a judicial or administrative action
asserting claims subject to arbitration, as prescribed herein, and another party
successfully stays such action and/or compels arbitration of said claims, the
Party filing said action shall pay the other Party's costs and expenses incurred
in seeking such stay and/or compelling arbitration, including reasonable
attorneys' fees.
(v) The Parties each acknowledge and agree that either party will
be irreparably harmed as a result of a breach by the other Party of Section 2 or
3 of this Agreement and that it would be difficult, if not impossible, to
measure the damages resulting from such a breach. Accordingly, in the event of
any actual or threatened breach by either party of Section 2 or 3, the
non-breaching party shall, in addition to any other legal remedies permitted
hereunder or by applicable law, be entitled to obtain equitable remedies from a
court of competent jurisdiction, without the need for any bond or security,
including, without limitation, specific performance, a temporary restraining
order or a permanent injunction to prevent or otherwise restrain a breach hereof
and to recover all costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred in enforcing this Agreement. Such relief shall be in
addition to and not in substitution for any other remedies available to such
Party. Notwithstanding
11.
<PAGE> 12
anything herein to the contrary, the Parties agree that the non-breaching Party
may seek a temporary restraining order or a preliminary injunction or other
equitable relief from any court of competent jurisdiction in order to prevent or
restrain a breach hereof pending the selection of an arbitrator to render a
decision on the ultimate merits of any dispute, controversy or claim.
(o) COMPLIANCE WITH LAWS. This Agreement and the Parties' actions under
this Agreement shall comply with all applicable federal, state, and local laws,
rules, regulations, court orders, and governmental or regulatory agency orders,
including the Telecommunications Act of 1996 and specifically the separated
affiliate requirements for the provision of electronic publishing.
12.
<PAGE> 13
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the
Effective Date.
GRAPHICS INTERNATIONAL, INC.
D/B/A HALLMARK CONNECTIONS
By: /s/ Graphics International, Inc.
------------------------------------------
Title:
WIRE NETWORKS, INC.
By: /s/ Marleen McDaniel
------------------------------------------
Title: CEO and President
13.
<PAGE> 14
INVESTMENT AGREEMENT
DATED AS OF AUGUST 19, 1997
BY AND BETWEEN
GRAPHICS INTERNATIONAL, INC.
D/B/A HALLMARK CONNECTIONS
AND
WIRE NETWORKS, INC.
<PAGE> 15
EXHIBIT 10.3(a)
WOMEN.COM NETWORKS
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (the "AMENDMENT") is made as of May 7, 1998, by
and between WOMEN.COM NETWORKS, a California corporation, formerly Wire
Networks, Inc. (the "COMPANY") and GRAPHICS INTERNATIONAL, INC. D/B/A HALLMARK
CONNECTIONS, a California corporation ("HALLMARK").
RECITALS
WHEREAS, the Company and Hallmark entered into that certain Investment
Agreement dated August 19, 1997 (the "INVESTMENT AGREEMENT") (capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement); and
WHEREAS, in accordance with Section 8(g) of the Investment Agreement,
the Company and Hallmark wish to amend the Investment Agreement pursuant to this
Amendment.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
considerations contained herein, the undersigned hereby agree as follows:
AGREEMENT
1. Section 1(b) of the Investment Agreement is hereby amended by adding
a sentence to such subsection which shall read as follows:
"Hallmark's right to appoint such additional director to
the Board of Directors of the Company shall terminate upon
the closing of the Company's first underwritten public
offering of its Common Stock registered under the
Securities Act of 1933, as amended."
2. Section 1(d) of the Investment Agreement is hereby amended to read in
full as follows:
"(d) If WNI fails to spend all of the Allocated Funds as
set forth above within the [*], Hallmark will
have the right to direct how and on what sites WNI shall
expend the unused portion of the funds, including
maintenance and updating of the Mini-Site and other
websites designated by Hallmark. WNI shall account, no
more often than monthly, to Hallmark in such detail as
Hallmark requires on how the Allocated Funds have been
expended and are anticipated to be expended."
3. The parties hereto hereby acknowledge that the development of the
Mini-Site has been completed by the Company in accordance with Section 1(c) of
the Investment Agreement.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
1.
<PAGE> 16
This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2.
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this AMENDMENT
AGREEMENT as of the day and year first set forth above.
GRAPHICS INTERNATIONAL, INC. WOMEN.COM NETWORKS
D/B/A HALLMARK CONNECTIONS
By: /s/ Graphics International, Inc. By: /s/ Marleen McDaniel
---------------------------------- ----------------------------------
Title: Marleen McDaniel, President
-------------------------------
AMENDMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.4
INVESTMENT AGREEMENT
DATED AS OF JULY 7, 1997
BY AND BETWEEN
U S WEST INTERACTIVE SERVICES, INC.
AND
WIRE NETWORKS, INC.
<PAGE> 2
INVESTMENT AGREEMENT
This INVESTMENT AGREEMENT (this "Agreement"), made as of the 7th day of
July 1997 by and between U S WEST INTERACTIVE SERVICES, INC., a Colorado
corporation ("U S West"), and WIRE NETWORKS, INC., a California corporation (the
"Company") (U S West and the Company are sometimes referred to herein
collectively as the "Parties" and individually as a "Party").
WHEREAS, the Company has developed an informational web site, and
desires to further develop such site in conjunction with the U S West Dive-In
Project and High Bandwidth Project, each described below; and
WHEREAS, U S West desires to purchase and the Company desires to sell an
ownership interest in the Company; and
WHEREAS, the Parties are, together with certain other investors in the
Series C Preferred Stock financing of the Company and concurrently with the
execution of this Agreement, entering into the Series C Preferred Stock Purchase
Agreement Wire Networks, Inc., a copy of which is attached hereto as Exhibit A,
an Amended and Restated Investors Rights Agreement, a copy of which is attached
hereto as Exhibit B, an Amended and Restated Co-Sale and Voting Agreement, a
copy of which is attached hereto as Exhibit C, a Web Site Linking and Promotion
Agreement, a copy of which is attached hereto as Exhibit D, and other documents
necessary to consummate this transaction, (collectively, these documents shall
be referred to as the "Transaction Documents"); and
WHEREAS, the Parties desire to set forth the terms and conditions of and
certain understandings with respect to the acquisition by U S West of an
ownership interest in the Company.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, capitalized terms used
herein shall, unless otherwise expressly provided for or defined hereto,
have the respective meanings set forth on Annex A hereto.
2. U S WEST'S PURCHASE OF AN INTEREST IN COMPANY.
(a) U S WEST'S PURCHASE. Subject to the terms and conditions of this
Agreement, the other Transaction Documents and any other
agreement governing the relationship between the Parties, U S
West hereby agrees to purchase one million three hundred fifteen
thousand seven hundred eighty-nine ( 1,315,789) shares of Series
C Convertible Preferred Stock (the "Stock") of the Company at a
total purchase price of four million one dollars and 60/100
($4,000,001.60) (the "Proceeds"), or three dollars and 4/100
($3.04) per share (the "Series C Stock Price"). In full
consideration of such subscription and payment, and the other
transactions contemplated hereby and in the Transaction
Documents, the Company hereby
1.
<PAGE> 3
accepts such purchase and upon payment therefore, shall issue to
U S West the Stock representing, on the date hereof,
approximately a seventeen percent (17%) Ownership Interest in
the Company on an as-converted basis.
(b) The Company's right to retain [*] of the Proceeds shall be
contingent upon the Company developing the Dive-in Project
and/or the High Bandwidth Project, each described below, to the
reasonable satisfaction of U S West, and in accordance with the
timetable and requirements set forth below. If the Company fails
to develop the Dive-In Project and/or the High Bandwidth Project
as provided below, the Series C Stock Price for the Stock will
be reduced by the Company returning the unused portion of the
Dive-In Allocated Funds and/or the High Bandwidth Allocated
Funds, each defined below, to U S West without decreasing U S
West's equity interest in the Company.
(i) The Company agrees to allocate [*] (the "Dive-In
Allocated Funds ") in a reasonably detailed development
plan and budget approved by U S West, and to use the
Dive-in Allocated Funds for customizing the Company's
product such that the customized Company product may be
co-branded and co-linked with U S West's local on-line
service ("the Dive-In Project") in the cities where U S
West offers such service. The Company shall complete the
Dive-in Project within [*] of the date of the first
closing (the "Closing Date") of the Series C Preferred
Stock financing of the Company (the "Dive-in Completion
Date"). If the Company fails to use all of the Dive-in
Allocated Funds for the Dive-In Project, and/or fails to
complete the Dive-In Project by the Dive-in Completion
Date, the Company shall return all Dive-in Allocated
Funds unused as of the Dive-In Completion Date to U S
West without affecting U S West's equity interest in the
Company.
(ii) The Company agrees to allocate [*] (the "High Bandwidth
Allocated Funds") in a reasonably detailed development
plan and budget approved by U S West, and to use the
High Bandwidth Allocated Funds for developing and
customizing the Company's product and purchasing
equipment in connection with the deployment of high
bandwidth content (i.e. video) over U S West's domestic
cable assets pursuant to a mutually satisfactory
agreement between U S West, its domestic cable assets
and the Company for the provision of such high bandwidth
content ("the High Bandwidth Project"). The Company
shall complete the High Bandwidth Project within [*] of
the Closing Date ("the High Bandwidth Completion Date").
If the Company fails to use all of the High Bandwidth
Allocated Funds for the High Bandwidth Project, and/or
fails to complete the High Bandwidth Project by the High
Bandwidth Completion Date, the Company shall return all
High Bandwidth Allocated Funds unused as of the High
Bandwidth Completion Date to U S West without affecting
U S West's equity interest in the Company.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2.
<PAGE> 4
The Company will also grant to U S West warrants (the
"Series C Warrants") to acquire at the Series C Stock
Price up to eight hundred eighty-seven thousand six
hundred sixty five (887,665) shares of Series C
Convertible Preferred Stock (the "Warrant Stock") of the
Company. Upon exercise of fifty percent (50%) of the
Series C Warrants, U S West will be entitled to appoint
one (l) additional director to the Board of D/rectors of
the Company.
(c) U S WEST'S RIGHTS. U S West shall have the right to delay,
suspend, discontinue or terminate the Dive-In Project and/or the
High Bandwidth Project upon not less than thirty (30) days
written notice to the Company (a "Discontinuation"), which
notice shall be given in the manner provided in Section 12(e) of
this Agreement. In the event of a Discontinuation of either the
Dive-in Project or High Bandwidth Project, U S West may
reallocate the unused portion of the Dive-In Allocated Funds or
the High Bandwidth Allocated Funds, as the case may be, to the
other project not subject to a Discontinuation. In the event
that both the Dive-In Project and the High Bandwidth Project are
subject to a Discontinuation, the Company may retain the unused
portion of the Dive-In Allocated Funds and High Bandwidth
Allocated Funds for use on other projects.
3. TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS OF THE PARTIES.
(a) INTELLECTUAL PROPERTY RIGHTS. Except for the licenses expressly
granted to the Company under any Transaction Document, any and
all trademarks, service marks, copyrights and trade names of U S
West are, and shall remain, the exclusive property of U S West.
(b) INTELLECTUAL PROPERTY OF THE COMPANY. The Company shall retain,
obtain or acquire, and thereafter preserve (including, but not
limited to, placing trademark notices on all Content,
advertising materials and any products which the Company may
distribute), trademarks and/or service marks in the name of the
Company with respect to the Company products. Except for such
licenses as may be expressly granted to U S West in or pursuant
to any Transaction Document, any and all intellectual property
now owned or hereafter developed by the Company for the Dive-In
Project or the High Bandwidth Project pursuant to this Agreement
shall be the exclusive property of the Company. The right, title
and interest in and to any intellectual property developed
jointly by U S West and the Company or funded in whole or in
part by U S West, in addition to the investment hereunder, shall
be negotiated in a separate written agreement between the
Parties.
4. CUSTOMER LISTS. Lists of actual and potential end-users of the Company's
products, shall be deemed to be owned by the Company. Should the Company
cease to exist, and there is no successor entity thereto, including a
purchaser or other transferee of assets, U S West shall have
non-exclusive rights to use such lists.
3.
<PAGE> 5
5. CAPITALIZATION, COSTS AND FEES. Except as otherwise expressly provided
herein, in the other Transaction Documents, the marketing plan or in any
business plan which may hereafter be developed by or on behalf of the
Company, each of the Parties shall bear and shall be responsible for its
own costs and expenses related to the Company products.
6. CONFIDENTIALITY.
(a) NEW INITIATIVES. The Parties anticipate that, as long as U S
West has an Ownership Interest in the Company, they may, from
time to time, discuss, and exchange with each other, ideas,
concepts or information to be used in connection with the
creation or development of possible future initiatives,
ventures, products or services, not contemplated by this
Agreement. The Parties agree that this Agreement is in no way
intended to limit such discussions or exchanges and that such
ideas, concepts or information referred to in the previous
sentence shall, without limitation, constitute Confidential
Information (as hereinafter defined).
(b) CONFIDENTIALITY. The Parties will each regard and preserve as
strictly confidential all information and material, including,
but not limited to, non-public information included as pan of
the transactions contemplated hereby and by the other
Transaction Documents and all other material or information,
including without limitation, customer or client information,
provided to one another in connection with the participation and
development of products, services or information for the Dive-in
Project or the High Bandwidth Project (hereinafter,
"Confidential Information"). Each of the Parties agrees that,
except as provided in this Agreement or any other Transaction
Document or as otherwise agreed by them in writing, it shall not
use the Confidential Information of the other Party for its own
benefit or for the benefit of any third Person. Each of the
Parties agrees not to interfere with, circumvent, frustrate or
otherwise impede in any manner the realization by the Company of
any of the objectives it seeks or benefits derived, or to be
derived, from any of such Confidential Information. The Parties
further acknowledge and agree that in the event of a breach or
threatened breach of this Section 6, the non-breaching Party or
Parties may have no adequate remedy in money damages and,
accordingly, may be entitled to appropriate injunctive relief
against such breach. The Parties agree that they each will have
no obligation in connection with specific Confidential
Information of any other Party to the extent, but only to the
extent that: (i) such Confidential Information is already known
to any of them, free from any obligation to keep such
Confidential Information confidential at the time it was
obtained from any other Party; (ii) such Confidential
Information is or becomes publicly known in the trade or
otherwise through no wrongful act of the receiving Party or any
third Person owing a duty of confidentiality to the disclosing
Party; or (iii) such Confidential Information is rightfully
received by the receiving Party from a third Person without
restriction and without breach of this Agreement or any
obligation of such third Person to the disclosing Party. Upon
the request of any of the Parties following the termination or
expiration of this Agreement as otherwise provided herein, all
tangible and machine readable copies of any Confidential
Information of any other Party shall be returned to such Party
and Confidential Information relating to the Company
4.
<PAGE> 6
shall be returned to or remain with the Company. Should the
Company cease to exist, and there is no successor entity
thereto, including a purchaser or other transferee of assets,
U S West shall have non-exclusive rights to such Confidential
Information.
7. REPRESENTATIONS AND WARRANTIES.
(a) U S WEST REPRESENTATIONS AND WARRANTIES. U S West represents and
warrants to the Company that:
(i) it is a corporation duly organized validly existing and
in good standing under the laws of the State of
Colorado;
(ii) it has all requisite corporate power and authority to
enter into this Agreement and the other Transaction
Documents to which it is a party and to carry out its
obligations hereunder and thereunder;
(iii) this Agreement and the other Transaction Documents have
been duly authorized, executed and delivered by it and
are a valid and binding obligation of such Party
enforceable in accordance with their terms;
(iv) the execution, delivery and performance of and
compliance with this Agreement and the other Transaction
Documents do not and will not conflict with, or
constitute a default under, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon
any of its properties or assets, nor result in any
violation of (A) any term of its certificate or articles
of incorporation or bylaws, (B) any term or provision of
any mortgage, indenture, contract, agreement,
instrument, judgment or decree of such Party, or (C) any
order, statute, rule or regulation applicable to it, the
violation of which would have a material adverse effect
on its ability to perform its obligations under this
Agreement or the other Transaction Documents to which it
is a party;
(v) it is acquiring the Stock and/or the Warrant Stock for
investment for its own account and not with a view to,
or for offer or sale in connection with, any public
distribution thereof and that it is an "accredited
investor" as defined in Regulation D promulgated under
the Securities Act of 1933;
(vi) it is not relying on any information provided by the
Company with respect to the tax and other economic
considerations of an investment in the Stock and/or the
Warrant Stock, and the undersigned has relied on the
advice of, or has consulted with, only the undersigned's
own advisor(s); and
(vii) the representations and warranties made by it in this
Agreement, and in any certificate or schedule referenced
hereby or attached hereto, do not contain any statement
which is false or misleading with respect to any
material fact and do not omit to state a material fact
required to be stated herein or therein or necessary in
order to make the statements contained
5.
<PAGE> 7
herein or therein not materially false or misleading.
The representations, warranties and agreements of it
contained herein are true and correct as of the date
hereof and may be relied upon by the Company, and it
will notify the Company immediately of any adverse
change in any such representations and warranties which
may occur prior to the acceptance of the subscription
and will promptly send the Company written confirmation
thereof. The representations, warranties and agreements
of it contained herein shall survive the execution and
delivery of this Agreement and the purchase of the Stock
and/or the Warrant Stock.
(b) COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to U S West that:
(i) it is a corporation duly organized validly existing and
in good standing under the laws of the State of
California;
(ii) it has all requisite corporate power and authority to
enter into this Agreement and the other Transaction
Documents to which it is a party and to carry out its
obligations hereunder and thereunder;
(iii) this Agreement and the other Transaction Documents have
been duly authorized, executed and delivered by it and
are valid and binding obligations of such Party
enforceable in accordance with their terms;
(iv) the execution, delivery and performance of and
compliance with this Agreement and the other Transaction
Documents do not and will not conflict with, or
constitute a default under, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon
any of its properties or assets, nor result in any
violation of (A) any term of its articles of
incorporation or bylaws, (B) any term or provision of
any mortgage, indenture, contract, agreement,
instrument, judgment or decree of such Party, or (C) any
order, statute, code or regulation applicable to it, the
violation of which would have a material adverse effect
on its ability to perform its obligations under this
Agreement or the other Transaction Documents to which it
is a party;
(v) it is not relying on any information provided by U S
West with respect to the tax and other economic
considerations in connection with this transaction, and
has relied on the advice of, or has consulted with, only
its own advisor(s);
(vi) with the exception of Volpe, Welty & Company, there is
no investment banker, broker, finder or other
intermediary which has been retained by, or is
authorized to act on behalf of, it, any shareholder of
it or their respective Affiliates who might be entitled
to any fee or commission from the Company or its
Affiliates upon the consummation of the transactions
contemplated hereby or thereafter; and
6.
<PAGE> 8
(vii) the representations and warranties made by it in this
Agreement, and in any certificate or schedule referenced
hereby or attached hereto, do not contain any statement
which is false or misleading with respect to any
material fact and do not omit to state a material fact
required to be stated herein or therein or necessary in
order to make the statements contained herein or therein
not materially false or misleading. The representations,
warranties and agreements of it contained herein are
true and correct as of the date hereof and may be relied
upon by U S West, and it will notify U S West
immediately of any adverse change in any such
representations and warranties which may occur prior to
the acceptance of the subscription and will promptly
send U S West written confirmation thereof. The
representations, warranties and agreements of it
contained herein shall survive the execution and
delivery of this Agreement and the purchase by U S West
of the Stock and/or Warrant Stock.
8. INDEMNIFICATION.
(a) Each Party (the "Indemnifying Party") shall indemnify, defend
and hold the other Party (including the Company), their
respective officers, managers, employees, shareholders,
managers, members and agents (an "Indemnitee") harmless, on an
after tax basis, from any claims, actions, suits, demands,
liabilities, obligations, losses, damages, judgments or
settlements of whatsoever kind and nature, including any and all
reasonable costs and expenses related thereto including
reasonable attorneys' fees (the "Claims"), directly or
indirectly arising from (i) any failure by the Indemnifying
Party to comply with or perform any of the terms of this
Agreement, or (ii) a misrepresentation or Material Breach of any
representation, warrant3,, covenant, or agreement of the
Indemnifying Party contained in this Agreement, any Transaction
Documents or any other agreement, instrument, certificate or
other document delivered by the Indemnifying Party in connection
with the transactions contemplated hereby.
(b) ASSERTION OF RIGHT OF INDEMNIFICATION. To assert its rights of
indemnification hereunder, an Indemnitee shall:
(i) promptly notify the Indemnifying Party in writing of any
Claim or legal proceedings which gives rise to such
right;
(ii) afford the Indemnifying Party the opportunity to
participate in, or fully control, in its sole
discretion, any proceeding and the compromise,
settlement, resolution or other disposition of such
Claim or proceeding so long as such settlement involves
payment of money damages only and provides the
Indemnitees with a general release; and
(iii) fully cooperate with the Indemnifying Party, at the
Indemnifying Party's expense, in such Indemnifying
Party's participation and control of any proceeding and
the compromise, settlement, resolution or other
disposition of such claim or proceeding; provided,
however, that if such compromise,
7.
<PAGE> 9
settlement or resolution or other disposition could have
an adverse effect on the Indemnitee, the Indemnitee's
consent to such compromise, settlement, resolution or
other disposition shall be required but shall not be
unreasonably withheld. The Indemnifying Party shall bear
all out of pocket expenses of the Indemnitee in
connection with such cooperation.
9. LIMITATION OF LIABILITY. EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 7 OF
THE WEB SITE LINKING AND PROMOTION AGREEMENT, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER, IN ANY CIRCUMSTANCES, FOR ANY LOSS OF BUSINESS OR
PROFITS, OR FOR ANY CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR SIMILAR
DAMAGES.
10. TERMINATION; SURVIVAL.
(a) TERMINATION. In the event of a Material Breach of any
representation, warranty or covenant contained in this Agreement
or any Transaction Document, the non-breaching Party may
(reserving cumulatively all other rights and remedies at law or
in equity unless otherwise expressly stated herein) terminate
this Agreement with respect to the breaching Party by giving
twenty (20) days prior written notice to the breaching Party
specifying such breach. If within such twenty (20) day period,
the breaching Party fails to remedy any such breach, this
Agreement shall terminate with respect to the breaching Party
without further act or notice and all of the rights and
obligations with respect to the breaching Patty hereunder shall
cease and terminate except as otherwise provided herein, or in
any other Transaction Document.
(b) ADDITIONAL TERMINATION RIGHTS. This Agreement may be terminated
by either party:
(i) if the other Party is declared insolvent or bankrupt by
a court of competent jurisdiction;
(ii) if the other Party files or consents, by answer or
otherwise, to the filing against it of a petition for
relief or reorganization or arrangement under the
insolvency or bankruptcy laws of any jurisdiction, and
any such petition is not dismissed within sixty (60)
days, thereafter; or
(iii) if a trustee in bankruptcy or a receiver or similar
entity is appointed for the other Party or the other
Party makes an assignment for the benefit of its
creditors, consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers
for itself or for any substantial part of its property,
or enters into an agreement for the composition,
extension, or readjustment of substantially all of its
obligations; or
(iv) if any governmental entity of competent jurisdiction
shall enter an order appointing any of the foregoing for
such Party or with respect to any substantial portion of
its property, or seeking the dissolution, winding-up or
liquidation of such Party.
8.
<PAGE> 10
(c) SURVIVAL. The following Sections or provisions of this Agreement
shall survive any termination of this Agreement until the
obligation of the Parties set forth therein shall have been
fully performed by the Parties: 3, 4, 6, 8, 9 and 11(a), 11(c),
11(e), 11(f), 11(g), 11(h), 11(1) and 11(n).
11. GENERAL.
(a) INDEPENDENT CONTRACTOR. The Parties agree that each Party is an
independent contractor and that no Party is an agent of the
other. No Party will be entitled to compensation for its
services hereunder except as expressly provided herein, or in
any separate agreements entered into among the Parties and/or
the Company from time to time. Each of the Parties, and not the
Company, will be responsible for, among other things, payment of
workers' compensation, disability benefits, unemployment
insurance, and for withholding income taxes and social security
for any of their respective employees that devote a portion of
their time to the business of the Company, unless and until any
of such personnel become employees of the Company. No Party will
have any authority to make any agreements or representations on
behalf of any other Party or to hold itself out to be an agent,
or representative of any other Party.
(b) PUBLIC ANNOUNCEMENTS. The Parties will jointly coordinate press
and other public announcements of US West's involvement in the
Company in order to maximize public, investor and advertiser
interest. Such announcements may not be used until the Company
shall have received written notice from U S West that it may use
such announcements.
(c) ENTIRE AGREEMENT. This Agreement, together with the other
Transaction Documents, sets forth the entire agreement between
the Parties in connection with the subject matter hereof and
incorporates, replaces, and supersedes all prior agreements,
promises, proposals, representations, understandings and
negotiations, written or not, between the Parties. The making,
execution, and delivery of this Agreement have been induced by
no representations, statements, warranties or agreements other
than those expressed herein and in the other Transaction
Documents.
(d) FORCE MAJEURE. No Party will be liable for any delay or failure
to perform under this Agreement if, and to the extent, such
failure is due to an act of God, war, fire, national disaster,
accident, act of government or other similar cause beyond the
control and without the fault or negligence of the Party
claiming excusable delay, and the Party claiming excusable delay
uses its best efforts to avoid or remove the cause of the delay.
The Party claiming excusable delay must promptly notify the
other Party of such delay. If the delay continues for more than
thirty (30) days and involves a material obligation, the Party
not claiming excusable delay may terminate this Agreement by
giving fourteen (14) calendar days written notice to the other
Party; provided that the Agreement will not terminate if the
Party claiming excusable delay substantially performs the
obligation which has been delayed within fourteen (14) days
after receipt of notice of such termination.
9.
<PAGE> 11
Notwithstanding the foregoing, there shall be no excusable delay
pursuant to this Section 11(d) applicable to any obligation of
payment hereunder.
(e) NOTICE. All notices shall be in writing and will be delivered
personally or sent by confirmed facsimile transmission, or
overnight carrier at the addresses specified below:
If to U S West: If to the Company:
U S West Interactive Services, Inc. Wire Networks, Inc.
9000 E. Nichols Avenue, Suite 100 1820 Gateway Drive
Englewood, Colorado 80112 San Mateo, CA 94404
Fax (303) 705-5163 Fax: (415) 378-6599
Attn:_____________________________ Attn: Marleen McDaniel
Any Party may change the person or the address to which notices are directed by
giving written notice to the other Party in accordance with this Section.
Personally delivered or confirmed facsimile notices will be deemed given when
delivered. Notices sent by overnight carrier will be deemed given on the second
business day after dispatch. Notwithstanding the foregoing, notices of change of
address will be deemed given only upon receipt by the Party to which it is
directed.
(f) GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the
State of Colorado (without giving effect to principles of
conflicts of law).
(g) MODIFICATION. No modification, amendment, supplement to or
waiver of any provision of this Agreement shall be binding upon
the Parties unless made in writing and duly signed by all of the
Parties.
(h) WAIVER. A failure of any Party to exercise any right provided
for herein shall not be deemed to be a waiver of any right
hereunder.
(i) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this
Agreement shall be prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Any unenforceable provision will be replaced by a mutually
acceptable provision which comes closest to the intention of the
Parties at the time the original provision was agreed upon.
(j) HEADINGS. The headings of this Agreement are for purposes of
reference only and shall not in any way limit or otherwise
affect the meanings or interpretations of any of the terms
hereof.
10.
<PAGE> 12
(k) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall
be deemed to be an original, but all of which together shall
constitute one and the same agreement.
(l) ASSIGNMENT. This Agreement and the rights and obligations of the
Parties hereunder shall not be assigned or delegated by any
Party to any other Person without the prior written consent of
the other Party, except that, U S West shall have the right on
notice to the Company, but without requiring the Company's
consent, to assign all of its respective rights hereunder to any
Person to which, U S West may transfer, assign or convey all or
substantially all of the business, assets or properties of U S
West, or to any Person with which, U S West may hereafter merge
or consolidate, or in connection with a reorganization
transaction, and the Company shall have the right on notice to U
S West, to assign this Agreement without the consent of U S West
in connection with a sale of all or substantially all of the
Company's assets, merger, consolidation or other reorganization
transaction.
(m) FURTHER ASSURANCES. The Parties agree to execute and deliver, or
to cause to be executed and delivered, such further instruments
or documents, and take such other actions as may be reasonably
required effectively to carry out the transactions contemplated
herein, in each case provided the same do not impose any
additional liabilities or obligations upon the Parties.
(n) DISPUTE RESOLUTION.
(i) Any claim, controversy or dispute, whether sounding in
contract, statute, tort, fraud, misrepresentation or
other legal theory, whenever brought and whether between
the parties to this Agreement or between one of the
parties of this Agreement and the employees, agents or
affiliated businesses of the other party, shall be
resolved by arbitration as prescribed in this Section
11(n). The Federal Arbitration Act, 9 U.S.C. Section
1-15, not state law, shall govern the arbitrability of
all claims.
(ii) A single arbitrator engaged in the practice of law and
experienced in transactions of the sort contemplated
hereby and by the Transaction Documents shall conduct
the arbitration under the then current rules of the
American Arbitration Association (AAA), unless otherwise
provided herein. The arbitrator shall be selected in
accordance with AAA procedures from a list of qualified
people maintained by AAA. The arbitration shall be
conducted in the regional AAA office closest to the
principal office of the Company, and all expedited
procedures prescribed by AAA. rules shall apply.
(iii) Except as provided in Section 11 (n)(v), the arbitrator
shall only have authority to award compensatory damages
and shall not have authority to award punitive damages,
other non-compensatory damages or any other form of
relief. Each party shall bear its own costs and
attorneys' fees and
11.
<PAGE> 13
the Parties shall share equally the fees and expenses of
the arbitration; provided that the arbitrator may
provide for the reimbursement by one Party of the costs
and attorneys' fees of the other Party incurred in
enforcing such Party's rights under this Agreement- The
arbitrator's decision and award shall be final and
binding, and judgment upon the award rendered by the
arbitrator may be entered in any court having
jurisdiction thereof.
(iv) If any Party files a judicial or administrative action
asserting claims subject to arbitration, as prescribed
herein, and another party successfully stays such action
and/or compels arbitration of said claims, the Party
filing said action shall pay the other Party's costs and
expenses incurred in seeking such stay and/or compelling
arbitration, including reasonable attorneys' fees.
(v) The Parties each acknowledge and agree that either party
will be irreparably harmed as a result of a breach by
the other Party of Section 3 or 6 of this Agreement and
that it would be difficult, if not impossible, to
measure the damages resulting from such a breach.
Accordingly, in the event of any actual or threatened
breach by either party of Section 3 or 6, the
non-breaching party shall, in addition to any other
legal remedies permitted hereunder or by applicable law,
be entitled to obtain equitable remedies from a court of
competent jurisdiction, without the need for any bond or
security, including, without limitation, specific
performance, a temporary restraining order or a
permanent injunction to prevent or otherwise restrain a
breach hereof and to recover all costs and expenses,
including, without limitation, reasonable attorneys'
fees, incurred in enforcing this Agreement. Such relief
shall be in addition to and not in substitution for any
other remedies available to such Party. Notwithstanding
anything herein to the contrary, the Parties agree that
the non-breaching Party may seek a temporary restraining
order or a preliminary injunction or other equitable
relief from any court of competent jurisdiction in order
to prevent or restrain a breach hereof pending the
selection of an arbitrator to render a decision on the
ultimate merits of any dispute, controversy or claim.
(o) COMPLIANCE WITH LAWS. This Agreement and the Parties'
actions under this Agreement shall comply with all
applicable federal, state, and local laws, roles,
regulations, court orders, and governmental or
regulatory agency orders, including the
Telecommunications Act of 1996 and specifically the
separated affiliate requirements for the provision of
electronic publishing.
12.
<PAGE> 14
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the
Effective Date.
U S WEST INTERACTIVE SERVICES, INC.
By:/s/ US West Interactive Services, Inc.
---------------------------------------------
Title:
WIRE NETWORKS, INC.
By: /s/ Marleen R. McDaniel
---------------------------------------------
Title: CEO and President
13.
<PAGE> 15
ANNEX A
DEFINITIONS
"AFFILIATE" shall mean a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the party specified. For purposes of this definition, the term
"control" (including the terms "controlling," "controlled by" and "under common
control with") means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"COMPANY" shall mean Wire Networks, Inc., a California corporation.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section 6
of the Investment Agreement.
"DISCONTINUATION" shall have the meaning set forth in Section 2(c) of
the Investment Agreement.
"DIVE-IN PROJECT" shall mean the U S West product which provides an
entertainment, educational, and informational service targeted at local
geographic territories on numerous U S West sites on the World Wide Web part of
the Internet.
"EFFECTIVE DATE" shall mean July 7, 1997.
"HIGH BANDWIDTH PROJECT" shall have the meaning set forth in Section
2(b)(ii) of the Investment Agreement
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 8 of
the Investment Agreement.
"INDEMNITEE" shall have the meaning set forth in Section 8 of the
Investment Agreement.
"INVESTMENT AGREEMENT" shall mean the Investment Agreement dated July 7,
1997 between U S West and the Company.
"MARKETING PLAN" shall have the meaning set forth in Section 3 of the
Investment Agreement.
"MATERIAL BREACH" shall mean a breach of any representation, warranty or
covenant by any party to a Transaction Document which is material in nature.
"OWNERSHIP INTEREST" shall mean, with respect to each Person holding of
record an interest in the Company, all of the interests of such Person in the
Company (including its Stock, interest in the Net Profits and Net Losses of the
Company, the Capital Account of such Person and all other rights and obligations
of such Person under this Agreement) that relate to such ownership status,
expressed as a percentage determined as of any particular time by dividing the
number of shares of Stock of the Company held of record by such Person by the
total number of shares of Stock of the Company then outstanding.
14.
<PAGE> 16
"PERSON" shall mean a natural person, partnership (whether general or
limited and whether domestic or foreign), limited liability company, foreign
limited liability company, trust, estate, association, corporation, custodian,
nominee, government or any agency or political subdivision thereof or any other
individual or entity in its own or any representative capacity.
"TERRITORY" shall mean the United States, and its respective territories
and possessions.
"TRANSACTION DOCUMENTS" shall mean the Investment Agreement, the Amended
and Restated Investor Rights Agreement, the Amended and Restated Co-Sale and
Voting Agreement, the Web Site Linking and Promotion Agreement, and any other
agreement governing the relationship of the parties.
"TRANSFER" shall mean a sale, exchange, assignment, transfer, pledge,
hypothecation or other disposition of Stock of the Company (whether voluntary or
involuntary) other than by operation of law or to an Affiliate.
"WEB SITE LINKING AND PROMOTION AGREEMENT" shall mean the Web Site
Linking and Promotion Agreement dated July 7, 1997 between the Company and US
West.
15.
<PAGE> 17
EXHIBIT 10.4(a)
WOMEN.COM NETWORKS
AMENDMENT AGREEMENT
THIS AMENDMENT AGREEMENT (the "AMENDMENT") is made as of April ___,
1998, by and between WOMEN.COM NETWORKS, a California corporation, formerly Wire
Networks, Inc. (the "COMPANY") and U S WEST INTERACTIVE SERVICES, INC., a
Colorado corporation ("U S WEST").
RECITALS
WHEREAS, the Company and MediaOne entered into that certain Investment
Agreement dated July 7, 1997 (the "INVESTMENT AGREEMENT") (capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement); and
WHEREAS, in accordance with Section 11(g) of the Investment Agreement,
the Company and MediaOne wish to amend the Investment Agreement pursuant to this
Amendment.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
considerations contained herein, the undersigned hereby agree as follows:
AGREEMENT
1. Section 2(b)(ii) of the Investment Agreement is hereby amended by
adding a sentence to the last paragraph of such subsection which shall read as
follows:
"U S WEST's right to appoint such additional director to
the Board of Directors of the Company shall terminate
upon the closing date of the Company's first
underwritten public offering of its Common Stock
registered under the Securities Act of 1933, as
amended."
2. Section 2(b) of the Investment Agreement is hereby amended by adding
subsection (iii) which shall read in full as follows:
"(iii) In the event the Company is required to return to
U S WEST the unused portion of the Dive-In Allocated
Funds and/or the High Bandwidth Allocated Funds pursuant
to this Section 2(b) (the "Unused Portion"), in lieu of
returning the Unused Portion to U S WEST, the Company
shall distribute a "pro rata portion" of the Unused
Portion to each of the holders of the Company's Series C
Preferred Stock and Series D Preferred Stock. For the
purposes of this Section 2(b)(iii), the "pro rata
portion" for each holder of Series C Preferred Stock or
Series D Preferred Stock shall be determined in
accordance with the liquidation preference of such
1.
<PAGE> 18
shares of Series C Preferred Stock or Series D Preferred
Stock as set forth in the Company's then current
Articles of Incorporation."
3. Section 2(d) of the Investment Agreement is hereby amended to read in
full as follows with additions shown by double underlined text:
"(d) U S WEST'S RIGHTS. U S WEST shall have the right to
delay, suspend, discontinue or terminate the Dive-In
Project and/or the High Bandwidth Project upon not less
than thirty (30) days written notice to the Company (a
"DISCONTINUATION"), which notice shall be given in the
manner provided in Section 12(e) of this Agreement. In
the event U S WEST delays or suspends the Dive-In
Project and/or the High Bandwidth Project, the Dive-in
Completion Date and/or the High Bandwidth Completion
Date, respectively, shall be extended by the length of
such delay or suspension. In the event of a
Discontinuation of either the Dive-In Project or the
High Bandwidth Project, U S WEST may reallocate the
unused portion of the Dive-In Allocated Funds or the
High Bandwidth Allocated Funds, as the case may be, to
the other project not subject to a Discontinuation;
provided, that such unused portion of the project
subject to Discontinuation shall be used by the Company
in connection with the project not subject to
Discontinuation prior to the later of the Dive-In
Completion Date or the High Bandwidth Completion Date.
In the event that both the Dive-In Project and the High
Bandwidth Project are subject to a Discontinuation, the
Company may retain the unused portion of the Dive-In
Allocated Funds and the High Bandwidth Allocated Funds
for use on other projects."
4. The parties hereto hereby acknowledge that the High Bandwidth Project
has been delayed and the High Bandwidth Completion Date is [*]; which
date is subject to further adjustments pursuant to Section 2(d) of the
Investment Agreement.
This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2.
<PAGE> 19
AMENDMENT AGREEMENT
IN WITNESS WHEREOF, the undersigned have executed this AMENDMENT
AGREEMENT as of the day and year first set forth above.
U S WEST INTERACTIVE SERVICES, INC. WOMEN.COM NETWORKS
By: /s/ Thomas A. Cullen By: /s/ Marleen R. McDaniel
--------------------------------- ----------------------------------
Title: Thomas A. Cullen, President Marleen McDaniel, President
AMENDMENT AGREEMENT
<PAGE> 1
EXHIBIT 10.5
WOMEN.COM NETWORKS LLC
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Agreement (the "AGREEMENT") is entered into by and
between MARLEEN MCDANIEL ("EXECUTIVE"), WOMEN.COM NETWORKS LLC (the "COMPANY")
and WOMEN.COM NETWORKS ("WOMEN.COM") as of this 27th day of January, 1999.
Capitalized terms used and not defined herein shall have the meanings given to
them in the LLC Agreement (as hereinafter defined).
WHEREAS, the Company, Women.com and Hearst HomeArts, Inc. ("HEARST")
have entered into a Limited Liability Company Agreement of even date herewith
(the "LLC AGREEMENT");
WHEREAS, Executive presently is an executive employee and shareholder of
Women.com and Executive has extensive knowledge with respect to the operations
of Women.com;
WHEREAS, the LLC Agreement contemplates that Executive will become the
President, Chief Executive Officer and Chairperson of the Management Committee
of the Company pursuant to this Agreement; and
WHEREAS, the parties desire to enter into this Agreement under the terms
and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is hereby agreed by and between the parties hereto as
follows:
1. EMPLOYMENT. Commencing upon the Closing Date (as such term is defined
in the LLC Agreement), Executive shall render full-time services to the Company
as President, Chief Executive Officer and Chairperson of the Management
Committee of the Company for at least three (3) years from the date hereof (the
"TERMINATION DATE") unless terminated earlier pursuant to paragraph 5 hereto. In
her capacity as the President, Chief Executive Officer and Chairperson of the
Management Committee, Executive shall report directly to the Management
Committee. The Executive shall possess the responsibilities, duties, and
authorities that are customarily associated with such position. Executive will
devote her best efforts and substantially all of her business time and attention
to the business of the Company and Women.com.
2. COMPENSATION.
(a) SALARY. Executive shall receive a salary in the amount of
$200,000.00 per year, subject to standard payroll deductions and withholdings.
Such salary amount shall be reviewed from time to time as determined by the
Management Committee of the Company.
(b) BONUS. Executive shall be eligible to receive an annual bonus
as set forth in EXHIBIT A hereto.
(c) ADDITIONAL BENEFITS. Executive shall be entitled to all
benefits for which she is eligible under the terms and conditions of the
Company's standard benefits programs and practices which may be in effect from
time to time and provided by the Company to its employees generally.
(d) OPTIONS. Executive shall be eligible to receive additional
option grants from time to time as determined by the Management Committee of the
Company.
1.
<PAGE> 2
3. OUTSIDE ACTIVITIES. By and in consideration of the salary and
benefits to be provided by the Company hereunder, except with the prior written
consent of the Company's Management Committee, Executive agrees that, during the
period commencing with the date hereof and during the period Executive is
entitled to Severance Benefits hereunder, she will not directly or indirectly
through any person, firm or corporation engage or prepare to engage in any
activity in competition with the Company, make any financial investment in
(except that Executive may own up to two percent (2%) of the shares in a
publicly traded company which may compete with the Company) provide other
services to, or establish a business relationship with, a business or individual
engaged in or preparing to engage in competition with the Company. Executive may
engage in civic and not-for-profit activities so long as such activities do not
breach any provision of this Agreement or materially interfere with the
performance of her duties hereunder.
4. PROPRIETARY AND CONFIDENTIAL INFORMATION OBLIGATIONS. Executive
agrees to continue to abide by her obligations pursuant to Women.com's
Proprietary Information Agreement assigned to the Company on the date hereof
(attached hereto as EXHIBIT B), including but not limited to, the obligation to
refrain from using or disclosing the proprietary and confidential information of
the Company as an assignee of all rights, responsibilities and obligations of
Women.com thereto. Executive acknowledges that these obligations continue even
after her employment with the Company has terminated.
5. TERMINATION OF EMPLOYMENT. Executive's employment relationship with
the Company is at-will, and either Executive or the Company may terminate that
employment relationship at any time and for any reason, with or without Cause
(as defined below in paragraph 5(c)) upon giving thirty (30) days written notice
to the other party; provided, however, that the Company may effect an immediate
termination of this Agreement upon a termination for Cause. This at-will
employment relationship cannot be changed except in writing signed by the
Executive and a duly authorized officer of the Company.
(a) Should the Executive be terminated pursuant to an Involuntary
Termination (as defined below in paragraph 5(b)) prior to the Termination Date,
the Executive shall receive (i) Severance Benefits (as hereinafter defined) for
the greater of (A) the number of months remaining until the Termination Date,
beginning on the date that she is effectively terminated or (B) a period of six
(6) months, beginning on the date she is effectively terminated, (ii) all vested
options held by the Executive (and such vested options shall be exercisable for
three (3) months after the date of Executive's termination of employment) and
(iii) all unvested options held by the Executive which would have vested had the
Executive been an employee of the Company through the Termination Date shall
immediately accelerate (the "ACCELERATED OPTIONS') (the Accelerated Options
shall be exercisable by the Executive for a period of three (3) months after the
date of Executive's termination of employment). "SEVERANCE BENEFITS" shall mean
(I) the Executive's base salary as defined in paragraph 2(a), which shall be
paid at semi-monthly intervals on the 15th and the last day of each calendar
month and will be subject to all applicable withholding requirements and (II)
benefits as described in paragraph 2(c); provided, however, that the Company
shall in no event be required to provide any benefits after such time as the
Executive becomes entitled to receive benefits of the same type from another
employer or recipient of Executive's services (such entitlement being determined
without regard to any individual waivers or other similar arrangements).
(b) For purposes of this Agreement, "INVOLUNTARY TERMINATION"
shall mean (i) the involuntary termination of Executive's employment with the
Company other than a termination for Cause (as defined below in paragraph 5(c)),
disability (as defined in paragraph 5(d)) or as a result of death or (ii)
Executive's voluntary resignation within sixty (60) days following (A) a
material reduction in the scope of her duties and responsibilities or the level
of management to which she reports, (B) a reduction in the
2.
<PAGE> 3
level of her compensation (including base salary, fringe benefits and target
bonuses under any corporate-performance based incentive program) by more than
fifteen (15%) percent or (C) a relocation of her principal place of employment
by more than fifty (50) miles; provided, that the Company may cure such
reduction or relocation within ten (10) days of notice thereof. Involuntary
Termination shall not include the termination of her employment by reason of
retirement, death or disability.
(c) For purposes of this Agreement, Executive's employment will
be deemed to be terminated for "CAUSE" if her termination occurs for any of the
following reasons: (i) her commission of any felony, any crime involving the
Company, or any crime involving fraud, moral turpitude or dishonesty; (ii) any
unauthorized use or disclosure of the Company's proprietary information or
breach of paragraph 3 or 4 of this Agreement; (iii) any intentional misconduct
or gross negligence on her part which has a materially adverse effect on the
Company's business or reputation; or (iv) her repeated and willful failure to
perform the duties, functions and responsibilities of her executive position
after a written warning from the Company. Physical or mental disability shall
not constitute "CAUSE."
(d) For purposes of this Agreement, Executive's employment will
be deemed terminated for Disability if Executive becomes disabled for purposes
of the long-term disability plan of the Company for which the Executive is
eligible, or, in the event that there is no such plan, if the Executive by ill
health or other disability is unable to perform substantially and continuously
the duties assigned to her for more than one hundred eighty (180) consecutive or
non-consecutive days out of any consecutive twelve (12) month period.
6. NONSOLICITATION. During her employment with the Company and for one
(1) year thereafter, Executive agrees that she will not, either directly or
through others, solicit or attempt to solicit any employee, consultant, or
independent contractor of the Company to terminate his or her relationship with
the Company in order to become an employee, consultant, or independent
contractor to or for any other person or business entity.
7. GENERAL PROVISIONS.
(a) NOTICES. All notices, requests, consents, and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered or delivered
by registered or certified mail (return receipt requested), or private overnight
mail (delivery confirmed by such service), to the address listed below, or to
such other address as either party shall designate by notice in writing to the
other in accordance herein:
If to the Company:
Women.com Networks LLC
1820 Gateway Drive
Suite 100
San Mateo, CA
Facsimile: (650) 378-6599
If to the Executive:
Marleen McDaniel
22536 Ravensburg Avenue
Los Altos Hills, CA 94024
Facsimile:________________________
3.
<PAGE> 4
(b) ENTIRE AGREEMENT. This Agreement sets forth the complete,
final and exclusive embodiment of the entire agreement between Executive, the
Company, Women.com and Hearst with respect to the subject matter hereof. This
Agreement is entered into without reliance upon any promise, warranty, or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises, warranties, representations, or
agreements.
(c) SEVERABILITY. The Executive acknowledges and agrees that (i)
she has had an opportunity to seek the advice of counsel in connection with this
Agreement and (ii) the Restrictive Covenants (as hereinafter defined) are
reasonable in geographical and temporal scope and in all other respects. If it
is determined that any of the provisions of this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the provisions of this Agreement shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.
(d) DURATION AND SCOPE OF COVENANTS. If any court or other
decision-maker of competent jurisdiction determines that any of Executive's
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration and scope of such provisions, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
(e) SPECIFIC PERFORMANCE. Executive acknowledges and agrees that
any breach by her of any of the provisions of paragraph 3, 4 or 6 (the
"RESTRICTIVE COVENANTS") would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if Executive
breaches, or threatens to commit a breach of, any of the provisions of
paragraphs 3, 4 or 6, the Company and its affiliates shall have the right and
remedy to have the Restrictive Covenants specifically enforced (without posting
bond and without the need to prove damages) by any court having equity
jurisdiction, including, without limitation, the right to an entry against
Executive of restraining orders and injunctions (preliminary, mandatory,
temporary or permanent) against violations, threatened or actual, and whether or
not then continuing, of such covenants, which rights and remedies shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company and its affiliates under law or equity (including, without limitation,
the recovery of damages).
(f) SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors, and administrators of
each party, and inure to the benefit of each party, its heirs, successors, and
assigns.
(g) APPLICABLE LAW. This Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with the laws of
the State of California, as applied to contracts made and to be performed
entirely within the State of California without regard to principles of the
conflict of laws.
(h) HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, all of which together shall
constitute one and the same instrument.
4.
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly authorized and caused this
Agreement to be executed as of the date set forth above.
MARLEEN MCDANIEL, WOMEN.COM NETWORKS LLC
AN INDIVIDUAL
/s/ Marleen McDaniel By: /s/ Alfred Sikes
- ------------------------------- -------------------------------
MARLEEN MCDANIEL
Title:
----------------------------
WOMEN.COM NETWORKS
By: _/s/ Michael D. Perry
-------------------------------
Title: CFO
----------------------------
EXECUTIVE EMPLOYMENT AGREEMENT
SIGNATURE PAGE
<PAGE> 6
EXHIBIT A
BONUS PLAN
EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT A
<PAGE> 7
EXHIBIT B
PROPRIETARY INFORMATION AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT B
<PAGE> 1
EXHIBIT 10.6
AGREEMENT
THIS AGREEMENT (this "Agreement"), is made and entered into as of the
_______ day of June ___, 1998 (the "Effective Date") by and between WOMEN.COM
NETWORKS, a California corporation ("WOMEN.COM" or the "Company") and RODALE
PRESS, INC., a Pennsylvania corporation ("Rodale"), (Rodale and WOMEN.COM are
sometimes referred to herein collectively as the "Parties" and individually as a
"Party").
WHEREAS, WOMEN.COM has developed informational Web sites, including in
conjunction with Rodale pursuant to that certain Website Agreement, dated May 2,
1997, (the "Initial Website Agreement"), and the parties desire to further
mutually develop an additional cobranded site.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
1. COBRANDED SITE. WOMEN.COM agrees to invest no fewer than [*] ("Directed
Funds") for the development of a co-branded website with Rodale, which website
will be based upon content from New Woman Magazine (the "Co-Branded Site"), upon
terms to be mutually agreed upon by WOMEN.COM and Rodale in the Co-Branded Site
Agreement (as hereinafter defined). Promptly following the Effective Date, the
parties will enter into good-faith negotiations for a period of sixty (60) days,
or such longer period as the parties may agree to in writing (the "Negotiation
Period"), with the goal of entering into a mutually acceptable agreement with
respect to the development and maintenance of the Co-Branded Site (the
"Co-Branded Site Agreement). The business terms for the Co-Branded Site
Agreement will be based upon and similar to those set forth in the Initial
Website Agreement. All Directed Funds will contribute to the Investment
Differential (which shall be defined and set forth in the Co-Branded Site
Agreement, and shall be reflect methodology similar to that found in the
definition of Investment Differential set forth in the Initial Website
Agreement). In addition, Rodale will be obligated, as it is in the Initial
Website Agreement, to provide content and cross promotion for the Co-Branded
Site.
2. ONLINE TRANSACTIONS. Women.com agrees to invest [*] within the twelve months
following the effective date of such agreement in an effort to develop a system
for conducting on-line business transactions. Such investment will include, but
not be limited to, equipment purchases and the licensing of appropriate
software, as well as allocation of headcount and other resources as reasonably
necessary to develop and maintain such transactions systems.
3. AUDIT RIGHT. WOMEN.COM agrees that it shall provided to Rodale on a timely
basis a statement (the "Statement"), prepared in accordance with generally
accepted accounting principles, detailing the expenditures made by WOMEN.COM in
satisfaction of its obligations pursuant to Sections 1 and 2 of this Agreement.
Rodale may at its own expense and upon no fewer than ten (10) days prior written
notice to WOMEN.COM, designate independent auditors or accountants (the
"Auditor") to examine or audit WOMEN.COM's records relevant to the
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
1.
<PAGE> 2
Statement to verify the figures reported, such audit to be conducted in a
manner calculated to minimize interference with WOMEN.COM's business. In the
event that the Auditor determines that the actual amount invested by WOMEN.COM
pursuant to Sections 1 and 2 is less than ninety-five percent (95%) of the
amount reported by WOMEN.COM in the Statement (an "Underexpenditure"), then
WOMEN.COM shall pay the cost of such Audit. Further, in the event such
Underexpenditure signifies a failure on the part of WOMEN.COM to invest the
amounts required by Sections 1 and/or 2, the WOMEN.COM shall remedy such failure
by making appropriate expenditures consistent with the terms of Sections 1 and 2
within sixty (60) days after WOMEN.COM's receipt of written notice of such
Underexpenditure.
4. CONFIDENTIALITY.
(a) CONFIDENTIALITY. The Parties will each regard and preserve as strictly
confidential all information and material, including, but not limited to,
non-public information included as part of the transactions contemplated hereby
and all other material or information, including without limitation, customer or
client information, provided to one another in connection with the development
of the Co-Branded Site (hereinafter, "Confidential Information"). Each Party
shall not use the Confidential Information of the other Party except as
necessary to fulfill its obligations under this or any other related agreements
between the parties. Further, each Party agrees not to disclose the Confidential
Information of the other Party to any except those of its employees, consultants
and agents who have been apprised of the confidential nature of such information
and are under a written obligation, consistent with this Section, to maintain
the confidentiality of the other Party's Confidential Information. Each of the
Parties agrees that, except as provided in this Agreement or as otherwise agreed
by them in writing, it shall not use the Confidential Information of the other
Party for its own benefit or for the benefit of any third Person. The Parties
agree that they each will have no obligation in connection with specific
Confidential Information of the disclosing Party to the extent that: (i) such
Confidential Information is already known to the receiving Party, free from any
obligation to keep such Confidential Information confidential at the time it was
obtained from any other Party; (ii) such Confidential Information is or becomes
publicly known through no wrongful act of the receiving Party or any third
Person owing a duty of confidentiality to the disclosing Party; (iii) such
Confidential Information is rightfully received by the receiving Party from a
third Person without restriction and without breach of this Agreement or any
obligation of such third Person to the disclosing Party; or (iv) such
Confidential Information is independently developed by the receiving Party
without reference to the Confidential Information of the disclosing Party. Upon
the request of the disclosing Party, following the termination or expiration of
this Agreement, all tangible and machine readable copies of any Confidential
Information of the disclosing Party in the possession or under the control of
the Receiving Party shall, at the disclosing Party's request, be returned to the
disclosing Party or destroyed, and the receiving Party shall confirm in writing
to the disclosing Party that such destruction has taken place. Notwithstanding
anything contained herein to the contrary, the obligations set forth in this
Section shall not apply to a receiving Party to the extent that the receiving
Party is required by order of court or any other governmental agency, or
otherwise by law, to disclose the Confidential Information of the other Party;
under such circumstances, the receiving Party agrees to give such notice to the
disclosing Party as is reasonably possible under the circumstances in order to
permit the disclosing Party to take legal action in an effort to limit or
prevent such disclosure.
2.
<PAGE> 3
5. LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER, IN ANY
CIRCUMSTANCES, FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY,
PUNITIVE OR SIMILAR NON-DIRECT DAMAGES THAT MAY ARISE OUT OF THIS AGREEMENT.
6. TERM OF AGREEMENT.
(a) TERM AND TERMINATION. This Agreement shall be in effect from and
after the Effective Date until the date the parties enter into the Co-Branded
Site Agreement.
(b) SURVIVAL. The following Sections or provisions of this Agreement
shall survive any termination of this Agreement: 4, 6(b), and 7.
7. GENERAL.
(a) INDEPENDENT CONTRACTOR. The Parties agree that each Party is an
independent contractor and that no Party is an agent of the other. No Party will
be entitled to compensation for its services hereunder except as expressly
provided herein, or in any separate agreements entered into between the Parties
from time to time. No Party will have any authority to make any agreements or
representations on behalf of any other Party or to hold itself out to be an
agent, or representative of any other Party.
(b) PUBLIC ANNOUNCEMENTS. The Parties will jointly coordinate press and
other public announcements of Rodale's involvement in WOMEN.COM in order to
maximize public, investor and advertiser interest. Such announcements may not be
used until WOMEN.COM shall have received written notice from Rodale that it may
use such announcements.
(c) NOTICE. All notices shall be in writing and will be delivered
personally or sent by confirmed facsimile transmission, or overnight carrier at
the addresses specified below:
If to Rodale: If to WOMEN.COM:
1820 Gateway Drive, Suite 100
San Mateo, CA 94404
Attn:
Fax: (650) 677-1976
Any Party may change the person or the address to which notices are directed by
giving written notice to the other Party in accordance with this Section.
Personally delivered or confirmed facsimile notices will be deemed given when
delivered. Notices sent by overnight carrier will be deemed given on the second
business day after dispatch. Notwithstanding the foregoing, notices of change of
address will be deemed given only upon receipt by the Party to which it is
directed.
(d) JURISDICTION. This Agreement shall be construed in accordance with the laws
of the State of New York, as such laws are applied to agreements made, entered
into and performed entirely in New York and solely by New York State residents.
3.
<PAGE> 4
(e) MODIFICATION. No modification, amendment, supplement to or waiver of
any provision of this Agreement shall be binding upon the Parties unless made in
writing and duly signed by all of the Parties.
(f) WAIVER. A failure of any Party to exercise any right provided for
herein shall not be deemed to be a waiver of any right hereunder.
(g) SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of this Agreement. Any unenforceable
provision will be replaced by a mutually acceptable provision that comes closest
to the intention of the Parties at the time the original provision was agreed
upon.
(h) HEADINGS. The headings of this Agreement are for purposes of
reference only and shall not in any way limit or otherwise affect the meanings
or interpretations of any of the terms hereof.
(i) ASSIGNMENT. This Agreement and the rights and obligations of the
Parties hereunder shall not be assigned or delegated by any Party to any other
Person without the prior written consent of the other Party.
(j) FURTHER ASSURANCES. The Parties agree to execute and deliver, or to
cause to be executed and delivered, such further instruments or documents, and
take such other actions as may be reasonably required effectively to carry out
the transactions contemplated herein, in each case provided the same do not
impose any additional liabilities or obligations upon the Parties.
(k) INJUNCTIVE RELIEF. The Parties each acknowledge and agree that
either Party will be irreparably harmed as a result of a breach by the other
Party of Section 4 of this Agreement and that it would be difficult, if not
impossible, to measure the damages resulting from such a breach. Accordingly, in
the event of any actual or threatened breach by either Party of Section 4, the
non-breaching Party shall, in addition to any other legal remedies permitted
hereunder or by applicable law, be entitled to obtain equitable remedies from a
court of competent jurisdiction, without the need for any bond or security,
including, without limitation, specific performance, a temporary restraining
order or a permanent injunction to prevent or otherwise restrain a breach
thereof and to recover all costs and expenses, including, without limitation,
reasonable attorneys' fees, incurred in enforcing the terms of Section 4.
(l) COMPLIANCE WITH LAWS. This Agreement and the Parties' actions under
this Agreement shall comply with all applicable federal, state, and local laws,
rules, regulations, court orders, and governmental or regulatory agency orders.
(m) ENTIRE AGREEMENT. This Agreement, sets forth the entire and sole and
exclusive understanding and agreement between the Parties in connection with the
subject matter hereof and incorporates, replaces, and supersedes all prior
agreements, promises, proposals, representations, understandings and
negotiations, written or not, between the Parties. The making, execution, and
delivery of this Agreement have been induced by no representations, statements,
warranties or agreements other than those expressed herein.
4.
<PAGE> 5
IN WITNESS WHEREOF, the Parties have signed this Agreement as of the
Effective Date.
RODALE PRESS, INC.
By: /s/ Barbara Newton
---------------------------------------
Title: Director of Publishing
WOMEN.COM
By: /s/ Marleen R. McDaniel
---------------------------------------
Title: CEO and President
5.
<PAGE> 1
EXHIBIT 10.7
January 27, 1999
Ms. Barbara Newton
Vice President & Publishing Director
Rodale Press, Inc.
33 East Minor Street
Emmaus, Pennsylvania 18098-0099
RE: AFFIRMATION OF WOMEN.COM OBLIGATIONS TO RODALE PRESS, INC. ("RODALE")
Dear Barb:
As you know: (i) Women.com Networks, Inc. ("Women.com, Inc.") has entered into a
joint venture (the "Joint Venture") with Hearst Communications, Inc. ("Hearst");
(ii) the company formed by the Joint Venture is named Women.com Networks, LLC
("Women.com, LLC); and that in connection with the Joint Venture, Women.com,
Inc.'s existing agreements with Rodale have or will be assigned to Women.com,
LLC.
This letter agreement (the "Letter Agreement") serves to confirm Women.com,
LLC's commitment to faithfully perform under: (i) that certain WebSite Agreement
(the "Prevention Agreement"), dated as of March 2, 1997, between Rodale and
Women.com, Inc.; (ii) that certain other Agreement ("Directed Funds Agreement"),
dated as of June, 1998, between Rodale and Women.com, Inc.; and (iii) that
certain Letter of Agreement, dated December 2, 1998 between Rodale and
Women.com, Inc. (the "Transaction Agreement"). Further, this Letter Agreement
shall serve to confirm the following understanding and agreement among Rodale,
Women.com, LLC and Hearst:
1. For purposes of this Letter Agreement: (a) the "Network" means that
certain network of Web sites maintained by Women.com, LLC and currently located
at www.women.com.; and (b) the "Prevention Site" means that certain Web site
developed pursuant to the Prevention Agreement.
2. Any and all [*] are hereby added to Exhibit E of the Prevention Agreement,
i.e. the list of third parties with whom Women.com, LLC agrees that it will not
create a separate Internet site with [*]. Notwithstanding the foregoing, nothing
herein shall prevent or be deemed to prevent Women.com, LLC from incorporating
into or including on any Network Web site other than the Prevention Site any
[*], provided that such Web site, taken as a whole, could not reasonably be
deemed, during the term of the Prevention Agreement, to directly compete with
the Prevention Web Site, it being understood and agreed that (i) the Hearst
magazine sites (the "Hearst Magazine Sites") to be incorporated into the
Network, (ii) other Hearst content to which Women.com, LLC will have access
pursuant to the Joint Venture, and (iii) other non-Prevention Network Sites may
contain some [*]. Further, Women.com, LLC agrees that during the term of the New
Woman Agreement (as hereinafter defined) Women.com, LLC will not enter into an
agreement with any third party print publication ("Third Party Publication") to
incorporate into the Network any Web site based upon such Third Party
Publication if the Web site based upon such Third Party Publication, taken as a
whole, may reasonably be deemed to compete with the New Woman Site (as
hereinafter
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
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<PAGE> 2
defined); provided, that any print publication now or hereafter owned by Hearst
is excluded from the foregoing restriction on Women.com, LLC.
3. The parties to the following agreements will faithfully perform their
respective obligations pursuant thereto: (i) the Directed Funds Agreement,
including without limitation the obligation to negotiate in good faith a
mutually acceptable agreement (the "New Woman Agreement") covering the creation
and launch of a co-branded Web site based upon content from New Woman Magazine
(the "New Woman Site"), which New Woman Agreement is to be concluded on
substantially similar business terms to those set forth in the Prevention
Agreement, except as may be otherwise agreed to by Rodale and Women.com, LLC;
(ii) the Prevention Agreement; (iii) the Transaction Agreement; and (iv) the New
Woman Agreement (from and after the date it is mutually executed by Rodale and
Women.com, LLC).
4. During the terms of the Prevention Agreement and the New Woman
Agreement, Women.com, LLC will treat the Prevention Site and the New Woman Site,
respectively, without prejudice in relation to, and in a manner no less
favorable than, its treatment of the Hearst Magazine Sites.
5. Women.com, LLC will neither share with Hearst any confidential or
proprietary information of Rodale, nor share with Rodale any confidential or
proprietary information of Hearst, except as and unless specifically permitted
under Women.com, LLC's written agreements with each of Rodale and Hearst,
including any and all such agreements originally entered into by Women.com, Inc.
Further, Women.com, LLC will: (a) neither share with Hearst, nor place on any
Hearst Magazine Site, any content that Women.com, LLC obtains from Rodale, and
(ii) neither share with Rodale, nor place on either the Prevention Site or the
New Woman Site, any content that Women.com, LLC obtains from Hearst. In
addition, Women.com, LLC will neither divulge to or otherwise share with Hearst
any user names that Women.com, LLC may collect from either the Prevention Site
or the New Woman Site, nor divulge to or otherwise share with Rodale any user
names that Women.com, LLC may collect from any Hearst Magazine Site.
6. From and after the date of this Letter Agreement until such time as
this Letter Agreement is terminated in accordance with its terms, Women.com, LLC
shall permit one representative of Rodale (the "Rodale Rep") to attend, on no
more than 4 occasions in any period of twelve (12) consecutive months, in a
nonvoting capacity only, the operational portion of any meetings of the managing
members of Women.com, LLC. Any materials or information provided to Rodale
during or otherwise in connection with any such meeting, and in any manner
disclosed, shall be deemed to be the confidential and proprietary information of
Women.com, LLC and may not be disclosed by Rodale to any third party or used for
any purpose by Rodale except as necessary to confirm that Women.com, LLC is
fulfilling its obligations pursuant to this Letter Agreement. Notwithstanding
the foregoing, Rodale understands and agrees that the Rodale Rep may be required
to absent herself or himself from any such meeting during any portion of such
meeting in which the confidential or proprietary information of Hearst is, or is
likely to be, discussed or otherwise disclosed, and nothing herein shall entitle
the Rodale Rep to receive or otherwise obtain such confidential or proprietary
information of Hearst.
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<PAGE> 3
7. Subject to the terms governing effect of termination and survival
therein, if any, Rodale may terminate this Letter Agreement, the Prevention
Agreement, the Directed Funds Agreement, the Transaction Agreement and/or the
New Woman Agreement in the event that Women.com or Hearst breaches its
obligations under this Letter Agreement in any material respect and fails to
cure such breach within thirty (30) days following receipt of written notice of
such breach; provided, that in no event shall termination of the Directed Funds
Agreement give rise to any obligation of Women.com to refund any amounts
invested by Rodale in Women.com, Inc. prior to or in connection with the
Directed Funds Agreement.
8. This Letter Agreement represents the sole, exclusive and final
statement of the agreement among the parties with respect to the subject matter
hereof and supercedes all prior or contemporaneous negotiations and agreements,
oral or written, and may not be modified except by a writing signed by all of
the parties hereto. This Letter Agreement shall be interpreted and governed by
the law of the State of California as applied to agreements made, entered into
and performed entirely in California solely by California residents.
We look forward to a mutually beneficial relationship with Rodale and to the
success of the Prevention Site and the New Woman Site. If the foregoing
accurately represents your understanding of our agreement, please indicate your
assent by signing in the signature block provided below. The signature of the
authorized representative of each of the parties below indicates the intention
of each such party to be bound by the terms and conditions set forth herein.
I have provided this Letter Agreement in triplicate with the intention that all
three duplicate originals be executed by all of the parties, with one
fully-executed copy to be retained by each of the parties.
Sincerely yours,
WOMEN.COM NETWORKS, LLC
By: /s/ Marleen McDaniel
------------------------------------------
Name: Marleen McDaniel
Title: CEO and President
AGREED AND ACCEPTED:
RODALE PRESS, INC.
By: /s/ Barbara Newton
------------------------------------------
Name: Barbara Newton
Title: VP and Publishing Director
HEARST COMMUNICATIONS, INC.
By: /s/ Alfred Sikes
------------------------------------------
Name: Alfred Sikes
Title:
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<PAGE> 1
EXHIBIT 10.8
RODALE PRESS, INC.
WEBSITE AGREEMENT
THIS WEBSITE AGREEMENT (the "Agreement") is made as of this 2nd day of
May, 1997 (the "Effective Date") between Rodale Press, Inc. ("Rodale"), a
Pennsylvania corporation, with offices at 33 East Minor Street, Emmaus,
Pennsylvania, and WIRE NETWORKS, INC. ("WNI"), a California corporation, with
offices at 1820 Gateway Drive, Suite 150, San Mateo, California 94404.
WHEREAS Rodale is a book and magazine publisher;
WHEREAS WNI has substantial Internet design, editorial and
community-building expertise and is a leading provider of interactive content;
and
WHEREAS both parties deem their respective services and products to be
largely complementary and have agreed to jointly produce a content and community
site on the World Wide Web and to grant certain rights to each other in
furtherance of promoting such site, on the terms and conditions set forth in
this Agreement,
NOW THEREFORE, in consideration of mutual promises contained herein, the
parties agree as follows:
ARTICLE 1: CERTAIN DEFINITIONS
1.1 Certain Definitions. As used herein, the following terms shall have
the following defined meanings:
"Advertising Revenue" shall mean, for any period, the sum of the
aggregate amounts collected by or on behalf of either party hereto arising from
the license or sale of any Advertising Rights on the Site, and excluding amounts
allocable to any credits granted for unused services, discounts, any direct
costs of collection (including, without limitation, fees paid to third parties,
agency fees and fees paid between parties to WNI's internal sales personnel or
to Rodale).
"Intellectual Property" shall mean all rights in and to trade secrets,
patents, copyrights, trademarks, know-how, as well as moral rights and similar
rights of any type under the laws of any governmental authority, domestic or
foreign, including rights in and to all applications and registrations relating
to any of the foregoing.
"Internet" shall mean the collection of computer networks commonly known
as the Internet.
1.
<PAGE> 2
"Page View" shall mean each occasion in which a user visiting the Site
accesses a page from the Site.
"Prevention(R)" shall mean the registered trademark of Rodale Press,
Inc. which trademark is used as a designation for the origin of Rodale's
Prevention(R) magazine.
"Site" shall mean the site on the WWW currently referred to as
"Prevention(R)," which is the site to be jointly produced by WNI and Rodale
pursuant to Article 2 of this Agreement, and which includes the collection of
the HTML files, brand features and concepts, database, and related scripts, all
trademarks, servicemarks, logos and other distinctive brand features that relate
to the Site excluding Rodale and Wire Networks' marks.
"Site Name" shall mean the name or names jointly selected by the parties
as the trademark(s) for the Site.
"URL" shall mean the Universal Resource Locator, which provides a unique
Internet protocol address for accessing an Internet page.
"WWW" shall mean the World Wide Web, a system for accessing and viewing
text, graphics, sound and other media via the Internet.
1.2 Rules of Construction. As used in this Agreement, all terms used in
the singular shall be deemed to include the plural, and vice versa, as the
context may require. The words "hereof," "herein," and "hereunder," and other
words of similar import refer to this Agreement as a whole, including the
Exhibits hereto, as the same may from time to time be amended or supplemented.
The word "including," when used hereof is not intended to be exclusive and means
"including, without limitation." References to "dollars" and "$$" are to be
United States dollars. Headings contained in this Agreement are for ease of
reference only and shall have no legal effect. The term "party" or "parties"
shall mean, as the case may be, Rodale or WNI, individually or collectively. In
constructing the terms of this Agreement, no presumption shall operate in favor
of or against any party as a result of its counsel's role in drafting the terms
and provisions hereof.
ARTICLE 2: THE SITE
2.1 General Responsibilities of the Parties.
(a) WNI's Responsibilities. WNI will be responsible for creating
the initial design for the Site, based upon the Product Plan mutually agreed
upon by both parties. WNI will have primary responsibility for producing,
hosting and creating content for the Site during the Term of this Agreement.
(b) Rodale's Responsibilities. Rodale will be responsible for
providing content and resources from its print magazines and libraries and
providing its promotional capabilities in accordance with the Product Plan.
2.2 Product Plan.
2.
<PAGE> 3
The parties will jointly develop the Product Plan as soon as practicable
after the execution hereof. Any change or additions to the Product Plan must be
mutually agreed by the parties. The Product Plan wilt consist of an editorial
plan, a site production and hosting plan and Site links.
2.3 Editorial Plan.
(a) An editorial plan will be developed by WNI and be approved by
Rodale to articulate the editorial mix and subject matter categories for the
Site. Editorial standards will be articulated in advance in the editorial plan
so that a common understanding of article length, editorial tone and attitude is
jointly understood. The editorial mix will be designed specifically for the [*].
The editorial plan will be documented as a part of the Product Plan and an
editorial calendar will be created for the marketing plan and production
schedule.
(b) Rodale will assign one primary representative to carry out
its responsibilities in accordance with the editorial plan. Rodale will be
responsible for providing the editorial content (on disk), photos/artwork and
other health content (e.g., video, databases, research) according to the
production schedule set forth in the editorial plan and submitting it to WNI's
Product Development manager. WNI will transform the content to WWW form (edit,
add interactivity, audio, video, etc.). In addition, WNI will create original
works for the Site, including derivative works based on content/resources
provided by Rodale. All editorial content will be approved by the Rodale
representative before being uploaded to the Site.
2.4 Site Production and Hosting.
(a) The Site will be developed in accordance with the Product
Plan that Rodale and WNI have mutually agreed upon. Such mutual agreement will
be required for any changes or additions to the Product Plan.
(b) WNI will have primary responsibility for the Site design.
Rodale will assign a single representative to carry out Rodale's
responsibilities hereunder who will work in concert with a team from WNI to
review the design and collaboratively work on changes to it. The initial Site
design will be mutually agreed upon by the parties. Changes to the Site design
after launch of the Site will be developed following the same process.
(c) Upon approval of all editorial content, WNI will be
responsible for formatting and uploading all data to the Site.
(d) WNI will be in charge of creating and producing advertising
banners, as well as uploading and rotating them on the Site. WNI will track
advertising performance and provide weekly reports to Rodale detailing this
performance. WNI will be in charge of tracking traffic on the Site, including
visits and Page Views. Rodale will have daily access to traffic reports as well
as original log files.
(e) WNI will provide hosting services for the Site. This includes
setup, monitoring and maintenance of the web server(s), providing Internet
connectivity for the server(s) and producing reports on Site traffic.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
3.
<PAGE> 4
2.5 Site Links.
(a) WNI will provide promotional links to the Site. WNI will
also promote the Site through advertising banners on its own WWW sites if there
is available unsold advertising inventory.
(b) At its discretion, Rodale will provide a link from all of
its sites to the Site. Rodale will also promote the Site through advertising
banners on its WWW sites if there is available unsold advertising inventory.
(c) As soon as practicable after the execution of this Agreement,
the parties will mutually agree on the content or a message to appear on the
current "Women's Edge" site. In addition, a link will be provided on the Women's
Edge quote/message page to the Women's Wire Body channel.
(d) The design of the advertising banners or logo treatments will
be mutually agreed upon by both parties.
2.6 Advertising Rights.
(a) WNI will have primary responsibility for the advertising
strategy, advertising rates and discount policy and for selling and scheduling
advertising space and managing inventory availability for the Site. In addition,
WNI will be responsible for managing an advertising scheduling and tracking
system to be implemented by WNI and Rodale as described in the Product Plan.
(b) WNI and Rodale each agree to use reasonable commercial
efforts to sell advertising space on the Site; provided, however, that neither
party makes any representation or warranty with respect to the amount of
advertising revenue to be generated by such party.
(c) Both parties have the right to sell Advertising Rights
inventory and receive a sales commission therefore in an amount not to exceed
[*], provided, however, that no sales commission shall be paid based on any
barter or other trade pursuant to Section 2.6(d) below. In such cases where
Rodale or WNI bundles advertising on the Site with other advertising properties
for a blended rate, the Advertising Revenue will be determined by calculating
its pro rata share based on the rate card of each property. Each proposed sales
transaction by Rodale shall be approved by WNI. Neither party shall sell to any
party that sells tobacco or spirits. All ads will conform with Rodale's
standards as set forth in Exhibit A.
(d) Rodale and WNI agree that [*] of the total advertising
inventory for the Site will be reserved ("Reserved Avails") for barters or other
co-marketing arrangements intended to increase traffic or provide merchandise on
the Site during its launch. [*]. At such time as [*] of available advertising
inventory is sold out, such Reserved Avails will be eliminated and one hundred
percent (100%) of the total advertising inventory will be available for sale.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
4.
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(e) As soon as WNI sells advertising for the Site or hosts the
server on which it resides (whichever is first), the Advertising Revenue shall
become allocatable as set forth in 2.8(b) below.
2.7 Marketing. In addition to the respective responsibilities of Rodale
and WNI for links and advertising banners as set forth in Sections 2.5 and 2.6
above, WNI will have primary responsibility for performing all other consumer
marketing activities, including the development of marketing programs and
marketing collateral, to promote the Site; provided, however, that Rodale and
WNI will mutually agree upon a product positioning strategy before any marketing
program is commenced or before any changes are made to an ongoing marketing
program. Rodale shall promote the Site in its print magazines and the magazines'
specials. [*] Rodale shall promote the Site in all other franchise extensions as
appropriate.
2.8 Payments.
(a) At the end of each three month period ("quarter") of this
Agreement, representatives of Rodale and WNI will meet to report their
respective cash investments in the Site for the preceding quarter and the Net
Revenue (as defined below) in the quarter to determine the "Net Investment
Differential" for the quarter and the "Cumulative Net Investment Differential"
for the quarter. The Net Investment Differential for the quarter shall be
calculated as:
[*]
At the end of each quarter, new Cumulative Net Investment Differential
will be calculated as:
[*]
The party entitled to recoup a Cumulative Net Investment Differential
shall also be entitled to "Interest" calculated as follows:
At the end of each quarter, Interest will be added to the Cumulative Net
Investment Differential. The previous Cumulative Net Investment Differential, if
any, will be charged interest at a rate of 1.5% (.015) per month for the quarter
outstanding. This Interest amount and the Net Investment Differential will be
added to the previous Cumulative Net Investment Differential to arrive at the
new Cumulative Net Investment Differential. In any quarter in which the new
Cumulative Net Investment Differential becomes negative, Rodale will receive one
half of the new Cumulative Net Investment Differential as of the end of that
quarter.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
5.
<PAGE> 6
Each of the parties hereto agrees that each such report shall reflect
accurately and correctly its respective investment in the Site and that each
such estimate shall be prepared in good faith and with best efforts to
accurately estimate such party's investment.
(b) Net Revenue (advertising revenue plus ancillary revenue)
received from the Site shall be allocated between the parties in the following
manner during each year of the Agreement: (i) [*]; (ii) thereafter [*]; and
(iii) such allocation shall apply to all revenue generated from the WWW
including ancillary revenues generated by either party.
(c) Both parties will submit budgets in advance to calculate the
total development cost of the Site. Neither party shall deviate from the budget
by more than [*] without the prior approval of the other party. WNI's budget is
attached hereto as Exhibit B; Rodale's budget is attached hereto as Exhibit C.
(d) Within forty-five (45) days following the end of each
quarter, WNI will provide to Rodale a quarterly report of advertising sales (in
a format mutually agreed upon by the parties) and will transfer to Rodale such
portion of the Advertising Revenue for such quarter in accordance with the
calculation set forth in Section 2.8(b) above.
(e) In the event that (i) either party reasonably believes that
the other's actual investment significantly varies from the amount reported in
any given quarter or quarters pursuant to Section 2.8(b) above, or (ii) Rodale
reasonably believes that an error has occurred in the monthly reports provided
or amounts paid by WNI with respect to Advertising Revenue, such party may, at
its own expense and upon ten (10) days prior written notice to the other party
(the "Audited Party"), designate independent auditors or accountants (the
"Auditor") to examine or audit the Audited party's records in a reasonable
manner to verify the figures reported or amounts paid, as the case may be. In
the event that the Auditor determines that either (x) the actual amount invested
by the Audited Party is less than ninety percent (90%) of the amount reported by
the Audited Party, or (y) the amount paid by the Audited Party is less than
ninety percent (90%) of the actual amount owed by the Audited Party, as the case
may be, then such difference, plus the fees of the Auditor, shall become
immediately due and payable by the Audited Party upon notice to the Audited
Party.
2.9 Restrictive Covenants.
(a) WNI recognizes that Rodale wishes to expose its users to the
breadth and depth of its content in many forms. Similarly, Rodale recognizes
that WNI relies on relationships with other WWW sites to drive traffic to its
site and that the new Site is one of many WWW sites that it will manage.
(b) Notwithstanding the foregoing, during the Term of this
Agreement each party agrees not to enter into a relationship with a third party
to create [*]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
6.
<PAGE> 7
[*]. During the term hereof, both parties may amend the listing set forth in its
Exhibit with the prior written approval of the other party.
ARTICLE 3: REPRESENTATIONS AND WARRANTIES
3.1 By Each Party. Each party to this Agreement represents and warrants
to the other party that:
(i) such party has the full corporate right, power and
authority to enter into this Agreement 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; and
(iv) such party acknowledges that the other party makes no
representations, warranties or agreements related to the subject matter hereof
that are not expressly provided for in this Agreement.
3.2 By WNI. In addition to the representations and warranties set forth
in Section 3.1 hereto, WNI represents and warrants to Rodale that the rights
granted under this Agreement to Rodale and the performance of WNI's obligations
under this Agreement will not knowingly infringe in any manner any U.S.
Intellectual Property right of any third party and that the Site will not
knowingly contain any information that is obscene, defamatory, libelous,
slanderous or that would otherwise result in any injury, damage or harm to any
person or that infringes any U.S. Intellectual Property rights of any third
party. WNI makes no representations or warranties that the content and its
supporting code will be compatible with any systems other than the systems being
utilized for the Site.
3.3 By Rodale. In addition to the representations and warranties set
forth in Section 3.1 hereto, Rodale represents and warrants to WNI that the
rights granted under this Agreement to WNI and the performance of Rodale's
obligations under this Agreement will not knowingly infringe in any manner any
U.S. Intellectual Property right of any third party and that the Site will not
knowingly contain any information that is obscene, defamatory, libelous,
slanderous or that would otherwise result in any injury, damage or harm to any
person or that infringes any U.S. Intellectual Property rights of any third
party.
3.4 No Additional Warranties. EXCEPT AS SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE PRODUCTS AND
SERVICES INCLUDING THE CONTENT AND SOFTWARE CONTEMPLATED BY THIS AGREEMENT,
INCLUDING ANY IMPLIED WARRANTY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
7.
<PAGE> 8
AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR COURSE OF
PERFORMANCE.
ARTICLE 4: INDEMNIFICATION; LIMITATION OF LIABILITY
4.1 Indemnification by WNI. WNI, at its own expense, will indemnify,
defend and hold harmless Rodale, and its employees, representatives and agents,
against any claim, suit, action, or other proceeding brought against Rodale, to
the extent that such claim, suit, action or other proceeding is based on or
arises from:
(i) a claim that the use of the Site in accordance
with this Agreement infringes any Intellectual Property right of any third
party, or any right of personality or publicity, is libelous or defamatory, or
otherwise results in injury or damage to any third party;
(ii) any misrepresentation or breach of representation
or warranty of WNI contained herein; or
(iii) any breach of any covenant or agreement to be
performed by WNI hereunder.
WNI 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 or in connection with or arising from any such claim, suit, action
or proceeding attributable to any such claim.
4.2 Indemnification by Rodale. Rodale, at its own expense, will
indemnify, defend and hold harmless WNI, and its employees, representatives and
agents, against any claim, suit, action, or other proceeding brought against
WNI, to the extent that such claim, suit, action or other proceeding is based on
or arises from:
(i) a claim that the use of the Site in accordance
with this Agreement infringes any Intellectual Property right of any third
party, or any right of personality or publicity, is libelous or defamatory, or
otherwise results in injury or damage to any third party;
(ii) any misrepresentation or breach of representation
or warranty of Rodale contained herein; or
(iii) any breach of any covenant or agreement to be
performed by Rodale hereunder.
Rodale 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 WNI in connection with or arising from any such claim, suit, action
or proceeding attributable to any such claim.
4.3 Limitation of Liability. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER
PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY
DAMAGES, EVEN IF THAT PARTY HAS BEEN ADVISED
8.
<PAGE> 9
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. IN NO EVENT SHALL EITHER PARTY'S LIABILITY UNDER THIS
AGREEMENT EXCEED THE COSTS EXPENDED BY THE OTHER PARTY HEREUNDER.
ARTICLE 5: TERM AND TERMINATION
5.1 Initial Term and Renewals. This Agreement will become effective as
of the Effective Date and shall, unless sooner terminated as provided below or
as otherwise agreed, remain effective for an initial term of [*] from the
launch date of the Site (the "Initial Term"). After the Initial Term, this
Agreement shall automatically be extended for successive additional one-year
periods (each an "Extension Term"), unless otherwise terminated by either party
by giving written notice to the other party not less than thirty (30) days prior
to the end of the initial Term or any Extension Term then in effect. As used
herein, the "Term" shall mean the Initial Term and any Extension Term(s).
5.2 Early Termination. Notwithstanding the foregoing, this Agreement
may be terminated at any time by either party, effective immediately upon
notice, if the other party: (i) becomes insolvent; (ii) files a petition in
bankruptcy; (iii) makes an assignment for the benefit of its creditors; or (iv)
breaches its obligations of confidentiality set forth in Article 6 below. Either
party may terminate this Agreement, effective upon thirty (30) days notice, in
the event that the other party breaches any of its responsibilities or
obligations under this Agreement in any material respect (including, without
limitation, failure to pay) which breach is not remedied within thirty (30) days
following written notice to such party.
5.3 Change in Control of WNI. In the event of a change of control of
WNI. which results in a controlling interest of WNI being owned by [*]
listed in Exhibit F, (a controlling interest being defined as an ownership
interest which permits the election of that number of directors of WNI required
to approve of a sale, merger, dissolution and liquidation of WNI under WNI's
Articles of Incorporation and Bylaws), Rodale may: (i) immediately withdraw the
use of any Rodale wholly-owned trademark, including Prevention(R)
(notwithstanding that such withdrawal may require the Site Name to be changed);
and (ii) Rodale shall have the right to terminate the Agreement upon [*] written
notice. During the term hereof, both parties may amend the listing set forth in
this Exhibit with the prior written approval of the other party.
5.4 Effect of Termination. Any termination pursuant to this Article 5
shall be without any liability or obligation of the terminating party, other
than with respect to any breach of obligations under this Agreement prior to
termination. The provisions in Articles 3, 4, 6, 7 and 8 shall survive any
termination or expiration of this Agreement.
ARTICLE 6: CONFIDENTIALITY
Rodale and WNI hereby acknowledge that each of them may have access to
confidential and proprietary information which relates to the other party's
technology, marketing and business (the "Confidential Information"). Each party
agrees to preserve and protect the
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
9.
<PAGE> 10
confidentiality of the Confidential Information and not to disclose any
applicable Confidential Information to any third party without the prior written
consent of the other party; provided, however, that any party hereto may
disclose to any other party any information which receiving party can prove is:
(i) already publicly known; (ii) discovered or created by the receiving party
without reference to the Confidential Information; or (iii) otherwise learned
through legitimate means other than from a third party under confidentiality
obligations. Moreover, any party hereto may disclose any Confidential
Information hereunder to such party's agents, attorneys and other
representatives or any court or competent jurisdiction or any other party
empowered hereunder as reasonably required to resolve any dispute between the
parties hereto.
ARTICLE 7: OWNERSHIP
7.1 Site Name.
(a) As between the parties, Rodale will retain all rights to the
names and trademarks "Prevention(R)" and "Prevention(R)'s Bodysense" and
existing department names in the Prevention(R) Magazine and WNI will retain all
rights to the names and trademark "Women's Wire" and "Beatrice's Web Guide" and
existing department names in "Women's Wire" website and "Beatrice's Web Guide"
website.
(b) If the parties chose a different name or names other than
"Prevention(R)" or "Prevention(R)'s Bodysense" for the Site Name, such name or
names and all rights including trademark in and to such name or names will be
jointly owned (50%/50%) by each party.
7.2 Site Content.
(a) The parties shall jointly own (50%/50%) all rights including
copyright, in and to the original works created hereunder for the Site including
derivative works based on existing works owned by either party.
(b) The parties shall jointly own (50%/50%) all rights including
copyright in and to the compilation prepared by WNI comprised of the works
including code set forth in (a) above. Such jointly owned property is
hereinafter referred to as Site Content.
(c) WNI shall have the responsibility for registration of the
copyright and trademark of the Site Content and Site Name in the United States
Copyright Office and Trademark Office and in such other jurisdictions as the
parties mutually agree. All such registrations shall be in the names of both
parties.
7.3 Right of First Refusal and Rights Upon Termination.
(a) At any time, one party may make an offer to purchase all of
the other party's ownership interest in the Site Content (and if the Site Name
is jointly owned, the Site Name) from the other party. The parties agree that
neither party can license, sell or otherwise transfer any or all rights in the
Site, Site Content and/or Site Name to a third party without the prior written
consent from the other. Each party has the right of first refusal to purchase
all or part of the ownership interest in the Site Content of the other party (at
the same price and on the terms
10.
<PAGE> 11
and conditions) if the other party has received an offer to license or sell it
or them to a third party.
(b) If this Agreement is terminated by one party for any reason,
the following will occur:
(i) The rights to the Site Content created up to the
date of termination will continue to be co-owned by Rodale and WNI. Both parties
may continue to use the Site Content without the right to license or sell to
third parties unless one party buys the rights ownership interest of the other
party. Each party using the Site Content must pay to the other a royalty of 50%
of net revenues it receives from such use. Each party commits that it will
evaluate a new royalty rate on a case-by-case basis.
(ii) If the Site Name is Prevention(R) and Rodale chooses
to allow continued use of the name, WNI shall pay Rodale a royalty of [*] of net
revenues for the usage of the Site Name as long as the name is used.
(iii) If the party that terminates the contract or
breaches the contract resulting in a termination of the contract also owns all
rights to the Site Name, that party will be prevented from using that URL for a
period of one year unless permission is granted from the other party.
(iv) If the Site Name (and all related names) is jointly
owned by Rodale and Wire Networks and one party terminates the contract or
breaches the contract, resulting in termination of the contract, the second
party will have the exclusive right to use the jointly owned names and must pay
the first party a royalty of [*] of net revenues when using such names.
If the second party does not exercise its right to
exclusive use of the name(s), then the first party will have the right to use
the name(s) and must pay the second party [*].
At any time either party may purchase the exclusive
right to (the name from the other party upon terms and conditions to be
negotiated between the parties.
ARTICLE 8: MISCELLANEOUS
8.1 Public Announcement. The parties hereto will issue a joint press
release regarding this Agreement at a time that is mutually agreed to by the
parties. No party will make any separate public announcement regarding this
Agreement or any of the contents contained herein without the prior consent of
the other party.
8.2 Assignment. This Agreement will bind and inure to the benefit of
each party's permitted successors and assigns. Either party may assign this
Agreement to a wholly owned subsidiary provided that the Assignor shall remain
responsible for its obligations hereunder, otherwise, neither party may assign
this Agreement, in whole or in part, without the other party's prior written
consent which shall not unreasonably be withheld.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
11.
<PAGE> 12
8.3 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without reference to
conflicts of laws rules, and without regard to its location of execution or
performance.
8.4 Severability. If any provision of this Agreement is found invalid
or unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
8.5 Notices. All notices, requests and other communications called for
by this Agreement shall be deemed to have given upon receipt if made by mail,
courier or personal delivery, or immediately if made by telecopy or electronic
mail (confirmed by concurrent written notice sent first-class U.S. mail, postage
prepaid), if to Rodale at 33 East Minor Street, Emmaus, Pennsylvania 18098-0099,
Attention Barbara Newton (FAX (610) 967-7723; E-mail: bnewton 1
@rodalepress.com) and if to WNI at 1820 Gateway Drive, Suite l50, San Mateo,
California 94404, Attention: Ellen Pack, Vice President (FAX (415) 378-6599;
E-mail: [email protected]), or to such other addresses as either party shall
specify to the other. Notice by any other means shall be deemed made when
actually received by the party to which notice is provided.
8.6 Relationship of Parties. Neither this Agreement, nor any terms and
conditions contained herein may be construed as creating or constituting a
partnership, joint venture or agency relationship between the parties. Neither
party will have the power to bind the other or incur obligations on the other's
behalf without the other's prior written consent.
8.7 Waiver. No failure of either party to exercise or enforce any of its
rights under this Agreement will act as a waiver of such rights.
8.8 Entire Agreement. This Agreement and its exhibits are the complete
and exclusive agreement between the parties with respect to the subject matter
hereof, superseding and replacing any and all prior agreements, communications,
and understandings, both written and oral, regarding such subject matter. This
Agreement may only be modified, or any rights under it waived, by a written
document executed by both parties.
8.9 Expenses. Each party shall bear its own expenses, including legal
fees, incurred in the negotiation and documentation of this Agreement.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute a single instrument.
Execution and delivery of this Agreement may be evidenced by facsimile
transmission.
8.11 Force Majeure. Neither party shall be liable for any failure or
delay in its performance under this Agreement due to causes including, but not
limited to, acts of God, acts of civil or military authority, fires, floods,
earthquakes, riots, wars, sabotage, or governmental actions, which are beyond
its reasonable control; provided, however, that such affected party take
reasonable efforts to mitigate the effects of such causes.
12.
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
RODALE WIRE NETWORKS, INC.
By:/s/ Barbara Newton By: /s/ Marleen R. McDaniel
------------------------------- ------------------------
Title: VP, Director of Publishing Title: CEO & President
------------------------------- ----------------------
13.
<PAGE> 14
EXHIBIT A
PREVENTION MAGAZINE ADVERTISING STANDARDS
Advertising will not be accepted:
1. That promotes a product deemed defective or unsafe by the FDA.
2. That promotes a product, therapy, or service whose possible harm to the
customer outweighs its benefits.
3. That promotes a health product for which there is no good evidence of
benefit, and no good reason to believe there is a benefit.
If there is any question about whether an advertiser is acceptable or not, WNI
will contact Gloria McVeigh at Rodale at (610) 967-8201 or Karyn Barczewski,
Advertising Business Manager. at (610) 967-8503.
14.
<PAGE> 15
EXHIBIT B
WNI BUDGET
<PAGE> 16
HEALTHY _________________
REVENUE AND EXPENSE STATEMENT
<TABLE>
<S> <C>
Revenue [*]
Less Commissions
NET REVENUE
EDITORIAL & PRODUCTION:
Editorial Expense
Production Expense
Design Expense
Product Development Expense
Content Expense
TOTAL EDITORIAL & PRODUCTION
OPERATIONS & TECHNICAL:
Operations Expense
Tech Ops Expense
TOTAL OPERATIONS & TECHNICAL
MARKETING EXPENSE:
Marketing Staff
Advertising
Promotional
Other
TOTAL MARKETING
Sales Expense
TOTAL SALES EXPENSE
Legal/Other Expense
TOTAL LEGAL/OTHER EXPENSE
TOTAL DEPT EXPENSE
OVERHEAD ALLOCATION (30%)
TOTAL EXPENSE
</TABLE>
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 17
EXHIBIT B
<TABLE>
<CAPTION>
WIRE NETWORKS' PREVENTION COST PROJECTIONS
- -----------------------------------------------------------------------------------------------------------------------
Overhead: 30%
------- -------- -------- -------- ----------
1Q97 2Q97 3Q97 4Q97 TOTAL
------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Costs:
Editorial & Design
- -------------------------------------------------- [*]
Producer
Editorial Staff
Illustration/Design
HTML Design & Production
Programming (JAVA, Perl, CGI)
Travel
Content/Writing
Other
Site Hosting & Software
- --------------------------------------------------
Server Fees & Maintenance
Software Licenses, Reporting/Audit
Technical Staff
Sales and Marketing
- --------------------------------------------------
Sales Staff
Travel & Entertainment
Public Relations
Sales Materials/Collateral
Marketing Staff
Market Research
Creative/Production
Site Promotion
Banner Advertising
Sub-Total
Overhead
TOTAL COSTS
</TABLE>
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 18
EXHIBIT C
RODALE BUDGET
<PAGE> 19
Exhibit C
<TABLE>
<CAPTION>
RODALE PRESS PREVENTION COST PROJECTIONS
- -----------------------------------------------------------------------------------------------------------------------
Overhead: 30%
------ ------- ------- ------- --------
1Q97 2Q97 3Q97 4Q97 TOTAL
------ ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
EDITORIAL [*]
Researcher
ADVERTISING
Cost of Page
Page in Specials
PR
Sub-Total
Overhead
TOTAL
</TABLE>
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 20
EXHIBIT D
RESTRICTIONS ON RODALE THIRD PARTY RELATIONSHIPS
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 21
EXHIBIT E
RESTRICTION ON WNI THIRD PARTY RELATIONSHIPS
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 22
EXHIBIT F
WNI CHANGE [N CONTROL - RESTRICTED ENTITLES
[*]
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 10.9
WIRE NETWORKS, INC.
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT is made as of the 7th day of July, 1997,
by and between WIRE NETWORKS, INC., a California corporation (the "Company"),
and U S WEST INTERACTIVE SERVICES, INC., a Colorado corporation (the
"Purchaser").
The parties hereby agree as follows:
1. PURCHASE AND SALE OF WARRANTS.
1.1 PURCHASE AND SALE OF WARRANTS. Subject to the terms of this
Agreement, the Company will issue and sell to the Purchaser from time to time
and the Purchaser will purchase at a price, per share, equal to three dollars
and 4/100 ($3.04) (the "Purchase Price") warrants to purchase up to eight
hundred eighty-seven thousand six hundred sixty five (887,665) shares of Series
C Convertible Preferred Stock of the Company ("Warrant Shares"). Such warrants
shall be in the form of Exhibit A hereto, (the "Warrant") and shall be
exercisable at the Purchase Price stated above at any time prior to three (3)
months following the third anniversary of the Effective Date of this Agreement
unless otherwise agreed to by the Parties.
2. EFFECTIVE DATE.
2.1 EFFECTIVE DATE. The effective date of this Agreement (the "Effective
Date") hereunder shall be the date of closing by the Company of its Series C
Convertible Preferred Stock financing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE OF INCORPORATION AND BYLAWS.
The Company is a corporation duly organized and existing under, and by virtue
of, the laws of the State of California and is in good standing under such laws.
The Company has the requisite corporate power to own and operate its properties
and assets and to carry on its business as presently conducted and as proposed
to be conducted.
3.2 CORPORATE POWER. The Company will have, as of the Effective Date,
all requisite corporate power to execute and deliver this Agreement and to carry
out and perform its obligations under the terms of this Agreement.
3.3 AUTHORIZATION. All corporate action on the part of the Company, its
directors and its shareholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder,
i.
<PAGE> 2
including the issuance and delivery of the Warrant and the reservation of the
Warrant Shares issuable upon exercise of the Warrant has been taken or will be
taken prior to the Effective Date. This Agreement and the Warrant, when executed
and delivered by the Company, shall constitute valid and binding obligations of
the Company enforceable in accordance with their terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors. The Warrant Shares, when issued in compliance with the provisions of
this Agreement and the Warrants, will be validly issued, fully paid and
nonassessable and free of any liens or encumbrances; provided, however, that the
Warrant Shares may be subject to restrictions on transfer under state and/or
federal securities laws.
3.4 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not, and will not
be by virtue of entering into and performing this Agreement and the transactions
contemplated hereunder, in violation of any term of its Amended and Restated
Articles of Incorporation or its Amended and Series C Preferred Stock Purchase
Agreement or any mortgage, indenture, contract, agreement, instrument, judgment
or decree. To the best of its knowledge, the Company is not, and will not be by
virtue of entering into and performing this Agreement and the transactions
contemplated hereunder, in violation of any order, statute, rule or regulation
applicable to the Company. The execution, delivery and performance of and
compliance with this Agreement and the transactions contemplated hereunder,
including the issuance of the Warrant and the Warrant Shares issuable upon
exercise of the Warrant, have not resulted and will not result in any violation
of or conflict with or constitute a default under any agreement to which the
Company is a party, and have not resulted and will not result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company; and there is no such violation or default that materially
and adversely affects the business of the Company or any of its properties or
assets.
3.5 GOVERNMENTAL CONSENTS. The offer, sale and issuance of the Warrant
in conformity with the terms of this Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Act") and will be
in compliance with applicable state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
4.1 PURCHASE FOR OWN ACCOUNT. The Purchaser represents that it is
acquiring the Warrant and the Warrant Shares issuable upon exercise of the
Warrant (collectively, the "Securities") solely for its own account and
beneficial interest for investment and not for sale or with a view to
distribution of the Securities or any part thereof, has no present intention of
selling (in connection with a distribution or otherwise), granting any
participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention. The Purchaser also
represents that the entire legal and beneficial interest of the Warrant it is
acquiring is being acquired for the account of the Purchaser only and neither in
whole nor in part for any other person, and that any transfer of the Securities
will be made in compliance with the Act, and all other applicable securities
laws.
4.2 The Purchaser acknowledges that it is an "accredited investor" as
that term is defined in Rule 501(c) of Regulation D under the Act.
ii.
<PAGE> 3
4.3 RESTRICTED SECURITIES; LIMITATION ON DISPOSITION.
(A) The Purchaser understands that the Securities it is
purchasing are characterized as "Restricted Securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited sets of circumstances. In this connection, the
Purchaser represents that it is familiar with Securities and Exchange Commission
Rule 144 ("Rule 144"), as presently in effect.
(B) Without limiting the foregoing, the Purchaser agrees that it
will in no event make any disposition of any of the Securities unless:
(I) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(II) Such disposition is made in accordance with Rule 144;
or
(III) The Purchaser shall have notified the Company of the
pertinent details of the proposed disposition and, if the Company so reasonably
requests, shall have provided the Company with an opinion of counsel for the
Purchaser to the effect that such disposition will not require registration of
the Securities under the Act, and such opinion of counsel shall be reasonably
acceptable to the Company's counsel.
(C) The Purchaser understands that the Company's stock transfer
records will be noted to reflect the restrictions on transferability of the
Securities contained herein and that certificates evidencing the Securities may
bear one or more of the following legends:
(I) "The securities represented hereby have not been
registered under the Securities Act of 1933, as amended (the "Act"). Any
transfer of such securities will be invalid unless (1) a Registration Statement
under the Act is in effect as to such transfer, (2) such transfer is made in
compliance with Rule 144 under the Act, or (3) in the opinion of counsel
satisfactory to the Company registration under the Act is unnecessary in order
for such transfer to comply with the Act."
(II) Any legend imposed or required pursuant to applicable
state securities law.
5. CONDITIONS TO CLOSING.
The Company's obligation to sell and issue and the Purchaser's
obligation to purchase the Warrant on the Effective Date is the subject to the
following conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company set forth in Section 3 and of the Purchaser set forth
in Section 4 shall be true at and as of the Effective Date with the same force
and effect as though such representations and warranties had been made at and as
of the Effective Date.
iii.
<PAGE> 4
5.2 AUTHORIZATION; RESERVATION OF SHARES. All corporate action on the
part of the Company and its officers, directors, and shareholders that is
necessary for the authorization, execution, and delivery of this Agreement by
the Company, for the performance of the Company's obligations hereunder and for
the authorization, issuance and delivery of the Warrant and the Warrant Shares
issuable upon exercise of the Warrant shall have been taken. The Warrant Shares
issuable upon exercise of the Warrant shall have been duly and validly reserved.
5.3 INVESTOR RIGHTS AGREEMENT. The Company shall have granted such
rights with respect to the Warrant shares issuable upon exercise of the Warrant
and the Shares issuable upon conversion of the Warrant Shares as are set forth
in that certain Amended and Restated Investor Rights Agreement dated July 9,
1997.
6. POST CLOSING COVENANTS.
6.1 CONFIDENTIALITY. Each party acknowledges that the terms of this
Agreement are proprietary in nature, and should be kept confidential. As such,
during the course of this Agreement, each party will protect the information
received from the other party under this Agreement ("Confidential Information")
with the same degree of care it would use to protect its own information, and
will not (a) use such Confidential Information for any purpose except the
performance of this Agreement, or (b) disclose any such Confidential Information
to any person, except to employees, consultants, directors, advisors, or any
other person with a need to know for purposes of performing under this
Agreement, to investors of the Company, and to prospective investors which have
executed confidentiality agreements with the Company, and to any party where
such disclosure is required by law, or, to any party at such time as the
specific terms are made available to the public by consent of the Company and
the Purchaser.
7. MISCELLANEOUS.
7.1 BINDING AGREEMENT. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Colorado.
7.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 NOTICES. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid, addressed to the Company at its principal offices, or to
a Purchaser at 9000 E. Nichols, Englewood,
iv.
<PAGE> 5
Colorado 80122, or at such other address as such party may designate by ten (10)
days advance written notice to the other party.
7.6 MODIFICATION; WAIVER. No modification or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and approved by the holders of at least a majority in interest of the
Warrants then outstanding.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPANY: PURCHASER
WIRE NETWORKS, INC. U S WEST INTERACTIVE SERVICES, INC.
By: /s/ Mark R. McDaniel By: /s/ US West Interactive Services, Inc.
-------------------- --------------------------------------
Its: CEO and President Its: President
v.
<PAGE> 6
EXHIBIT A
887,665 WARRANTS
THESE WARRANTS AND THE SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK ISSUABLE
UPON EXERCISE OF THESE WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE
STATE SECURITIES LAWS. THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH
REGISTRATION, PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
July 7, 1997
WIRE NETWORKS, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, Wire Networks, Inc., a California corporation (the
"Company"), hereby certifies that U S WEST Interactive Services, Inc. (the
"Holder") is entitled, subject to the provisions contained herein, to purchase
from the Company eight hundred eighty-seven thousand six hundred sixty-five
(887,665) fully paid and non-assessable shares of Series C Convertible Preferred
Stock (as defined below), subject to adjustment as provided herein, at an
exercise price equal to the price per share of three dollars and 4/100 ($3.04)
(the "Exercise Price").
The term "Series C Stock" means the Series C Convertible Preferred Stock
of the Company purchased at a price of $3.04 per share. The number of shares of
Series C Stock to be received upon the exercise of these Warrants may be
adjusted from time to time as hereinafter set forth. The shares of Series C
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter referred to as "Warrant Stock." The term "Other Securities" means
any other securities that may be issued by the Company in addition to, or in
substitution for, the Warrant Stock.
References herein to the "Company" are to (i) Wire Networks, Inc. and
any successor thereto, (ii) any successor corporation resulting from the merger
or consolidation of Wire Networks, Inc., or any successor thereto, with another
corporation or (iii) any corporation to which Wire Networks, Inc., or any
successor thereto, has transferred its property or assets as an entirety or
substantially as an entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants,
1.
<PAGE> 7
if mutilated, the Company shall execute and deliver new Warrants of like tenor
and date. Any such new Warrants, upon execution and delivery, shall constitute
an additional contractual obligation on the part of the Company, whether or not
these Warrants so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
By its acceptance of these Warrants, the Holder agrees with the Company
that these Warrants are issued, and all the rights hereunder shall be held
subject to, all of the conditions, limitations and provisions set forth herein,
including the following:
1. EXERCISE OF WARRANTS. The Warrants may be exercised in the amounts
set forth below, at any time prior to three (3) months following the third
anniversary of the date of closing of the Series C Convertible Preferred Stock
financing for the Company ("Expiration Date"). The Warrants shall be exercisable
by presentation and surrender of these Warrants to the Company at its principal
office (which on the date hereof is 1820 Gateway Drive, San Mateo, or at the
office of its stock transfer agent (which on the date hereof is the Company), if
any, with the Warrant Exercise Form attached hereto duly executed and
accompanied by payment (either in cash or by certified or official bank check or
checks, payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the Company's
stock transfer agent at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the Warrant Stock (and Other
Securities) issuable upon such exercise, notwithstanding that the transfer books
of the Company shall then be closed or that certificates representing such
Warrant Stock (or Other Securities) shall not then be actually delivered to the
Holder. The Company shall pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of Warrant Stock (and
Other Securities) upon exercise of these Warrants.
2. RESERVATION OF SHARES AND OTHER SECURITIES. The Company will at all
times reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock and other shares of capital stock of the Company (and
Other Securities) from time to time receivable upon exercise of these Warrants.
All such shares (and Other Securities) shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable and
free and clear of all preemptive rights.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share in lieu of each fraction of a share otherwise issuable upon any
exercise of these Warrants, as determined by the Board of Directors in its
reasonable discretion.
4. EXCHANGE OF WARRANTS. These Warrants are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations, entitling the Holder to purchase in the
aggregate the same number of shares of Warrant Stock (and Other Securities)
purchasable hereunder.
2.
<PAGE> 8
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights as a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed herein.
6. ANTI-DILUTION PROVISIONS
6.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Series C Stock (or Other Securities at the
time receivable upon the exercise of these Warrants) by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Series C Stock shareholders, the number of
shares of Series C Stock (or Other Securities) subject to these Warrants
immediately prior to such subdivision shall be proportionately increased and the
Exercise Price per share shall be proportionately decreased, and if the Company
shall at any time combine the outstanding shares of Series C (or Other
Securities) by recapitalization, reclassification or combination thereof, the
number of shares of Series C Stock (or Other Securities) subject to these
Warrants immediately prior to such combination shall be proportionately
decreased and the Exercise Price per share shall be proportionately increased.
Any such adjustments pursuant to this Section 6.1 shall be effective at the
close of business on the effective date of such subdivision or combination or,
if any adjustment is the result of a stock dividend or distribution, then the
effective date for such adjustment shall be the record date therefor.
6.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
(A) In case of any reorganization of the Company (or any other
corporation, the securities of which are at the time receivable upon the
exercise of these Warrants) after the date hereof or in case after such date the
Company (or any such other corporation) shall consolidate with or merge into
another corporation or convey all or substantially all of its assets to another
corporation, then, and in each such case, the Holder, upon the exercise hereof,
at any time after the consummation of such reorganization, consolidation, merger
or conveyance, shall be entitled to receive, in lieu of the securities and
property receivable upon the exercise of these Warrants prior to such
consummation, the securities or property to which the Holder would have been
entitled upon such consummation if the Holder had exercised these Warrants
immediately prior thereto (but had not exercised any rights with respect to such
securities or property in connection with the reorganization, consolidation,
merger or conveyance); in each such case, the terms of these Warrants shall be
applicable to the securities or property receivable upon the exercise of these
Warrants after such consummation.
(B) In any case where the Company shall consolidate with or merge
into another corporation, and shall not be the surviving corporation, or shall
convey all or substantially all of its assets to another corporation, then, and
in each such case, the Company shall, as a condition of the closing of such
transaction, require that the surviving corporation or the corporation that
shall have received substantially all of the Company's assets expressly assume
the obligations of the Company under these Warrants in a form reasonably
satisfactory to the Holder.
6.3 NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any
3.
<PAGE> 9
other voluntary action, willfully avoid or seek to avoid the observance or
performance of any of the terms of these Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing,
while these Warrants are outstanding, the Company (a) will not permit the par
value, if any, of the shares of Warrant Stock to be above the amount payable
therefor upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
or sell fully paid and non-assessable shares of Warrant Stock and Other
Securities upon the exercise of these Warrants
6.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in the
number of shares of Warrant Stock or Other Securities receivable upon the
exercise of these Warrants, the Company at its expense will promptly compute
such adjustment in accordance with the terms of these Warrants and prepare a
certificate executed by an executive officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company will forthwith mail a copy of each such certificate to the Holder.
6.5 NOTICES OF RECORD DATE, ETC. In case:
(A) the Company shall take a record of the holders of its Series
C Stock (or Other Securities at the time receivable upon the exercise of these
Warrants) for the purpose of entitling them to receive any dividend (other than
a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities,
or to receive any other right; or
(B) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, and consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation; or
(C) of any voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take place, and
the time, if any, to be fixed, as to which the holders of record of Warrant
Stock (or such other securities at the time receivable upon the exercise of
these Warrants) shall be entitled to exchange their shares of Warrant Stock (or
such other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least 20
days prior to the date therein specified and these Warrants may be exercised
prior to said date during the term of these Warrants.
4.
<PAGE> 10
7. RESTRICTIONS ON TRANSFER OF WARRANTS, WARRANT STOCK AND OTHER
SECURITIES. The Warrant Stock and Other Securities may not be sold, transferred
or otherwise disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant to
available exemptions from such registration, provided that the seller delivers
to the Company an opinion of counsel satisfactory to the Company confirming the
availability of such exemption.
8. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of these Warrants
and the issuance of any of the shares of Warrant Stock or Other Securities, all
certificates representing such securities shall bear on the face thereof
substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
9. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by the Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no
enumeration herein of the rights or privileges of the Holder shall cause the
Holder to be a stockholder of the Company for any purpose
10. AMENDMENT; WAIVER. Any term of the Warrants may be amended and the
observance of any term of the Warrants may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section shall be binding upon the Holder and the
Company.
11. NOTICES. All notices required hereunder shall be in writing and
shall be deemed given when telecopied, delivered personally or within two days
after mailing when mailed by certified mail, return receipt requested, to the
Company at its principal office, or to the Holder at the address set forth on
the record books of the Company, or at such other address of which the Company
or the Holder has been advised by notice in writing hereunder.
12. ASSIGNMENT. These Warrants, and the rights of the Holder hereunder,
are not assignable by the Holder, except to an affiliate (as such term is
defined in Rule 12b-2 under the Securities Exchange Act of 1934) thereof. Any
attempted assignment in violation of this Section 12 shall be null and void.
5.
<PAGE> 11
13. ENTIRE AGREEMENT. This Agreement, together with Annex A hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties respecting the subject matter hereof.
14. APPLICABLE LAW. These Warrants shall be governed by, and construed
in accordance with, the laws of the State of Colorado without giving effect to
conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as of
the day and year first above written.
WIRE NETWORKS, INC.
BY:
-----------------------
TITLE:
ACKNOWLEDGED AND AGREED:
U S WEST INTERACTIVE SERVICES, INC.
By:
---------------------------------------
Title:
---------------------------------
6.
<PAGE> 12
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase __________ shares of Series C Convertible Preferred Stock of Wire
Networks, Inc., a California corporation, and hereby makes payment of
$____________________ in full satisfaction thereof.
----------------------------
Signature
----------------------------
Signature, if jointly held
----------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the Holder of the within Warrants)
Name __________________________________________________________________________
Address _______________________________________
_______________________________________________
_______________________________________________
Social Security or Taxpayer Identification Number.
_______________________________________________
<PAGE> 1
EXHIBIT 10.10
887,665 WARRANTS
THESE WARRANTS AND THE SHARES OF SERIES C CONVERTIBLE PREFERRED STOCK ISSUABLE
UPON EXERCISE OF THESE WARRANTS (THE "WARRANT SHARES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE
STATE SECURITIES LAWS. THE WARRANT SHARES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH
REGISTRATION, PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
July 7, 1997
WIRE NETWORKS, INC.
WARRANTS FOR THE PURCHASE OF SHARES OF COMMON STOCK
FOR VALUE RECEIVED, Wire Networks, Inc., a California corporation (the
"Company"), hereby certifies that U S WEST Interactive Services, Inc. (the
"Holder") is entitled, subject to the provisions contained herein, to purchase
from the Company eight hundred eighty-seven thousand six hundred sixty-five
(887,665) fully paid and non-assessable shares of Series C Convertible Preferred
Stock (as defined below), subject to adjustment as provided herein, at an
exercise price equal to the price per share of three dollars and 4/100 ($3.04)
(the "Exercise Price").
The term "Series C Stock" means the Series C Convertible Preferred Stock
of the Company purchased at a price of $3.04 per share. The number of shares of
Series C Stock to be received upon the exercise of these Warrants may be
adjusted from time to time as hereinafter set forth. The shares of Series C
Stock deliverable upon such exercise, and as adjusted from time to time, are
hereinafter referred to as "Warrant Stock." The term "Other Securities" means
any other securities that may be issued by the Company in addition to, or in
substitution for, the Warrant Stock.
References herein to the "Company" are to (i) Wire Networks, Inc. and
any successor thereto, (ii) any successor corporation resulting from the merger
or consolidation of Wire Networks, Inc., or any successor thereto, with another
corporation or (iii) any corporation to which Wire Networks, Inc., or any
successor thereto, has transferred its property or assets as an entirety or
substantially as an entirety.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of these Warrants, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of these Warrants,
1.
<PAGE> 2
if mutilated, the Company shall execute and deliver new Warrants of like tenor
and date. Any such new Warrants, upon execution and delivery, shall constitute
an additional contractual obligation on the part of the Company, whether or not
these Warrants so lost, stolen, destroyed or mutilated shall be at any time
enforceable by anyone.
By its acceptance of these Warrants, the Holder agrees with the Company
that these Warrants are issued, and all the rights hereunder shall be held
subject to, all of the conditions, limitations and provisions set forth herein,
including the following:
1. EXERCISE OF WARRANTS. The Warrants may be exercised in the amounts
set forth below, at any time prior to three (3) months following the third
anniversary of the date of closing of the Series C Convertible Preferred Stock
financing for the Company ("Expiration Date"). The Warrants shall be exercisable
by presentation and surrender of these Warrants to the Company at its principal
office (which on the date hereof is 1820 Gateway Drive, San Mateo, or at the
office of its stock transfer agent (which on the date hereof is the Company), if
any, with the Warrant Exercise Form attached hereto duly executed and
accompanied by payment (either in cash or by certified or official bank check or
checks, payable to the order of the Company) of the Exercise Price for the
number of shares specified in such form. Upon receipt by the Company of these
Warrants, together with the Exercise Price, at its office, or by the Company's
stock transfer agent at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the Warrant Stock (and Other
Securities) issuable upon such exercise, notwithstanding that the transfer books
of the Company shall then be closed or that certificates representing such
Warrant Stock (or Other Securities) shall not then be actually delivered to the
Holder. The Company shall pay any and all documentary stamp or similar issue or
transfer taxes payable in respect of the issue or delivery of Warrant Stock (and
Other Securities) upon exercise of these Warrants.
2. RESERVATION OF SHARES AND OTHER SECURITIES. The Company will at all
times reserve for issuance and delivery upon exercise of these Warrants all
shares of Warrant Stock and other shares of capital stock of the Company (and
Other Securities) from time to time receivable upon exercise of these Warrants.
All such shares (and Other Securities) shall be duly authorized and, when issued
upon such exercise, shall be validly issued, fully paid and non-assessable and
free and clear of all preemptive rights.
3. FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issuable upon the exercise of these Warrants, but the
Company shall pay the Holder an amount equal to the fair market value of such
fractional share in lieu of each fraction of a share otherwise issuable upon any
exercise of these Warrants, as determined by the Board of Directors in its
reasonable discretion.
4. EXCHANGE OF WARRANTS. These Warrants are exchangeable, without
expense, at the option of the Holder, upon presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any, for other
Warrants of different denominations, entitling the Holder to purchase in the
aggregate the same number of shares of Warrant Stock (and Other Securities)
purchasable hereunder.
2.
<PAGE> 3
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights as a shareholder of the Company, either at law or in
equity, and the rights of the Holder are limited to those expressed herein.
6. ANTI-DILUTION PROVISIONS
6.1 ADJUSTMENT FOR RECAPITALIZATION. If the Company shall at any time
subdivide its outstanding shares of Series C Stock (or Other Securities at the
time receivable upon the exercise of these Warrants) by recapitalization,
reclassification or split-up thereof, or if the Company shall declare a stock
dividend or distribute shares of Series C Stock shareholders, the number of
shares of Series C Stock (or Other Securities) subject to these Warrants
immediately prior to such subdivision shall be proportionately increased and the
Exercise Price per share shall be proportionately decreased, and if the Company
shall at any time combine the outstanding shares of Series C (or Other
Securities) by recapitalization, reclassification or combination thereof, the
number of shares of Series C Stock (or Other Securities) subject to these
Warrants immediately prior to such combination shall be proportionately
decreased and the Exercise Price per share shall be proportionately increased.
Any such adjustments pursuant to this Section 6.1 shall be effective at the
close of business on the effective date of such subdivision or combination or,
if any adjustment is the result of a stock dividend or distribution, then the
effective date for such adjustment shall be the record date therefor.
6.2 ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
(A) In case of any reorganization of the Company (or any other
corporation, the securities of which are at the time receivable upon the
exercise of these Warrants) after the date hereof or in case after such date the
Company (or any such other corporation) shall consolidate with or merge into
another corporation or convey all or substantially all of its assets to another
corporation, then, and in each such case, the Holder, upon the exercise hereof,
at any time after the consummation of such reorganization, consolidation, merger
or conveyance, shall be entitled to receive, in lieu of the securities and
property receivable upon the exercise of these Warrants prior to such
consummation, the securities or property to which the Holder would have been
entitled upon such consummation if the Holder had exercised these Warrants
immediately prior thereto (but had not exercised any rights with respect to such
securities or property in connection with the reorganization, consolidation,
merger or conveyance); in each such case, the terms of these Warrants shall be
applicable to the securities or property receivable upon the exercise of these
Warrants after such consummation.
(B) In any case where the Company shall consolidate with or merge
into another corporation, and shall not be the surviving corporation, or shall
convey all or substantially all of its assets to another corporation, then, and
in each such case, the Company shall, as a condition of the closing of such
transaction, require that the surviving corporation or the corporation that
shall have received substantially all of the Company's assets expressly assume
the obligations of the Company under these Warrants in a form reasonably
satisfactory to the Holder.
6.3 NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, issue or sale of
securities, sale of assets or any
3.
<PAGE> 4
other voluntary action, willfully avoid or seek to avoid the observance or
performance of any of the terms of these Warrants, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holder against impairment. Without limiting the generality of the foregoing,
while these Warrants are outstanding, the Company (a) will not permit the par
value, if any, of the shares of Warrant Stock to be above the amount payable
therefor upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
or sell fully paid and non-assessable shares of Warrant Stock and Other
Securities upon the exercise of these Warrants
6.4 CERTIFICATE AS TO ADJUSTMENTS. In each case of an adjustment in the
number of shares of Warrant Stock or Other Securities receivable upon the
exercise of these Warrants, the Company at its expense will promptly compute
such adjustment in accordance with the terms of these Warrants and prepare a
certificate executed by an executive officer of the Company setting forth such
adjustment and showing in detail the facts upon which such adjustment is based.
The Company will forthwith mail a copy of each such certificate to the Holder.
6.5 NOTICES OF RECORD DATE, ETC. In case:
(A) the Company shall take a record of the holders of its Series
C Stock (or Other Securities at the time receivable upon the exercise of these
Warrants) for the purpose of entitling them to receive any dividend (other than
a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for, purchase
or otherwise acquire any shares of stock of any class or any other securities,
or to receive any other right; or
(B) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, and consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation; or
(C) of any voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, and in each such case, the Company shall mail or cause to be mailed to the
Holder a notice specifying, as the case may be, (i) the date on which a record
is to be taken for the purpose of such dividend, distribution or right, and
stating the amount and character of such dividend, distribution or right, or
(ii) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding up is to take place, and
the time, if any, to be fixed, as to which the holders of record of Warrant
Stock (or such other securities at the time receivable upon the exercise of
these Warrants) shall be entitled to exchange their shares of Warrant Stock (or
such other securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least 20
days prior to the date therein specified and these Warrants may be exercised
prior to said date during the term of these Warrants.
4.
<PAGE> 5
7. RESTRICTIONS ON TRANSFER OF WARRANTS, WARRANT STOCK AND OTHER
SECURITIES. The Warrant Stock and Other Securities may not be sold, transferred
or otherwise disposed of unless registered under the Securities Act of 1933 (the
"Securities Act") and any applicable state securities laws or pursuant to
available exemptions from such registration, provided that the seller delivers
to the Company an opinion of counsel satisfactory to the Company confirming the
availability of such exemption.
8. LEGEND. Unless the shares of Warrant Stock or Other Securities have
been registered under the Securities Act, upon exercise of any of these Warrants
and the issuance of any of the shares of Warrant Stock or Other Securities, all
certificates representing such securities shall bear on the face thereof
substantially the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY CONFIRMING THE AVAILABILITY OF SUCH
EXEMPTION. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
9. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by the Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant, and no
enumeration herein of the rights or privileges of the Holder shall cause the
Holder to be a stockholder of the Company for any purpose
10. AMENDMENT; WAIVER. Any term of the Warrants may be amended and the
observance of any term of the Warrants may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holder. Any amendment or waiver effected
in accordance with this Section shall be binding upon the Holder and the
Company.
11. NOTICES. All notices required hereunder shall be in writing and
shall be deemed given when telecopied, delivered personally or within two days
after mailing when mailed by certified mail, return receipt requested, to the
Company at its principal office, or to the Holder at the address set forth on
the record books of the Company, or at such other address of which the Company
or the Holder has been advised by notice in writing hereunder.
12. ASSIGNMENT. These Warrants, and the rights of the Holder hereunder,
are not assignable by the Holder, except to an affiliate (as such term is
defined in Rule 12b-2 under the Securities Exchange Act of 1934) thereof. Any
attempted assignment in violation of this Section 12 shall be null and void.
5.
<PAGE> 6
13. ENTIRE AGREEMENT. This Agreement, together with Annex A hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties respecting the subject matter hereof.
14. APPLICABLE LAW. These Warrants shall be governed by, and construed
in accordance with, the laws of the State of Colorado without giving effect to
conflicts of law principles.
IN WITNESS WHEREOF, the Company has caused these Warrants to be signed
on its behalf, in its corporate name, by its duly authorized officer, all as of
the day and year first above written.
WIRE NETWORKS, INC.
BY: /s/ MARLEEN MCDANIEL
-----------------------
TITLE: CEO and President
ACKNOWLEDGED AND AGREED:
U S WEST INTERACTIVE SERVICES, INC.
By: /s/ U S WEST INTERACTIVE SERVICES, INC.
----------------------------------------
Title:
---------------------------------
6.
<PAGE> 7
WARRANT EXERCISE FORM
The undersigned hereby irrevocably elects to exercise Warrants to
purchase __________ shares of Series C Convertible Preferred Stock of Wire
Networks, Inc., a California corporation, and hereby makes payment of
$____________________ in full satisfaction thereof.
----------------------------
Signature
----------------------------
Signature, if jointly held
----------------------------
Date
INSTRUCTIONS FOR ISSUANCE OF STOCK
(if other than to the Holder of the within Warrants)
Name __________________________________________________________________________
Address _______________________________________
_______________________________________________
_______________________________________________
Social Security or Taxpayer Identification Number.
_______________________________________________
<PAGE> 1
EXHIBIT 10.11
CONFIDENTIAL
SAN MATEO CENTER
BUILDING 3
1820 GATEWAY DRIVE
SAN MATEO, CA 94404
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into at San
Mateo, California, and dated this 7th day of November, 1994 for reference
purpose only, by and between Golden Century Investment Company, Inc., a Delaware
corporation ("Landlord"), and Wire Networks, Inc. ("Tenant"), without regard to
number or gender.
WITNESSETH:
1. LEASED PREMISES. In consideration of the rent herein provided, and the
terms, provisions and covenants hereof, Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, Suite(s) No. 150 on the first floor(s)
containing approximately 6,500 rentable square feet, including Tenant's
proportionate share of common areas, as more particularly described on Exhibit
"A" attached hereto and incorporated herein by this reference (the "Premises"),
situated in the San Mateo Center, Building 3, located in the City of San Mateo,
State of California, as more particularly described in Exhibit "B" attached
hereto and incorporated herein by this reference (the "Building").
2. TERM.
(a) COMMENCEMENT DATE: Subject to and upon the conditions set forth
herein, the term (the "Term") of this Lease shall commence on the 1st day of
December, 1994 (the "Commencement Date") and shall end on the 31st day of
December, 1997, unless sooner terminated as hereinafter provided. Taking of
possession by Tenant shall be conclusively deemed to establish that the Premises
have been accepted and that the Premises are in good and satisfactory condition
as of the date possession was so taken by Tenant.
(b) DELAY IN OCCUPANCY: If Landlord is unable to deliver possession of
the Premises by the Commencement Date, Landlord shall not be liable for any
damage to Tenant caused by the failure to deliver possession, and this Lease
shall not be void or voidable nor shall the Tenant be relieved of any obligation
hereunder, nor shall the Term be extended, but rent reserved shall not commence
to accrue until possession of the Premises is tendered to Tenant. If Tenant
occupies the Premises prior to the Commencement Date, such occupancy shall be
subject to all the provisions of this Lease.
1.
<PAGE> 2
3. RENT.
(a) BASE MONTHLY RENTAL: Tenant agrees to pay a base monthly rental (the
"Base Monthly Rental") for the Premises during the Term in the amount of See
addendum ($______), which amount shall be payable in advance each month on the
first (1st) day of the month and shall be payable to Landlord at the address
shown below. The Base Monthly Rental shall be subject to escalation as
hereinafter provided. If the Base Monthly Rental is not received by Landlord on
or before five (5) days following the due date, said Base Monthly Rental shall
be in default and a service charge of ten percent (10%) of the defaulted payment
may, at the option of the Landlord, become due and payable, in addition to the
regular rent owed under this Lease. The first (1st) monthly installment of Base
Monthly Rental shall be due and payable on the date of execution of this Lease
by Tenant, and a like monthly installment shall be due on or before the first
(1st) day of each calendar month during the Term. Should the Commencement Date
be a date other than the first (1st) day of the month, the Base Monthly Rental
for such partial month shall be appropriately reduced, and the Base Monthly
Rental for the first (1st) partial month shall be payable at the beginning of
said period.
(b) ADDITIONAL CHARGES: Landlord and Tenant agree that the following
additional charges (collectively the "Additional Charges") shall be made with
respect to each calendar year of the Term, or portion thereof, after the base
year, which shall be the calendar year 1995 (the "Base Year"). In addition to
the Base Monthly Rental, Tenant shall pay monthly with such rental "Tenant's
Proportionate Share" (as defined in subparagraph 3(f)(1)) of Operating Expenses
(as defined in subparagraph 3(f)(2)), and Property and Possessory Interest Taxes
(as defined in subparagraph 3(f)(3)).
(c) OPERATING EXPENSES: Landlord shall be responsible for Operating
Expenses to the extent they do not exceed an aggregate amount in any one
calendar year equal to $____________ per square foot of total usable space in
the Building. If the Operating Expenses for the calendar year first (1st)
following the Base Year, or for any subsequent calendar year (including the
calendar year in which this Lease terminates); are higher than the amount of
Landlord's share of such Operating Expenses, then Tenant agrees to pay
additional rental with respect to such year, and continuing for each subsequent
year through the Term, the amount of Tenant's Proportionate Share of such
increase.
See addendum
(d) PROPERTY TAX: Landlord shall pay as they come due all Property and
Possessory Interest Taxes, which accrue against the Premises during the Term.
Tenant hereby agrees to pay Landlord as additional charge its Proportionate
Share of any increases in said Property and Possessory Interest Taxes over the
taxes paid for the fiscal year 94-95, which increase shall be payable in monthly
installments following presentation of receipted evidence over the fiscal year
for which such computation is made.
2.
<PAGE> 3
(e) DEFINITIONS:
(1) "Tenant's Proportionate Share" shall be the ration of the total
number of square feet leased by Tenant in the Building pursuant to this Lease to
the total number of leasable square feet in the Building, specifically
____________ percent (4.6%).
(2) "Operating Expenses" shall mean all costs and expenses of
ownership, operating and maintenance of the Building (excluding depreciation on
the Building, all amounts paid on loans of Landlord, real estate brokers'
commissions, and expenses capitalized for federal income tax purposes),
including, without limitation, the following: real and personal property taxes
and assessments and any tax in addition to or in lieu thereof, whether assessed
against Landlord or Tenant or collected by Landlord or both, utilities,
supplies, insurance, license, permit and inspection fees, cost of services of
independent contractors (including property management fees), cost of
compensation (including employment taxes and fringe benefits) of all persons who
perform regular and recurring duties connected with day-to-day operation,
maintenance and repair of the Building, its equipment and adjacent walks,
landscaped areas, including janitorial, scavenger, gardening, security, parking,
operating engineer, elevator, painting, plumbing, electrical, carpentry,
heating, ventilation, air conditioning, window washing, signing and advertising
(but excluding persons performing services not uniformly available to or
performing for substantially all tenants of the Building), and maintenance and
repair expenses, including, without limitation, capital expenditures required to
meet changed government regulations (whether or not capitalized for income tax
purposes), with such Operating Expenses for the Base Year to be calculated by
projection as if the Building were substantially completed for the entire
calendar year if such improvements were not in fact substantially completed
prior to commencement of the Base Year. *See below
*Actual Operating Expenses for both the Base Year and each subsequent year
will be adjusted to equal Landlord's reasonable estimate of operating expenses
had the total rentable area of the Building been 95% occupied.
(3) "Property and Possessory Interest Taxes" as used herein shall
include (a) all real estate taxes, possessory interest taxes, personal property
taxes, and any other taxes, charges and assessments which are levied with
respect to the Building and any improvements, fixtures and equipment and all
other property of Landlord, real or personal, located in the Building and used
in connection with the operation of the Building and the land upon which they
are situated; and (b) any other tax assessed to Landlord (other than net income
taxes) in addition to or in lieu of such real estate and possessory interest or
personal property taxes, whether or not now customary or within the
contemplation of the parties thereof, including, without limitation, any and all
taxes (i) upon, allocable to or measured by the area of the Premises or the
Building or on the rent payable hereunder or on the Building or land or any
portion thereof, including, without limitation, any gross income tax or excise
tax levied by any government or quasi-governmental entity with respect to such
rent; (ii) upon or with respect to the possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Landlord or
Tenant of the Premises or the Building or any portion thereof; (iii) upon,
measured by, resulting from or with respect to this transaction or any
transaction or document to which Tenant is a party creating or transferring any
interest or any estate in the Premises or the Building; and (c) the cost and
expenses of contesting the amount or validity of
3.
<PAGE> 4
any of the foregoing taxes by appropriate legal proceedings. If the Term shall
expire prior to the end of a calendar year, Tenant's obligation under this
Paragraph 3 with respect to such partial calendar year shall be adjusted
accordingly. If this Lease shall be terminated by Landlord prior to the end of
the calendar year pursuant to the default provisions of Paragraph 17, Tenant's
liability under this Paragraph 3 shall immediately be due and payable based upon
Landlord's projections as to likely tax increases if the same are not yet then
ascertainable with certainty, with any such projection payment by Tenant subject
to subsequent adjustment if such projection shall thereafter prove to be less
than ninety-five percent (95%) accurate.
(f) PROCEDURE: With respect to each calendar year of the Term,
subsequent to the Base Year (including the calendar year in which this Lease
terminates), Landlord shall deliver to Tenant, either prior to or at any time
after the commencement of each such calendar year, a written estimate (the
"Estimate") signed by an officer or agent of the Landlord, wherein is set forth
Landlord's good faith estimate of the Additional Charges for the particular
calendar year and an amount (the "Amount") equal to Tenant's Proportionate Share
of such Additional Charges. Tenant agrees to pay to Landlord, on the first (1st)
day of each month occurring during such calendar year for each month of said
calendar year, one-twelfth (1/12th) of the Amount stated in the Estimate if the
written notice of the Estimate is delivered to Tenant after the beginning of the
calendar year. Tenant shall pay, within ten (10) days of receipt of said notice,
a lump sum of all amounts due from the beginning of such calendar year to which
the Estimate applies through the end of the month in which notice is received.
Within ninety (90) days after the expiration of each such calendar year
(including the calendar year in which this Lease terminates) or reasonably soon
thereafter, Landlord shall notify Tenant, in writing and signed by an officer or
agent of Landlord, of the actual Additional Charges of such preceding calendar
year at which time appropriate adjustments shall then be made between the
parties, i.e., if Tenant has paid on account of such calendar year more than the
Tenant's Proportionate Share, Landlord shall refund such overpayment to Tenant
at the time of giving such notice. If Tenant has paid on account of such
calendar year less than Tenant's Proportionate Share for such calendar year,
then Tenant shall pay the difference to Landlord within ten (10) days after the
giving of such notice. Appropriate pro rata adjustment shall be made for the
last calendar year in which this Lease terminates.
(g) RECORDS: Landlord agrees to keep books and records showing Operating
Expenses in accordance with a system of accounts and accounting practices
consistently maintained on a year to year basis in compliance with such
provisions of this Lease as may affect such accounts.
(h) PAYMENT: Accrued Additional Charges are payable monthly with the
Base Monthly Rental. All provisions hereof applicable to the payment of rent
shall apply to the payment of Additional Charges the same as if such Additional
Charges had been part of the rent.
4. SECURITY DEPOSIT. Tenant has deposited with Landlord a sum equal to
Twenty Thousand and no cents Dollars ($20,000.00) as a security deposit for the
performance by Tenant of each and every provision of this Lease to be performed
by Tenant. If Tenant is in default of any provision of this Lease, including,
without limitation, provisions relating to the payment of rent and escalations,
Landlord may use, apply or retain all or any portion of the security deposit
4.
<PAGE> 5
for the payment of said rent, escalation, or any other sum in default or for the
payment of any other amount which Landlord may spend or will become obligated to
spend by reason of Tenant's default or to compensate Landlord for any other
damage or loss occasioned by reason of Tenant's default. If any portion of the
security deposit is so used or applied, within five (5) days after written
demand therefor by Landlord, Tenant shall deposit in cash with Landlord a sum
equal to the portion of the security deposit expended or applied by Landlord so
as to maintain the security deposit in the sum initially deposited with
Landlord. Tenant's failure to do so shall be a material breach of this Lease. If
Tenant is not in default at the expiration or termination of this Lease,
Landlord shall return the security deposit to Tenant. Landlord's obligations
with respect to the security deposit are those of a debtor and not a trustee.
Landlord may maintain the security deposit separate and apart from Landlord's
general fund or may commingle the security deposit with Landlord's general and
other funds. Landlord shall not be required to pay Tenant interest on the
security deposit.
See addendum for insert.
5. SERVICES. Landlord shall furnish the Premises, during reasonable and
usual business hours as determined by Landlord and subject to the regulations of
the Building, with a reasonable amount of water and electricity suitable for
general office uses, including a normal complement of electrical office
equipment, daily janitor service except on Saturdays, Sundays and public
holidays, window washing with reasonable frequency, replacement of fluorescent
tubes and light bulbs, public toilet room supplies, and elevator service
consisting of non-attended automatic elevators. Such heat and air conditioning
as may be required for the comfortable occupation of the Premises will be
provided during the hours of 8:00 a.m. to 6:00 p.m. daily, except Saturdays,
Sundays and public holidays. During other hours, Landlord shall provide
reasonable heat and air-conditioning upon twenty-four (24) hours prior written
notice by Tenant to Landlord, and Tenant, upon presentation of a bill therefor,
shall pay Landlord for such service on an hourly basis at the then prevailing
rate as established by Landlord, and if such service is not a continuation of
that furnished during regular business hours, Tenant shall pay the same hourly
rate for a period of two (2) hours preceding the commencement of such service.
If in the reasonable judgment of Landlord any equipment or device used on the
Premises will result in unusual electrical or water use, Landlord may cause a
special meter to be installed on the Premises to measure the amount of electric
current or water consumed for such equipment or device. Tenant shall pay all
expenses related to any such meters, including, without limitation, the expense
of such meters and of installation, maintenance and repair thereto for all such
electric current and water so consumed (at the rates then in effect by the
utility furnishing same, utilizing average rate for the Building), and for the
expense of keeping account of the electric current or water so consumed. If
Landlord does not install such separate meter until after the use of such
equipment or device has commenced, Tenant shall pay the expense of electric
current or water consumed prior to installation of the meter as reasonably
estimated by Landlord on the basis of actual use determined after installation
of the meter. Landlord may install supplemental air conditioning units in the
Premises or otherwise provide supplemental air conditioning if any heat
generating equipment or devices are installed or used on the Premises, and all
expenses of such supplemental air conditioning (including, without limitation,
installation, operation, repair and maintenance, separate metering, if any, and
accounting for such expenses) determined in the reasonable judgment of Landlord
shall be paid by Tenant. Landlord shall not be liable for failure to furnish any
of the foregoing services when such failure is caused by accidents or conditions
5.
<PAGE> 6
beyond the control of Landlord, or by repairs, labor disturbances, or labor
disputes of any character, whether resulting from or caused by acts of Landlord
or otherwise, provided, however, that in any such events Landlord shall make a
prompt and diligent effort to cause the resumption of such services. Further,
Landlord is not aware of any hazardous substances or materials regulated by
applicable ___________ to exist in, on or about the Premises or the Building.
Subject to the foregoing, Landlord shall not be liable under any circumstances
for loss of or injury to property, however occurring, through or in connection
with or incidental to the furnishing of any of the foregoing, nor shall any such
failure relieve Tenant from the duty to pay the full amount of rent herein
reserved, except as expressly provided above, or constitute or be construed as a
constructive or other eviction of Tenant. Landlord's obligations hereunder are
subject to adoption by Landlord of energy conservation measures required or
requested by any governmental entity or reasonably determined by Landlord.
6. QUIET ENJOYMENT. Landlord warrants that it has full right to execute and
to perform this Lease and to grant the estate demised herein and that Tenant,
upon payment of the rents herein required and performing the terms, conditions,
covenants and agreements herein contained, shall peaceably and quietly have,
hold and enjoy the Premises during the Term and any extension or renewal hereof.
7. REPAIRS, ALTERATIONS AND IMPROVEMENTS. Further, Landlord is not aware of
any hazardous substances or materials regulated by applicable ____ to exist in
on or about the Premises or the Building. Subject to the foregoing, Tenant
agrees by taking possession of the Premises are then in a tenantable and good
condition, that Tenant will take good care of the Premises, and that the same
will not be altered, repaired or changed without the prior written consent of
the Landlord. As part of the consideration for rental hereunder, Tenant agrees
that all improvements, repairs or maintenance of the Premises shall, except as
otherwise herein agreed, be made at its expense, and Tenant hereby waives the
provisions of Subdivision (1) of Section 1932 and of Sections 1941 and 1941.1 of
the Civil Code of California, and all rights to make repairs at Landlord's
expense under the provisions of Section 1942 and 1942.1 of said Civil Code.
Unless otherwise provided by written agreement, all alterations, improvements
and changes that may be permitted by Landlord shall be done either by or under
the direction of Landlord, but at the cost of Tenant, shall at the termination
of the Lease become the property of Landlord, and shall remain upon and be
surrendered with the Premises, provided, however, that at Landlord's option,
Tenant shall, at Tenant's expense, when surrendering the Premises, restore the
same to their original condition. All damage or injury done to the Premises by
Tenant or by any persons who may be in or upon the Premises with the consent of
Tenant, shall be paid for by Tenant. Tenant shall, at the termination of this
Lease by the expiration of time or otherwise, surrender and deliver up the
Premises to Landlord in as good condition as when received by Tenant from
Landlord, reasonable wear, tear and casualty excepted. Tenant shall pay for all
damage to the Building, as well as all damage to Tenants or occupants thereof
caused by Tenant's misuse or neglect of the Premises or the appurtenances
thereto.
See addendum for insert.
6.
<PAGE> 7
8. ASSIGNMENT, SUBLETTING AND ENCUMBERING.
(a) PROHIBITION AGAINST TRANSFER: Tenant shall not either voluntarily or
by operation of law (i) assign, transfer, encumber, mortgage, pledge or
hypothecate this Lease or any interest herein, (ii) sublet the Premises, or any
part thereof, or (iii) enter into a license agreement or other arrangement
whereby the ownership or use of the leasehold estate herein is held or utilized
by another party, without the prior written consent of Landlord. Any such act
prohibited as aforesaid is a material breach under this Lease. Tenant shall not
permit the Premises to be occupied by anyone other than Tenant or Tenant's
employees. If Tenant breaches this paragraph in addition to any other rights
Landlord may have, Landlord may terminate this Lease.
(b) LANDLORD'S CONSENT: Landlord's consent to any such act shall not be
unreasonably withheld provided the proposed subtenant or assignee is reasonably
satisfactory to Landlord as to character and credit and will occupy the Premises
for general office purposes not inconsistent with Landlord's commitments to
other Tenants. The consent by Landlord to an assignment or subletting shall not
be construed as relieving Tenant from obtaining the express written consent of
Landlord to any future or further assignment or subletting or as releasing
Tenant or any assignee or subtenant from any liability or obligation hereunder
whether or not then accrued and the terms of this Lease shall be binding upon
any person holding by or through Tenant.
(c) DEFAULT BY ASSIGNEE: In the event of default by an assignee in the
performance of any of the terms of this Lease, Landlord may proceed directly
against Tenant without the necessity of exhausting remedies against said
assignee or subtenant. Landlord any consent to subsequent assignment and
sublettings without notifying Tenant or any assignee or subtenant and without
obtaining its or their consent thereto.
(d) CONDITIONS TO LANDLORD'S CONSENT: As a condition to Landlord's
consent to any subleasing, assignment or transfer of part or all of Tenant's
interest in the Premises (i) Tenant shall be required to pay Landlord's legal
and other costs incurred in connection with the review and execution thereof,
(ii) Landlord shall be entitled to receive any rent or other premium on the
sublease, assignment or transfer (i.e., if the sublease, assignment or transfer
provides that the subtenant, assignee or other transferee thereunder is to pay
any amount in excess of the rental and other charges due under this Lease,
whether such premium be in the form of an increased rental, a lump sum payment
in consideration of the sublease, assignment or transfer, or consideration of
any other form, such premium over and above the rent and other sums due
hereunder shall at Landlord's election inure only to Landlord's benefit), (iii)
any subtenant of part or all of Tenant's interest in the Premises shall agree
that in the event Landlord gives such subtenant notice that Tenant is in default
under this Lease, such subtenant shall thereafter make all sublease or other
payments directly to Landlord, which payments will be received by Landlord
without any liability, whether to honor the sublease or otherwise (except to
credit such payments against sums due under this Lease), and any subtenant shall
agree to attorn to Landlord or its successors and assigns should the sublease be
terminated for any reason voluntarily or otherwise, except that in no event
shall Landlord or its successors or assigns be obligated to accept such
attornment, (iv) any such transfer and consent shall be affected on forms, the
form and substance of which have been supplied or approved by Landlord and/or
its
7.
<PAGE> 8
legal counsel, and (v) Landlord may require that Tenant not then be in default
hereunder in any respect. If such sublease, assignment or transfer pertains to a
portion of the Premises only, any premium shall be computed on the assumption
that Tenant's rental and other sums due hereunder are allocable on a pro rata,
per square foot basis.
(e) PROCEDURE: Upon Tenant notifying Landlord of Tenant's intent to
sublease or license the entire premises or assign this Lease, Landlord shall
within thirty (30) days from receipt of such notice (i) consent to such proposed
assignment, subletting or licensing, or (ii) refuse such consent, or (iii) elect
to cancel this Lease. In the event of Landlord's election to cancel, Tenant
shall have ten (10) days from receipt of such notice in which to notify Landlord
of Tenant's acceptance of such cancellation or Tenant's desire to remain in
possession of the Premises under the terms and conditions and for the remainder
of the Term. In the event Tenant fails to so notify Landlord of Tenant's
election to accept cancellation or to continue as Tenant hereunder, such failure
shall at Landlord's sole discretion be deemed an election to terminate and such
termination shall be effective as of the end of the 10-day period provided for
in Landlord's notice as herein provided.
(f) SUBLET OF PREMISES: In addition to any of the foregoing provisions
of this paragraph, in the event at any time or time during the Term Tenant
desires to sublet all or part of the Premises, Landlord reserves the prior right
and option (i) to sublet from Tenant any portion of the Premises proposed by
Tenant to be sublet for the term for which such portion is proposed to be sublet
but at the same rent (including escalation as provided for in Paragraph 3
hereof) as Tenant is required to pay to Landlord under this Lease for the same
space computed on a pro rata per square foot basis, or (ii) to terminate this
Lease as it pertains to the portion of the Premises so proposed by Tenant to be
sublet. Tenant shall notify Landlord in writing if Tenant proposed to sublet all
or any part of the Premises, designating the space proposed to be sublet and the
terms of the proposed subletting. Landlord shall be allowed fifteen (15) days
after Landlord's receipt of such notice from Tenant within which to exercise
Landlord's foregoing option. If Landlord fails to exercise its said option, all
the provisions of subparagraph 8(a) above respecting subletting nevertheless
shall be in full force and effect and nothing contained in this subparagraph
8(f) shall be construed as a waiver by Landlord of any of its rights under said
subparagraph 8(a). Landlord's right and option shall continue throughout the
Term.
(g) PARTIES IN NEGOTIATION WITH LANDLORD: In no event shall Tenant
assign this Lease or sublet the Premises or any portion thereof to any then
existing or prospective tenant of the Building or to any party with whom
Landlord is actively negotiating a lease (at Tenant's request Landlord shall
promptly advise Tenant whether a specified party is in active lease negotiations
with Landlord).
(h) RELATED ENTITIES: Anything in the foregoing provisions to the
contrary notwithstanding, Tenant shall be entitled to assign and transfer this
Lease to any corporation or affiliated firm owned or controlled by Tenant or to
the surviving corporation in the event of a consolidation or merger to which
Tenant shall be a party; provided, however, that (i) such subsidiary, affiliated
firm or surviving corporation shall in writing expressly assume all of the
provisions, covenants and conditions of this Lease on the part of Tenant to be
kept and performed and (ii) no such assignment or transfer shall act as a
release of Tenant from any of the
8.
<PAGE> 9
provisions, covenants and conditions on this Lease on the part of Tenant to be
kept and performed.
9. USE. The Premises are to be used as a general office and for no other
business or purpose without the prior written consent of Landlord. No use shall
be made or permitted to be made of the Premises or acts done in or about the
Premises which will in any way conflict with any law, ordinance, rule or
regulation affecting the occupancy of use of the Premises which are or may
hereafter be enacted or promulgated by any public authority or which will
increase the existing rate of insurance upon the Building or cause a
cancellation of any insurance policy covering the Building or any part thereof,
nor shall Tenant sell or permit to be kept, used or sold in or about the
Premises any article which may be prohibited by the standard form of fire
insurance policy. Tenant shall not commit or suffer to be committed, any waste
upon the Premises or any public or private nuisance, or other act or thing which
may disturb the quite enjoyment of any other tenant in the Building, nor shall
Tenant, without the prior written consent of Landlord, use any apparatus,
machinery or device in or about the Premises which shall cause any substantial
noise or vibration, or which shall substantially increase the amount of
electricity or water, if any, agreed to be furnished or supplied under this
Lease. Tenant further agrees not to connect with electric wires or water or
other pipes any apparatus, machinery or device without the prior consent of
Landlord, except that Tenant may install the usual office machines and
equipment, such as electrical typewriters, adding machines, teletypewriters and
similar equipment.
10. INSURANCE. Tenant agrees to maintain in full force during the Term, at
its own expense, a policy or policies of comprehensive liability insurance,
including property damage coverage with respect to any liability for injury to
persons or property or death of persons occurring in or about the Premises with
limits of public liability of not less than one million dollars ($1,000,000.00)
and property damage liability of not less than five hundred thousand dollars
($500,000.00). Such liability coverage shall be issued by an insurer (or
insurers) and in form reasonably satisfactory to Landlord and shall name
Landlord as an additional insured.
11. COMPLIANCE WITH LAWS AND RULES OF BUILDING. Tenant shall comply with
all laws, ordinances, rules and regulations (state, federal, municipal and other
agencies or bodies having any jurisdiction thereof) relating to Tenant's
particular use or occupancy of the Premises. Tenant will comply with the rules
of the Building adopted by Landlord which are set forth on a schedule either
attached hereto or to be initialed by the parties hereto and made a part hereof
as fully as though set forth herein. Landlord shall have the right if necessary
to change such rules and regulations or to amend them in any reasonable manner
for the safety, care and cleanliness of the Premises and for preservation of
good order therein, all of which changes and amendments will be sent by Landlord
to Tenant in writing and shall be thereafter carried out and observed by Tenant.
Landlord shall not be liable to Tenant for violation of any such rules and
regulations or for the breach of any covenant or condition in any lease by any
other tenant in the Building.
12. LANDLORD'S RIGHT OF ENTRY AND ACCESS. Tenant shall permit Landlord or
its agents or representatives to enter into and upon any part of the Premises at
all reasonable hours for any or all of the following purposes:
9.
<PAGE> 10
(a) To inspect, clean or make repairs, alterations or additions thereto
as Landlord may deem necessary or desirable or for the purpose of determining
Tenant's use thereof or whether an act or default under this Lease has occurred.
Tenant shall not be entitled to any abatement or reduction of rent by reason of
any such repairs, alterations or additions reasonably required to be made by
Landlord hereunder.
(b) To serve, post or keep posted any notices required or allowed under
the provisions of this Lease.
(c) To post for sale signs at any time during the Term or to post for
rent or for lease signs during the last six (6) months of the Term or during any
period while Tenant is in default.
(d) To show the Premises to prospective brokers, mortgagees, agents,
purchasers, tenants or persons interested in an exchange at any time during the
Term.
(e) To perform any act which Landlord has a right or obligation to
perform under the terms of this Lease.
Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quite enjoyment of the Premises and any other loss occasioned by such
reasonable entry. For each of the aforesaid purposes, Landlord shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Tenant's vaults and safes, and Landlord shall have
the right to use any means which Landlord may deem proper to open said doors in
an emergency in order to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord by any of said means or otherwise shall not under
any circumstances be construed or deemed to be a forcible or unlawful entry into
or a detainer of the Premises or an eviction of Tenant from the Premises or any
portion thereof.
13. NUISANCE. Tenant shall conduct its business and control its agents,
employees, invitees and visitors in such a manner as not to create any nuisance
or interfere with, annoy or disturb any other Tenant or Landlord in its
management of the Building.
14. CONDEMNATION AND LOSS OR DAMAGE.
(a) EMINENT DOMAIN: If the whole of the Premises or so much thereof as
to render the balance unsuitable by Tenant shall be taken under power of eminent
domain, this Lease shall automatically terminate at the option of either party.
No award for any partial or any entire taking shall be apportioned and Tenant
hereby assigns to Landlord any award which may be made in such taking or
condemnation together with any and all rights of Tenant now or hereafter arising
in or to the same or any part thereof, provided, however, that nothing contained
herein shall be deemed to give Landlord any award made to Tenant for the taking
of personal property and fixtures belonging to Tenant and/or for the
interruption of or damage to Tenant's business and/or for Tenant's unamortized
cost of Leasehold improvements. In the event of the partial taking which does
not result in a termination of this Lease, the rent shall be apportioned
according to the part of the Premises remaining usable by the Tenant.
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(b) LOSS AND DESTRUCTION: If there is a destruction of the Building that
exceeds sixty percent (60%) of the then replacement value of the Building from
any risk, Landlord may elect to terminate this Lease whether or not the Premises
are destroyed as long as Landlord terminated the leases of all tenants in the
building.
(1) If the Premises or the Building are damaged by fire or other
casualty, the damage shall be repaired by and at the expense of Landlord,
provided such repairs can, in Landlord's opinion, be made within sixty (60) days
after the occurrence of such damage without the payment of overtime or other
premiums, and until such repairs are completed, the rent shall be abated in
proportion to the part of the Premises which is unusable by tenant in the
conduct of its business (but there shall be no abatement of rent by reason of
any portion of the Premises being unusable for a period equal to one day or
less). If the damage is due to the fault or neglect of Tenant or its employees,
there shall be no abatement of rent.
If such repairs cannot in Landlord's opinion be made within sixty
(60) days, Landlord may, at its option, make them within a reasonable time and
in such event this Lease shall continue in effect and the rent shall be
apportioned in the manner provided above. Unless Landlord shall elect, by
written notice to Tenant within thirty (30) days after the occurrence of the
damage, not to make such repairs it shall be deemed to have elected to make
them.
If Landlord elects not to make such repairs which cannot be made
within sixty (60) days, then either party may, by written notice to the other,
cancel this Lease as of the date of the occurrence of such damage. A total
destruction of the Building shall automatically terminate this Lease.
(2) If the Premises should be damaged or destroyed by fire,
earthquake or other casualty, Tenant shall immediately give notice thereof to
Landlord. If the Premises through no fault of Tenant, its agents, employees,
invitees or visitors shall be partially destroyed by fire or other casualty so
as to render the Premises untenantable, the rental herein shall cease upon such
notice and until such time as the Premises are made tenantable by Landlord. In
the event of the total destruction of the Premises without fault or neglect of
Tenant, its agents, employees, invitees, licensees or visitors, or if form such
cause the same shall be so damaged that Landlord shall decide not to rebuild,
then all rent owed up to the time of such destruction or termination shall be
paid by Tenant and this Lease shall cease and terminate as of the date of such
notice by Tenant to Landlord.
Landlord or Tenant should not be liable or responsible to each other
for any loss or damage to any property or person occasioned by theft, fire, act
of God, public enemy, injunction, riot, strike, insurrection, war, court order,
requisition or order of governmental body or authority beyond the control of
Landlord or Tenant, as the case may be, or for any damage or inconvenience which
may arise through repair or alterations of any part of the Building, which may
prevent Tenant's continued use of the Premises.
15. CASUALTY INSURANCE. Landlord shall maintain at all times during the
Term, as an expense of the Building, a policy or policies of insurance, insuring
the Building against loss or damage by fire. Landlord shall not be obligated to
insure any furniture, equipment, machinery,
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goods or supplies not covered by this Lease which Tenant may bring or obtain
upon the Premises or any additional improvements which Tenant may construct
thereon. If the annual premiums charged Landlord for such casualty insurance
exceed the standard premium rates because the nature of Tenant's operation
results in extra hazardous exposure, Tenant shall upon receipt of appropriate
invoices reimburse Landlord for such increase in such premiums.
Landlord shall not be liable to Tenant for any damage to Tenant or Tenant's
property from any cause. Tenant waives all claims against Landlord for damage to
personal property arising for any reason. Tenant shall hold Landlord harmless
from all damage arising out of or any injury or damage to any person or property
occurring in, on or about the Premises an the Building.
16. HOLDING OVER. In the event of holding over by the Tenant after the
expiration or termination of this Lease, such hold over shall be as a month to
month tenancy and all of the terms and provisions of this Lease shall be
applicable during such period, except that Tenant shall pay Landlord as rental
for the period of such holdover an amount equal to the highest monthly rent
provided for in this Lease or the then prevailing fair market rental rate for
the Premises, whichever shall be greater.
Tenant will vacate the Premises and deliver the same to Landlord upon
Tenant's receipt of notice from Landlord to vacate the Premises. The rental
payable during such hold over period shall be payable to Landlord on demand. No
holding over by Tenant either with or without Landlord's consent shall operate
to extend this Lease except as herein provided.
17. DEFAULT BY TENANT. The occurrence of any of the following shall
constitute a material default and breach of this Lease:
(a) The filing of a petition against Tenant to adjudge Tenant bankrupt,
or a petition for reorganization or arrangement under any law relating to
bankruptcy (unless in the case of a petition filed against Tenant the same is
dismissed within sixty (60) days).
(b) A petition for the appointment of a trustee or of a receiver to
take possession of all or substantially all of Tenant's assets located at the
Premises or Tenant interest in this Lease where possession is not restored to
Tenant within thirty (30) days.
(c) The attachment, execution or other judicial seizure of all or
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease where said seizure is not discharged within thirty (30)
days.
(d) Voluntary bankruptcy proceedings are instituted by Tenant, or if
Tenant is adjudged a bankrupt, or if Tenant makes an assignment for the benefit
of its creditors.
(e) The vacation or abandonment of the Premises by Tenant.
(f) A failure by Tenant to pay the rent or to make any other payment
required to be made by Tenant hereunder.
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(g) A failure by Tenant to observe and perform any other provision of
this Lease to be observed or performed by Tenant where such failure continues
for thirty (30) days after written notice by Landlord to Tenant, provided,
however, that if the nature of such default is such that the same cannot
reasonably be cured within such thirty (30) day period, Tenant shall not be
deemed to be in default if Tenant shall within such period commence such cure
and thereafter diligently prosecute the same to completion.
18. LANDLORD'S REMEDIES UPON BREACH OR ABANDONMENT. Landlord shall have the
following remedies if Tenant commits material breach, default or abandons the
Premises, before the end of the Term. These remedies are not now exclusive; they
are cumulative in addition to any remedies now or later allowed by law:
(a) Landlord can continue this Lease in full force and effect, and this
Lease will continue in effect as long as Landlord does not terminate Tenant's
right to possession, and Landlord shall have the right to collect rent when due.
During the period Tenant is in default, Landlord can enter the Premises and
relet them or any part of them to third parties for Tenant's account. Tenant
shall be liable immediately to Landlord for all costs Landlord incurs in
reletting the Premises, including, without limitation, attorneys' fees, brokers
commissions, expenses of remodeling the Premises required by the reletting and
like costs. Reletting can be for a period shorter or longer than the remaining
term of this Lease. Tenant shall pay to Landlord the rent due under this Lease
on the dates rent is due, less the rent Landlord receives from the reletting. No
act by Landlord allowed by this paragraph shall terminate this Lease unless
Landlord notifies Tenant that Landlord elects to terminate this Lease. After
Tenant's default and for as long as Landlord does not terminate Tenant's right
to possession of the Premises, if Tenant obtains Landlord's prior written
consent, Tenant shall have the right to assign or sublet its interest in this
Lease as provided elsewhere in this Lease.
(b) Landlord can terminate Tenant's right to possession of the Premises
at any time. No act by Landlord other than giving written notice to Tenant shall
terminate this Lease. Acts of maintenance, efforts to relet the Premises, or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord has the right to recover from Tenant:
(1) The worth at the time of the award of the unpaid rent that had
been earned at the time of termination of this Lease;
(2) The worth at the time of the award of the amount by which the
unpaid rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that Tenant
proves could have been reasonably avoided.
(3) The worth at the time of the award of the amount by which the
unpaid rent for the balance of the Term after the time of award exceeds the
amount of the rent that Tenant proves could have been reasonably avoided; and
(4) Any other amount and court costs necessary to compensate
Landlord for all detriment proximately caused by Tenant's default.
13.
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The "worth at the time of the award" as this term is used in
subparagraphs 18(b)(1) and 18(b)(2), is to be computed by allowing interest at
ten percent (10%) per annum permitted to be charged to Tenant under applicable
law. The "worth at the time of the award," as the term is used in subparagraph
18(b)(3), is to be computed by discounting the amount of the discount rate of
the Chase Manhattan Bank at the time of the award plus one percent (1%).
(c) If Tenant is in default of this Lease, Landlord shall have the
right to have a receiver appointed to collect rent and conduct Tenant's
business. Neither the filing of a petition for the appointment of a receiver nor
the appointment itself shall constitute an election by Landlord to terminate
this Lease.
(d) Landlord, at any time after Tenant commits a default, can cure the
default at Tenant's cost. If Landlord at any time by reason of Tenant's default
pays any sum or does any act that requires the payment of any sum, the sum paid
by Landlord shall be due immediately from Tenant to Landlord at the time the sum
is paid and if paid at a later date shall bear interest at the rate of ten
percent (10%) per annum for the date the sum is paid by Landlord until Landlord
is reimbursed by Tenant. The sum together with interest thereon shall be
additional rent.
(e) Re-enter the Premises with or without process of law and take
possession of the same and of all equipment and fixtures of Tenant therein and
expel or remove Tenant and all other parties occupying the Premises, using such
force as may be reasonably necessary to do so without being liable for any
prosecution for such re-entry or for the use of such force, and without
terminating this Lease.
19. WAIVER IF BREACH. No waiver by Landlord of any provision of this Lease
shall be deemed to be a waiver of any other provision hereof, or of any
subsequent breach by Tenant of the same or any other provision. Landlord's
consent to or approval of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to render unnecessary the obtaining of Landlord's
consent or approval of any subsequent act of Tenant, whether or not similar to
the acts so consented to or approved. No act or thing done by Landlord's agent
or by Landlord during the Term shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept such a surrender shall be valid unless
in writing and signed by Landlord. No employee of Landlord or of Landlord's
agents shall have any power to accept the keys to the Premises prior to the
termination of this Lease and the delivery of the keys to any such employee
shall not operate as a termination of this Lease or a surrender of the Premises.
The acceptance of rent by Landlord following a breach of any part of this Lease
by Tenant shall not be a waiver of any breach by Tenant whether said breach
occurs before or after Landlord's acceptance of rent.
20. ATTORNEYS' FEES. In the event Tenant defaults in the performance of any
of the terms, covenants, agreements or conditions contained in this Lease and
Landlord places the enforcement of this Lease or any part thereof, or the
collection of any rent due, or to become due hereunder, or recovery of the
possession of the Premises in the hands of any attorney, or files suit upon the
same, Tenant agrees to pay Landlord reasonable attorneys' fees for the services
of such attorneys. The obligation for reasonable attorneys' fees shall be deemed
to have accrued on the date of the commencement of any action which is filed and
shall be enforceable whether or not
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the action is prosecuted to judgment. As used in this paragraph 20, the term
"reasonable attorneys' fees" shall include costs and expenses as well.
21. WAIVER OF SUBROGATION. Anything in this Lease to the contrary
notwithstanding, the parties hereto waive any and all rights of recovery, claim,
action or cause of action against each other, their agents, officers and
employees for any loss or damage that may occur to the Premises or any
improvements thereto, by reason of fire, the elements, or any other cause which
could be insured against under the terms of standard fire and extended coverage
insurance policies, regardless of cause or origin, including negligence of the
parties hereto, their agents, officers, employees, customers and business
visitors.
22. SIGNS. No sign, advertisement or notice shall be exhibited, painted or
affixed by Tenant on any part of, or as to be seen from the outside of, the
Premises without the prior written consent of Landlord. In the event of the
violation of the foregoing by any tenant, Landlord may remove same without any
liability, and may charge the expense incurred for such removal to Tenant
violating this provision. Interior signs on doors and the directory shall be
inscribed, painted or affixed for each tenant by Landlord at the expense of such
Tenant, and shall be of a size and style acceptable to Landlord.
23. INDEMNIFICATION AND HOLD HARMLESS. Tenant ______ material part of the
consideration to be rendered to Landlord under this Lease hereby waives any and
all claims against Landlord for any damage, loss or injury to any person or
property in, upon or about the Premises or Building from any cause arising at
any time, other than the negligence of Landlord and Landlord's employees. Tenant
shall indemnify and hold harmless Landlord, its agents, servants and employees
against and from any and all claims arising from Tenant's use of the Premises or
the conduct of its business or from any activity, work or thing done, permitted
or suffered by Tenant in or about the Premises, and shall further indemnify and
hold harmless Landlord against and from any and all claims arising from any
breach or default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease or arising from any act, neglect, fault
or omission of Tenant, or of its agents or employees, and from and against all
costs, attorneys' fees, expenses and liabilities incurred in or about such claim
or any action or proceeding brought thereon, and in case any action or
proceeding be brought against Landlord by reason of such claim, Tenant upon
notice from Landlord shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant as a material part of the
consideration to Landlord hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause whatsoever,
except that which is caused by the failure of Landlord to observe any of the
terms and conditions of this Lease and such failure has persisted for an
unreasonable period of time after written notice of such failure and Tenant
hereby waives all claims in respect thereof against Landlord. For the purpose of
this Lease, Landlord shall also be deemed to include the owner of the real
property herein if other than the Landlord. See addendum.
24. DAMAGE TO PROPERTY. Notwithstanding the provisions of paragraph 23 to
the contrary, Landlord or its agents shall not be liable for any damage to
property entrusted to employees of the Building, nor for loss of or damage to
any property by theft or otherwise nor for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the
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<PAGE> 16
pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place or resulting from dampness or any other cause
whatsoever. Landlord or its agents shall not be liable for interference with the
light or other incorporeal impediments, nor shall Landlord be liable for any
latent defect in the Premises or in the Building. *SEE ADDENDUM. Tenant shall
give prompt written notice to Landlord in case of fire or accidents in the
Premises or in the Building or of defects therein or in the fixtures or
equipment located therein.
25. PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all
taxes assessed against or levied upon fixtures, furnishings, equipment and all
other personal property of Tenant located in the Premises, and when possible
Tenant shall cause said fixtures, furnishings, equipment and other personal
property to be assessed and billed separately from the real property of which
the Premises form a part. In the event any or all of the Tenant's fixtures,
furnishings, equipment and other personal property shall be assessed and taxed
with said real property, Tenant shall be responsible for the amount of such
taxes applicable to Tenant's personal property.
26. ESTOPPEL CERTIFICATES. Tenant shall from time to time without charge
and upon ten (10) days written notice from Landlord execute and deliver to
Landlord a statement certifying as to the then current status of this Lease,
stating any modifications thereof, the date to which rent has been paid
hereunder and any then claimed Landlord defaults hereunder. Failure to deliver
such statement shall be conclusive that this Lease is then in full force and
effect and unmodified, that Landlord is not in default thereunder, that one
month's rent has been paid in advance and that there are no claimed Landlord
defaults.
27. NOTICES. All notices or documents of any kind which Landlord may be
required or may desire to serve on Tenant under the terms of this Lease may be
served (as an alternative to personal service upon Tenant) by either leaving a
copy of such notice or document addressed to Tenant at the Premises or by
mailing a copy thereof by certified mail postage, return receipt requested,
addressed to Tenant at the Premises. Service shall be deemed complete at the
time of leaving the notices or documents or within five (5) days after the
mailing thereof. All notices at the Premises or at Landlord's notice, address or
documents of any kind which Tenant may be required or may desire to serve on
Landlord under the terms of this Lease may be served (as an alternative to
personal service upon Landlord) by mailing a copy thereof by certified mail,
postage prepaid, addressed to Landlord at 1820 Gateway Drive, Suite 107, San
Mateo, California 94404. Service shall be deemed complete within two (2) days
after the mailing thereof. Either Landlord or Tenant may change its mailing
address by notifying in writing the other party as to such new address as
Landlord or Tenant may desire to be used.
28. BUILDING NAME. The Tenant shall not use the name of the Building for
any purpose other than as the address of the business to be conducted by Tenant
in the Premises. Landlord shall have the right, without liability to Tenant for
any damage or any injury (all claims for damage being hereby released) and
without giving rise to any claim for setoffs or abatement of rent, to change the
name or street address of the Building.
29. AUTHORIZATION. If Tenant is a corporation, each individual executing
this Lease on behalf of said corporation represents and warrants that he is duly
authorized to execute and
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deliver this Lease on behalf of said corporation in accordance with the articles
and bylaws of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms.
30. RECORDING. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum thereof without the consent of the other.
31. LIENS. Tenant shall not permit any mechanic's, materialman's or other
liens arising out of work performed by Tenant or on Tenant's behalf to be filed
against the fee of the real property of which the Premises form a part nor
against Tenant's leasehold interest in the Premises. The Landlord shall have the
right at all reasonable times to post and keep posted on the Premises any
notices which it deems necessary for protection from such liens. If any such
liens are so filed, Landlord may, upon thirty (30) days written notice to
Tenant, without waiving its rights based on such breach by Tenant, and without
releasing Tenant from any obligations, pay bonds or otherwise satisfy the same
and in such event the sum so paid by the Landlord, with interest at the highest
rate per annum permitted to be charged Tenant under applicable law from the date
of payment, shall be due and payable by Tenant at once upon notice or demand to
Tenant.
32. LIGHT AND AIR. Tenant covenants and agrees that no diminution of light,
air or view by any structure which may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of rent hereunder, or result in
any liability whatsoever of Landlord to Tenant.
33. WAIVERS. No waiver by Landlord of Landlord's rights to enforce any
provision hereof after any default on the part of Tenant shall be deemed a
waiver of Landlord's right to enforce each and all of the provisions hereof upon
any further or any default on the part of Tenant. The acceptance of rent
hereunder shall not be, or, be construed to be, a waiver of any breach of any
term, covenant or condition of this Lease, nor shall it reinstate, continue or
extend the Term or affect any notice, demand or suit thereunder. No act or thing
done by Landlord or Landlord's agent, including, without limitation, the
acceptance of the keys to the Premises, shall constitute an acceptance of the
surrender of the Premises by Tenant before the expiration of the Term and only a
written notice from Landlord to Tenant shall constitute acceptance of the
surrender of the Premises and accomplish a termination of this Lease.
34. SUBORDINATION. This Lease, without any further instrument, shall at all
times be subject and subordinate to any and all now effective or hereafter
executed ground or underlying leases, and to any and all deeds of trust which
may now or hereafter affect Landlord's estates in the real property of which the
Premises form a part, and to all advances made or hereafter to be made upon the
security thereof, and to all renewals, modifications, consolidations,
replacements and extensions thereof. In confirmation of such subordination,
Tenant shall promptly execute any certificate or other instrument which Landlord
may deem proper to evidence such subordination, without expense to Landlord.
Tenant hereby irrevocably constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute and to deliver to any third party any such
certificate or instrument for and on behalf of Tenant, if Tenant shall have
failed to do so within ten (10) days after request therefor by Landlord.
Provided, however, that any person or persons purchasing or otherwise acquiring
the real property of which the Premises form a part by any ground lease
termination, or at any sale, sales and/or other proceeding under such mortgages
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and/or deeds of trust, may elect to continue this Lease in full force and effect
in the same manner and with like effect as if such person or persons had been
named as Landlord herein, and in the event of such election, this Lease shall
continue in full force and effect as aforesaid, and Tenant hereby attorns and
agrees to attorn to such person or persons. SEE ADDENDUM FOR INSERT
35. LANDLORD'S ELECTIONS NON-EXCLUSIVE. The exercise of any right, option
or privilege hereunder by Landlord shall not exclude Landlord from exercising
any and all other rights, options and privileges hereunder, and Landlord's
failure to exercise any right, option or privilege hereunder shall not be deemed
a waiver of said right, option or privilege, nor shall it relieve Tenant from
Tenant's obligations to perform each and every covenant and condition on
Tenant's part to be performed hereunder nor from damages or other remedy for
failure to perform or meet the obligations of this Lease.
36. VOLUNTARY SURRENDER. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subleases or subtenancies,
or may, at the option of Landlord, operate as an assignment to Landlord of any
or all such subleases or subtenancies.
37. RULES AND REGULATIONS. Tenant agrees that Tenant, together with all
other persons entering and/or occupying the Premises at Tenant's request or with
Tenant's permission, will abide by, keep and observe all reasonable rules and
regulations which Landlord may make from time to time for the management,
safety, care and cleanliness of the Building and the preservation of good order
therein as well as for the convenience of other occupants and tenants of the
Building, including those set forth in the schedule either attached hereto or to
be initialed by the parties hereto and made a part hereof as fully as though set
forth herein. The violation of any such rules and regulations shall be deemed a
material breach of this Lease by Tenant.
38. SUBSTITUTED PREMISES. Landlord shall have the right at any time during
the Term, upon giving Tenant not less than thirty (30) days prior written
notice, to provide Tenant with space elsewhere in the Building of approximately
the same size as the Premises (but in no event will tenant's rental obligation
exceed those applicable to the Premises) and remove and place Tenant in such
space, with Landlord to pay all reasonable costs and expenses incurred as a
result of such removal of Tenant. Should Tenant refuse to permit Landlord to
move Tenant to such new space at the end of said thirty (30) day period,
Landlord shall have the right to cancel and terminate this Lease effective
thirty (30) days from the date of original notification by Landlord. If Landlord
moves Tenant to such new space, this Lease and each and all of its terms,
covenants and conditions shall remain in full force and effect and be deemed
applicable to such new space and such new space shall thereafter be deemed to be
the Premises as though Landlord and Tenant had entered into an express written
amendment of this Lease with respect thereto. Failure of Tenant to accept, in
writing, Landlord's assignment within ten (10) days of the date of Landlord's
written notice shall constitute Tenant's election to terminate this Lease.
39. DEFINITIONS. The words "Landlord" and "Tenant" as used in this Lease or
in any other instruments referred to in or made a part of this Lease shall
include both singular and plural; the masculine and feminine, a corporation,
co-partnership, individual or person acting in a fiduciary capacity as an
executor, administrator, trustee or in any other representative capacity. All
covenants herein contained upon the part of Tenant shall be joint and several.
The titles of
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paragraphs herein are for identification only and are not to be considered to be
a part of this Lease nor to be restrictive in any manner of the provisions of
any of the paragraphs of this Lease.
40. SEVERABILITY. If any word, phrase, clause, sentence or paragraph of
this Lease is, or shall be invalid for any reason, the same shall be deemed
severable from the remainder thereof and shall in no way affect or impair the
validity of this Lease or of any other portion thereof.
41. TRANSFER OF LANDLORD'S INTEREST. In the event Landlord transfers its
reversionary interest in the Premises or the Building (other than a transfer for
security purposes), Landlord shall be automatically relieved of any obligation
hereunder accruing after the date of such transfer provided such obligations are
assumed by such transferee in writing.
42. INABILITY. This Lease and the obligations of Tenant hereunder shall not
be affected or impaired if Landlord is unable to fulfill any of its obligations
hereunder or is delayed in doing so by reason of strike or labor troubles or
other matters beyond the reasonable control of Landlord.
43. SUCCESSORS. Each of the provisions hereof extend to and shall, as the
case may require, bind and inure to the benefit of Landlord and Tenant and their
respective heirs, legal representatives, successors and assigns, subject at all
times, nevertheless, to all agreements herein contained with respect to
assignment or other transfer of Tenant's interests herein.
44. AMENDMENTS. This Lease contains the entire agreement between the
parties hereto with respect to the subject matter hereof, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provision of this Lease may be amended or added to or modified
except by an agreement in writing signed by the parties hereto or their
respective successors.
45. NO CONDITIONAL PAYMENTS. No payment by Tenant or receipt by Landlord of
a lesser amount than the total of all sums due hereunder shall be deemed other
than on account of the earliest stipulated rent, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment for rent
be deemed an accord or satisfaction, and Landlord may accept such cash and/or
negotiate such check regardless of whether Landlord makes any notation on such
instrument of payment or otherwise notifies Tenant that such acceptance,
cashing, or negotiation is without prejudice to all of Landlord's right.
46. INTEREST. Any amount due from Tenant to Landlord which is not paid when
due shall bear interest at ten percent (10%) per annum permitted to be charged
Tenant by applicable law.
47. PUBLIC TRANSPORTATION INFORMATION. Tenant shall cooperate with Landlord
in maintaining, during the Term, a program to encourage maximum use of public
transportation by personnel of Tenant employed on the premises, including
without limitation, the distribution to such employees of written materials
explaining the convenience and availability of public transportation facilities
adjacent or proximate to the Building, staggering working hours of employees,
and encouraging use of such facilities.
19.
<PAGE> 20
48. OFFER AND ACCEPTANCE. Delivery of this Lease, duly executed by Tenant,
constitutes an offer to lease the Premises as herein set forth, and under no
circumstances shall such delivery be deemed to create an option or reservation
to lease the Premises for the benefit of Tenant. This Lease shall only become
effective and binding upon execution hereof by Landlord and delivery of a signed
copy to Tenant.
49. TIME. Time is of the essence of this Lease and all the terms and
covenants hereof are conditions.
50. OTHER PROVISIONS.
See Addendum.
51. LEASE EFFECTIVE DATE. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation or option for lease, and
is not effective as a lease or otherwise until execution and delivery by both
Landlord and Tenant.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
"LANDLORD"
GOLDEN CENTURY INVESTMENT COMPANY, INC.,
a Delaware corporation
Date: 11/21/94 By: /s/ Handota Tanta
----------------------- ---------------------------------
Its: Vice President
----------------------------
Printed Name: Handota Tanta
-------------------
"TENANT"
WIRE NETWORKS, INC.
Date: 11/15/94 By: /s/ Marleen R. McDaniel
----------------------- ---------------------------------
Its: CEO and President
----------------------------
Printed Name: Marleen McDaniel
------------------
20.
<PAGE> 21
EXHIBIT "A"
[See diagram]
21.
<PAGE> 22
EXHIBIT "B"
[PROPERTY DESCRIPTION]
That certain real property located in the State of California, County
of San Mateo, City of Foster City and the City of San Mateo described as
follows:
PARCEL A:
Parcel 2 as shown on that certain "PARCEL MAP NO. 267, CITY OF SAN MATEO AND
CITY OF FOSTER CITY, SAN MATEO COUNTY, STATE OF CALIFORNIA," filed May 9, 1985
in Book 55 of Parcel Maps at pages 92, 93 and 94. Records of San Mateo County,
State of California.
Subject to the provisions of paragraph 2 of that certain Amended and Restated
Declaration of Establishment of Reciprocal Parking Easements, recorded December
4, 1985 as Document No. 85130144 whereunder grantor has reserved a non-exclusive
easement for (a) vehicular ingress, egress, driveway purposes and parking
purposes, and (b) pedestrian ingress and egress, over the Parking Area as said
term is defined and described in paragraph 1 of said Declaration.
PARCEL H:
A non-exclusive easement over Parcels 1, 3 and 4 as shown on said Parcel Map No.
267 for (a) vehicular ingress, egress, driveway purposes and parking purposes
and (b) pedestrian ingress and egress, over the Parking Area as said term is
defined and described in paragraph 1 of, and to the extent such an easement is
created by, that certain Amended and Restated Declaration of Establishment of
Reciprocal Parking Easements recorded December 4, 1985 as Document No. 85130144.
PARCEL C:
A non-exclusive easement for roadway purposes and ingress and egress to and from
Parcel 2 as shown on said P. M. #267, within so much of Parcels 1 and 3, as
shown said Parcel Map No. 267, as is designated "P.U.E. and I.E.E."
PARCEL D:
The right to use, as a member of the public to the same extent as any other
member of the public those certain easements for ingress and egress designated
as "I.E.E." as dedicated to the City of San Mateo, City of Foster City, and the
Estero Municipal Improvement District on and by that certain "PARCEL MAP NO.
267, CITY OF SAN MATEO AND CITY OF FOSTER CITY, SAN MATEO COUNTY, STATE OF
CALIFORNIA," filed May 9, 1985 in Book 55 of Parcel Maps at pages 92, 93 and 94,
Records of San Mateo County, State of California.
22.
<PAGE> 23
ADDENDUM TO LEASE AGREEMENT dated November 8,1994 by and
between GOLDEN CENTURY INVESTMENT COMPANY, INC.,
a Delaware corporation ("Landlord"), and
WIRE NETWORKS, INC. ("Tenant"), for the property
located at 1820 GATEWAY, SAN MATEO, CALIFORNIA
For ease of reference, the paragraph numbers used herein conform to the
paragraph numbers used in the Lease.
PARAGRAPH 3. RENT. a) Tenant agrees to pay to Landlord Base Monthly Rental
during the term in accordance with the following schedule:
<TABLE>
<CAPTION>
LEASE MONTHS BASE MONTHLY RENTAL
- ------------ -------------------
<S> <C>
12/01/94 - 12/31/94 None
01/01/95 - 03/31/95 $ 4,875.00
04/01/95 - 12/31/95 $ 7,312.00
01/01/96 - 12/31/97 $ 10,400.00
</TABLE>
PARAGRAPH 4. SECURITY DEPOSIT. $20,000.00. Of the $20,000.00, $10,000.00 shall
not be used for rent whatsoever, the balance of $10,000.00 shall be applied to
partial 19th month rent, provided Tenant continuously paid the rent for the
first eighteen (18) months on or before the fifth (5th) of the month.
During the first eighteen (18) months, should Tenant make one or more rent
payments after the fifth (5th) of the month, the total security deposit of
$20,000.00 shall not be applied to rent whatsoever.
PARAGRAPH 5. SERVICES. If such services can not be restored within five (5)
business days, Tenant's rental obligation shall be abated to the extent of fifty
percent (50%) of all rent that would otherwise be due and payable hereunder
during the entire period that such services are not provided.
PARAGRAPH 7. REPAIRS, ALTERATIONS & IMPROVEMENTS.
A) A.D.A. The parties acknowledge that Title III of the Americans With
Disabilities Act of 1990 and the regulations and rules promulgated
thereunder, as all of the same may be amended and supplemented from
time to time (collectively referred to herein as the "ADA") establish
requirements for accessibility and barrier removal, and that such
requirements may or may not apply to the demised premises and the real
property of which the demised premises are a part depending on, among
other things: (1) whether Tenant's business is deemed a "public
accommodation" or "commercial facility," (2) whether such requirements
are "readily achievable," and (3) whether a given alteration affects a
"primary function area" or triggers "path of travel" requirements. The
parties hereby agree that: (a) Landlord shall be responsible for ADA
Title III compliance in the common areas and those portions of the
real property not in possession of Tenant, (b) Tenant shall be
responsible for ADA Title III compliance within the demised
23.
<PAGE> 24
premises following delivery of possession, and (c) Landlord may
perform, or require that Tenant perform, and Tenant shall be
responsible for the cost of, ADA Title III "path of travel"
requirements triggered by alterations within the demised premises made
subsequent to the commencement of the term at the request of Tenant.
B) Landlord shall repair and maintain all common areas of the Building
and all systems serving and all components of the Building and the
Premises which are not under the exclusive control of or for the
exclusive benefit of Tenant.
PARAGRAPH 23. INDEMNIFICATION AND HOLD HARMLESS. Notwithstanding the foregoing,
Tenant shall have no liability or obligation to Landlord, nor shall any waiver
of Tenant's rights against Landlord be effective, in the event that any injury,
damage or claim otherwise covered by this Section is caused or arises out of
Landlord's, or its agents' or employees', negligence or willful misconduct.
PARAGRAPH 24. DAMAGE TO PROPERTY. Notwithstanding the foregoing, Tenant shall
have no liability or obligation to Landlord, nor shall any waiver of Tenant's
rights against Landlord be effective, in the event that any injury, damage or
claim otherwise covered by this Section is caused or arises out of Landlord's or
its agents or employees< negligence or willful misconduct.
PARAGRAPH 50. OTHER PROVISIONS.
A) OPTION TO RENEW. Provided Tenant is not in default of the Lease,
Tenant shall have an option to renew the initial lease term for an
additional three (3) years at 95% of the then prevailing rates in the
San Mateo/Foster City area. Tenant shall give Landlord written notice
at least six (6) months prior to the termination of the initial lease
term.
B) TENANT IMPROVEMENTS. Tenant to accept the space in its "as is"
condition. Tenant, at its own cost, may construct its own
improvements but subject to Landlord's approval, which will not be
unreasonably withheld. Landlord acknowledges that Tenant may collect
$9,000.00 from CREM; however, it is Tenant's responsibility to make
arrangements with CREM.
C) DELAY IN OCCUPANCY. The lease commencement is set for December 1,
1994, regardless of the actual occupancy. Tenant shall look solely to
CREM if for whatsoever reason CREM cannot deliver the premises to
Tenant by December 1, 1994.
D) PARKING. Tenant shall be provided with 3.5 parking spaces per
1,000 rentable sq. ft. on a non-exclusive and unreserved basis.
/s/ Handota Tanta /s/ Marleen R. McDaniel
- ---------------------------------- ----------------------------------
Landlord Tenant
24.
<PAGE> 25
ADDENDUM TO LEASE AGREEMENT dated November 8,1994 by and
between GOLDEN CENTURY INVESTMENT COMPANY, INC.,
a Delaware corporation ("Landlord"), and
WIRE NETWORKS, INC. ("Tenant"), for the property
located at 1820 GATEWAY, SAN MATEO, CALIFORNIA
For reference, the paragraph numbers used herein conform to the paragraph
numbers used in the Lease.
PARAGRAPH 1. LEASED PREMISE. Beginning May 1, 1996, Landlord hereby leases to
Tenant an additional 3,041 rentable square feet on the first floor as described
in the attached Exhibit A. Tenant's proportionate share of the common areas
shall be adjusted accordingly.
PARAGRAPH 3. RENT. Tenant agrees to pay to Landlord additional Base Monthly
Rental during the term in accordance with the following schedule:
<TABLE>
<CAPTION>
LEASE MONTHS ADDITIONAL BASE MONTHLY RENTAL
<S> <C>
May, 1996 Free
June 1, 1996 - December 31, 1997 $6,082.00
</TABLE>
PARAGRAPH 4. SECURITY DEPOSIT. Tenant to deposit with Landlord an additional
security deposit of (one thousand five hundred and no/100 dollars ($1,500.00).
PARAGRAPH 50. OTHER PROVISIONS.
A. Tenant Improvements. Tenant to accept the space in its "as is"
condition. Tenant, at its own cost, may construct its own
improvements but subject to Landlord's approval, which shall not be
unreasonably withheld.
All other terms and conditions of the lease dated November 8, 1994, including
Base Year 1995, shall remain in full force and effect.
Landlord: Tenant:
GOLDEN CENTURY INVESTMENT WIRE NETWORKS, INC.
COMPANY, INC.
/s/ Handota Tanta /s/ Jerry Burger
- ---------------------------------- ----------------------------------
Dated: 4/4/96 Dated: 4/4/96
25.
<PAGE> 1
EXHIBIT 10.12
AMENDMENT NO. 1 TO LEASE AGREEMENT
The date of this Amendment No. 1 to Lease Agreement ("Amendment") is
December 1, 1994.
The parties to this Amendment are WIRE NETWORK, INC. ("Tenant") and
GOLDEN CENTURY INVESTMENT COMPANY, INC., a Delaware corporation ("Landlord").
This Amendment is made with reference to the following background facts:
A. Landlord is the owner of two office buildings, situated in the City
of San Mateo, State of California, commonly known as San Mateo Centre Buildings
2 and 3, located at 1810 and 1820 Gateway Drive (collectively, the "Building").
B. Tenant is the lessee of certain premises in the Building, commonly
known as Suite 150 of San Mateo Centre Building 3, pursuant to that certain
lease between Landlord and Tenant, dated November 7, 1994 (the "Lease").
C. The Building contains an exercise facility (the "Exercise Facility'),
for the exclusive use of tenants and employees of San Mateo Centre, subject to
certain restrictions as more fully set forth herein.
D. Tenant desires to obtain from Landlord, and Landlord, is willing to
grant to Tenant, a non-exclusive, revocable license for the use of the Exercise
Facility by Tenant and Tenant's principals and employees working in the Building
(the "On-Site Personnel"), subject to the conditions set forth hereinbelow.
Accordingly, the parties hereby agree as follows:
1. Landlord hereby grants to Tenant and Tenant's On-Site Personnel a
non-exclusive, revocable license (the `License') to use the Exercise Facility in
accordance with (i) the terms and conditions hereof and (ii) the rules and
regulations attached hereto as Exhibit "A" and incorporated herein by this
reference.
2. The License shall terminate automatically, without requirement of
notice, upon the occurrence of any event of default by Tenant under the Lease.
In addition, Landlord shall have the right in its sole and absolute discretion
to terminate the License in the event of any breach by Tenant of the terms of
this License and the Tenant agrees to return any and all keys in Tenant's
possession or under Tenant's control for use of the Exercise Facility.
3. Concurrently with the execution hereof, Landlord shall provide one
(1) key to the Exercise Facility to Tenant. Tenant hereby acknowledges receipt
of the key. Tenant shall not make or permit to be made any copies of the key.
4. Tenant hereby agrees that the only parties who may use the Exercise
Facility pursuant to the License granted herein shall be Tenant and Tenant's
On-Site Personnel. Tenant
1.
<PAGE> 2
shall have the sole and exclusive responsibility for insuring that the Tenant's
key to the Exercise Facility is provided to and used by only Tenant and its
On-Site Personnel. Upon request, Tenant shall provide Landlord with a list of
its On-Site Personnel authorized to use the Exercise Facility. Said list shall
be updated by Tenant, as appropriate, as personnel changes occur within Tenant's
organization.
5. Tenant hereby acknowledges and agrees that the use of the Exercise
Facility by Tenant and its On-Site Personnel shall be at the sole risk of Tenant
and Tenant's On-Site Personnel. Tenant, for itself and its successors and
assigns, hereby irrevocably and unconditionally releases and discharges Landlord
and each and all of its officers, directors, shareholders, employees, agents,
representatives, attorneys, predecessors, successors and assigns, from any and
all claims, rights, damages, demands, debts, liabilities, accounts, reckonings,
obligations, costs, expenses, liens, judgments, actions and causes of action of
every kind and nature whatsoever, whether known or unknown, which Tenant may at
any time hereafter have, own or hold against Landlord arising out of, based upon
or in any way relating to the Exercise Facility.
6. In furtherance of the foregoing, Tenant hereby acknowledges and
agrees that it is familiar with and expressly waives any and all rights that
might be claimed by reason of Section 1542 of the California Civil Code, which
provides as follows:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with
the debtor."
7. Tenant shall and hereby agrees to fully indemnify and hold harmless
Landlord and each of its officers, directors, shareholders, employees, agents,
representatives, attorneys, predecessors, successors and assigns, from and
against any and all losses, liabilities, damages, judgments, causes of action,
awards, costs and/or expenses (including attorneys' fees) arising out of or in
any way relating to the use of the Exercise Facility by Tenant, Tenant's On-Site
Personnel and/or any other persons obtaining access to the Exercise Facility
through the use of Tenant's key.
8. As a condition of use of the Exercise Facility, Tenant warrants and
represents to Landlord that Tenant presently has and at all relevant times will
maintain liability insurance covering Tenant and its On-Site Personnel in
connection with the use of the Exercise Facility, which insurance names Landlord
as an additional insured. Said insurance (i) is in an amount not less than
$1,000,000 per occurrence and $2,500,000 in the aggregate, (ii) is in form and
substance and with a company acceptable to Landlord, and (iii) provides for
thirty (30) days prior written notice to Landlord in the event of any reduction
in amount or cancellation thereof. Upon execution hereof, and prior to receipt
of the Exercise Facility key described herein, Tenant shall provide Landlord
with a certificate evidencing such insurance.
9. Prior to each use of the Exercise Facility by any of Tenant's On-Site
Personnel, Tenant agrees to procure from each user on each occasion of use a
written release and waiver of claims (`Release') protecting Landlord, which
Release shall be in the form attached hereto as
2.
<PAGE> 3
Exhibit "B". The Releases shall be retained by Tenant and delivered to Landlord
on a weekly basis.
10. Should Tenant's key to the Exercise Facility become lost, Tenant
agrees to pay Landlord $50.00 to cover all costs of re-keying the Exercise
Facility locks and replacing all keys.
11. Tenant represents and warrants that it is executing this Amendment
after having received full and independent legal advice as to its rights
hereunder and the legal effect hereof from legal counsel of its own choosing.
12. This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which when taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year first above written.
"Landlord"
GOLDEN CENTURY INVESTMENT COMPANY,
a Delaware corporation
By: Golden Century Investment Company
---------------------------------
Title:
---------------------------
"Tenant"
WIRE NETWORK, INC.
By: /s/ Marleen McDaniel
---------------------------------
Title: Chief Executive Officer
------------------------------
3.
<PAGE> 4
Exhibit "A"
Rules and Regulations
Regarding Exercise Facility
RULES FOR THE EXERCISE FACILITY LOCATED AT 1820 GATEWAY DRIVE
1. The exercise facility is for the exclusive use of tenants and subtenants
of San Marco Centre and their respective employees only. The hours of
operation are Monday through Friday from 8:00 AM to 7:00 PM.
2. No keys will be checked out after 6:00 PM.
3. There is a maximum of 10 people allowed in the exercise facility at any
one time.
4. The keys are to be checked out and returned during office hours from a
responsible employee of the employer tenant prior to 6:00 PM.
5. No keys are to be checked out and returned earlier than 2 hours before
working out.
6. Do not open the door for anyone who does not have in their possession a
key to open the door.
7. The keys must be returned immediately after your work out. Failure to do
so could cause a loss of exercise facility privileges.
8. Everyone is to wear appropriate clothing. This will include shoes and
shirt at all times.
9. Please be sure to wipe off all equipment after use.
10. There is to be no smoking, eating, or drinking at any time while using
the exercise facility.
11. There will be a $50.00 key replacement charge if any key is not returned
within one (1) working day.
Dated: 12/1/94
------------------------------------
Print Name: Marleen McDaniel
-------------------------------
Signature: /s/ Marleen McDaniel
--------------------------------
Company Name: WIRE NETWORK, INC.
-----------------------------
1.
<PAGE> 5
RELEASE AND WAIVER OF CLAIMS
REGARDING USE OF EXERCISE FACILITY
1. The undersigned hereby acknowledges its receipt of the key to use the
exercise facility located at 1820 Gateway Drive, San Mateo, California (the
"Exercise Facility").
2. The key to the Exercise Facility was received by the undersigned at
a.m./p.m, on , 199_.
3. For good and valuable consideration, including the revocable license
to use the Exercise Facility, the undersigned hereby irrevocably and
unconditionally releases and discharges Golden Century Investment Company, a
Delaware corporation ("GCIC"), the owner of the building in which the Exercise
Facility is located and each and all of their officers, directors, shareholders,
employees, agents, representatives, attorneys, predecessors, successors and
assigns, from any and all claims, rights, damages, demands, debts, liabilities,
accounts, reckonings, obligations, debts, expenses, liens, judgments, actions
and causes of action of every kind and nature whatsoever, whether known or
unknown, which the undersigned may at any time hereafter have, own or hold
against GCIC arising out of, based upon or in any way relating to the
undersigned's use of the Exercise Facility.
In furtherance of the foregoing, the undersigned hereby acknowledges and
agrees that he/she is familiar with and expressly waives any and all rights that
might be claimed by reason of Section 1542 of the California Civil Code, which
provides as follows:
"A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
4. The undersigned represents, warrants and covenants for the benefit of
GCIC as follows:
A. I am in good health and fully able to participate in exercise
activities including, without limitation, the use of the equipment in the
Exercise Facility, and any questions concerning my ability to use the equipment
in the Exercise Facility and the extent of such use, have been or will be
discussed with my doctor before I use the Exercise Facility.
B. I acknowledge that no supervision, advice, or instruction
will be furnished regarding this use of the Exercise Facility, and that I am
responsible for my own health and for determining an exercise program which is
suitable and appropriate for me.
C. I have read and understand, and agree to comply fully with,
the rules and regulations for use of the Exercise Facility, attached hereto as
Exhibit "1".
5. The undersigned hereby represents that any questions which he/she may
have concerning this Release and/or the legal effect hereof have been answered
by legal counsel of the undersigned's own choosing prior to signing this
Release.
1.
<PAGE> 6
IN WITNESS WHEREOF, the undersigned has executed this Release and Waiver
of Claims on 12/1, 1994.
Signature: /s/ Marleen McDaniel
--------------------------
Print Name: Marleen McDaniel
-------------------------
2.
<PAGE> 7
Exhibit "1"
Rules and Regulations
Regarding Exercise Facility
RULES FOR THE EXERCISE FACILITY LOCATED AT 1820 GATEWAY DRIVE
1. The exercise facility is for the exclusive use of tenants and subtenants
of San Mateo Centre and their respective employees only. The hours of
operation are Monday through Friday from 8:00 AM to 7:00 PM.
2. No keys will be checked out after 6:00 PM.
3. There is a maximum of 10 people allowed in the exercise facility at any
one time.
4. The keys are to be checked out and returned during office hours from a
responsible employee of the employer tenant prior to 6:00 PM.
5. No keys are to be checked out and returned earlier than 2 hours before
working out.
6. Do not open the door for anyone who does not have in their possession a
key to open the door.
7. The keys must be returned immediately after your work out. Failure to do
so could cause a loss of exercise facility privileges.
8. Everyone is to wear appropriate clothing. This will include shoes and
shirt at all times.
9. Please be sure to wipe off all equipment after use.
10. There is to be no smoking, eating, or drinking at any time while using
the exercise facility.
11. There will be a $50.00 key replacement charge if any key is not returned
within one (1) working day.
Dated: 12/1/94
---------------------------------
Print Name: Marleen McDaniel
----------------------------
Signature: /s/ Marleen McDaniel
-----------------------------
Company Name: WIRE NETWORK, INC.
--------------------------
1.
<PAGE> 1
EXHIBIT 10.13
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (this "Amendment") is dated for reference
purposes only as July 21, 1997, by and between CARRAMERICA REALTY CORPORATION, a
Maryland corporation ("Landlord"), and WIRE NETWORKS, INC. ("Tenant").
RECITALS
A. Golden Century Investment Company ("Golden Century"), Landlord's
predecessor in interest, and Tenant entered into that certain Lease
Agreement dated November 7, 1994 and the Addendum thereto (collectively,
the "Initial Lease") for Suite 150 (approximately 6,500 rentable square
feet) of that certain building commonly known as 1820 Gateway Drive in
San Mateo, California ("Building 3" or the "Building"). Golden Century
and Tenant entered into that certain Addendum II to the Initial Lease
pursuant to which the size of Suite 150 was increased by 3,041 rentable
square feet for a total of 9,541 rentable square feet (the "Initial
Premises"). Landlord and Tenant agree and acknowledge that the date of
the Initial Lease is incorrectly identified as November 8, 1994 (instead
of November 7, 1994) in both Addendum and Addendum II.
B. Landlord and Tenant desire to further expand the size of the Leased
Premises and to extend the Lease Term, pursuant to the terms and
conditions set forth below.
C. The Initial Lease as amended by the Addendum, Addendum II and this
Amendment shall be referred to herein as the Lease.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereby mutually promise, covenant and
agree as follows:
1. Effectiveness of Amendment. Notwithstanding any provision herein to the
contrary, the effectiveness of this Amendment shall be expressly
conditioned upon the Landlord's receipt of the cash sum of $28,713.50
(i.e., the increase in the Security Deposit referred to in paragraph 10
below).
2. Lease Premises. As of the Commencement Date (as defined below), Section
I of the Lease shall be amended to include the space (approximately
4,569 rentable square feet) within following Suites in the Building
(collectively, the "Expansion Premises"), as described in more detail in
Exhibit A, attached hereto:
<TABLE>
<S> <C>
Suite 105 431 rentable square feet
Suite 106 1,206 rentable square feet
Suite 107 729 rentable square feet
Suite 108 2,203 rentable square feet
--------- --------------------------
Total Expansion Premises 4,569 rentable square feet
</TABLE>
As of the date on which each of the Commencement Dates for each of the
foregoing Suites has occurred, the term Premises shall mean all of the
Initial Premises and the
1.
<PAGE> 2
Expansion Premises (totaling approximately 14,110 rentable square feet).
Landlord and Tenant hereby agree that (i) the rentable square footage of
the Premises shall be 14,100 rentable square feet, and (ii) neither
Tenant nor Landlord shall have the right to remeasure the square footage
of the Premises during the "Term" of this Lease (as defined below).
3. Commencement Date. Tenant shall commence to perform all of its covenants
and obligations under the Lease with respect to each suite comprising
the Expansion Premises, including the obligation to pay rent (the
"Commencement Date") as follows:
a. Suites 105 and I07. With respect to Suites 105 and 107, the
Commencement Date shall be the later of (i) the Close of Escrow,
or (ii) December 1, 1997. Notwithstanding the foregoing,
Landlord shall exercise commercially reasonable efforts to make
both Suite 105 and Suite 107 available to Tenant for early
occupancy on or about November 1, 1997 for the purpose of
constructing certain interior improvements therein. Any early
occupancy of such suites by Tenant shall be subject to the terms
of the Lease, except that Tenant's obligation to pay Landlord
the Base Monthly Rental for such occupied space shall not
commence until December 1, 1997 (i.e., the Commencement Date for
such space).
b. Suites 106 and 108. With respect to Suites 106 and 108, the
"Commencement Date" shall be the later of (i) the Close of
Escrow, or (ii) September 1, 1997. Notwithstanding the
foregoing, Landlord shall exercise commercially reasonable
efforts to make both Suites 106 and 108 available to Tenant for
early occupancy on or about July 15, 1997 for the purpose of
constructing certain interior improvements therein. Any early
occupancy of such suites by Tenant shall be subject to the terms
of the Lease, except that Tenant's obligation to pay Landlord
the Base Monthly Rental for such occupied space shall not
commence until September 1, 1997 (i.e., the Commencement Date
for such space).
4. Term. Section 2 of the Lease is hereby amended to extend the Lease
"Term" such that the Lease shall now expire on August 31, 2001
("Expiration Date"), unless the Lease is terminated earlier pursuant to
the terms of the Lease.
5. Rent. As of the applicable Commencement Date for each Suite which is a
part of the Expansion Premises (as described in Section 3 of this
Amendment), and in the case of the Initial Leased Premises as of
September 1, 1997, the first sentence of Section 3(a) of the Lease shall
be amended in its entirety to read as follows:
Tenant agrees to pay a base monthly rental ("Base Monthly
Rental") for the Premises during the Term in the following
amounts:
<TABLE>
<S> <C> <C> <C> <C>
(1) Suite 150: Months Base Monthly Rent
------ -----------------
9/1/97 - 8/31/98 $25,569.88
9/1/98 - 8/31/99 $26,046.93
9/1/99 - 8/31/2000 $26,523.98
9/1/2000 - 8/31/2001 $27,001.03
</TABLE>
2.
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C>
(2) Suite 105: Months Base Monthly Rent
------ -----------------
12/1/97 - 8/31/98 $1,155.08
9/1/98 - 8/31/99 $1,176.63
9/1/99 - 8/31/2000 $1,198.18
9/1/2000 - 8/31/2001 $1,219.73
(3) Suite 106 Months Base Monthly Rent
------ -----------------
9/1/97 - 8/31/98 $3,232.08
9/1/98 - 8/31/99 $3,292.38
9/1/99 - 8/31/2000 $3,352.68
9/1/2000 - 8/31/2001 $3,412.98
(4) Suite 107 Months Base Monthly Rent
------ -----------------
12/1/97 - 8/31/98 $1,953.72
9/1/98 - 8/31/99 $1,990.17
9/1/99 - 8/31/2000 $2,026.62
9/1/2000 - 8/31/2001 $2,063.07
(5) Suite 108: Months Base Monthly Rent
------ -----------------
9/1/97 - 8/31/98 $5,904.04
9/1/98 - 8/31/99 $6,014.19
9/1/99 - 8/31/2000 $6,124.34
9/1/2000 - 8/31/2001 $6,234.49
</TABLE>
The foregoing amounts shall be payable in advance each month on the
first (1st) day of the month and shall become delinquent on the 5th day
of each month and shall be payable to Landlord at the address and in the
manner set forth below:
If by check: CarrAmerica Realty Corporation
t/a: San Mateo II & III
P.O. Box 100341
Atlanta, GA 30384-0341
If by wire transfer: Bank Name: NationsBank of Georgia
ABA Number: 061-000-052
Account Name: CarrAmerica Realty
Corporation
t/a: San Mateo II & III
Account Number: 3255808026
Notification: Mr. Marc Sterling
(CarrAmerica)
Telephone Number: (202) 624-1759
6. Base Year. As of the Commencement Date, the term "Base Year" shall be
amended to mean the 1997 calendar year. As a result, the reference to
1995 in Section 3(b) is hereby deleted and replaced with a reference to
"1997", and the first sentence in Section 3(c) is hereby deleted and
replaced with the following: "Landlord shall be responsible for
Operating Expenses to the extent they do not exceed an aggregate amount
in any one calendar year equal to those Operating Expenses paid or
incurred by Landlord during the 1997 Base Year."
3.
<PAGE> 4
7. Operating Expenses. The definition of "Operating Expenses" contained in
Section 3(f)(2) is hereby clarified to specifically include a "property,
management fee" in an amount not to exceed three percent (3%) of the
total rent due hereunder, whether or not such fee is paid to an
independent contractor.
8. Project. The Building (i.e., Building 3) and the building commonly known
as 1810 Gateway Drive, San Mateo, California ("Building 2"), and the
land on which the Building and Building 2 are located (which land is
more particularly described in Exhibit "B" attached to the Initial
Lease), are collectively referred to herein as the "Project". The
Building, Building 2, and another building commonly known as 1800
Gateway Drive ("Building 1"), are collectively referred to herein and
commonly known as the San Mateo Centre. In the event Landlord acquires
the fee interest in Building 1 and the land on which Building 1 is
located (the "Building l Land"), then the definition of "Project" shall
be automatically amended to include Building 1 and the Building 1 Land.
Landlord and Tenant further agree and acknowledge that for purposes of
this Lease the total rentable square footage of the Building, Building 1
and Building 2 shall each be 70,000 rentable square feet, and that
neither party shall have the right to remeasure the square footage of
such buildings during the Term of this Lease.
9. Tenant's Proportionate Share. As of the Commencement Date, the Tenant's
Proportionate Share of the Building shall be the aggregate of the
following (excluding any Suite for which the Commencement Date has yet
to occur):
<TABLE>
<S> <C> <C> <C>
(1) Suite 150 13.63%
(2) Suite 105 0.62%
(3) Suite 106 1.72%
(4) Suite 107 1.04%
(5) Suite 108 3.15%
--------- -------
Total 20.16%
</TABLE>
10. Security Deposit. Section 4 of the Lease is amended to increase the
amount of the Security Deposit from $11,500.00 to $40,213.50.
Concurrently with Tenant's execution and delivery of this Amendment,
Tenant shall deliver cash in the amount of $28,713.50 so that the total
amount of Security Deposit held by Landlord pursuant to Section 4 of the
Lease shall be equal to the total Base Monthly Rental to be paid by
Tenant for the entire Premises during the last month of the Term.
11. Tenant Improvements. Tenant agrees and acknowledges that Landlord
shall provide the Leased Premises in its "as-is" condition with existing
paint and carpet. Tenant may, at its own cost, construct any interior
improvements or alterations within the Premises, subject to Landlord's
prior written approval, which shall not be unreasonably withheld.
Notwithstanding the foregoing, Landlord agrees to reimburse Tenant for
certain interior improvement costs paid by Tenant in connection with the
Expansion Premises to the extent such costs were incurred solely as a
result of the Expansion Premises not being delivered all at once,
subject to the following terms and conditions: (i) Tenant shall supply
Landlord with reasonable evidence showing that such costs would not have
been incurred if the Expansion Premises had been delivered all at once
(e.g., a certification from its architect and/or general contractor
shall be sufficient); (ii) Landlord's total
4.
<PAGE> 5
reimbursement obligation under this Section 11 shall not exceed ten
thousand dollars ($10,000); and (iii) Landlord receives Tenant's
reimbursement request (including the supporting documentation described
in subparagraph (i) above) on or before December 31, 1997.
12. Real Estate Broker. Tenant warrants for landlord's benefit that it has
not had any dealings with any real estate brokers or salesmen or
incurred any obligations for the payment of real estate brokerage
commissions or finder's fees which would be earned or due and payable by
reason of the execution of this Amendment, except for the 2.5% leasing
commission payable to Cushman & Wakefield to be paid by Landlord, and
Tenant agrees to indemnify, defend and hold Landlord harmless from any
claims made any party other than Cushman & Wakefield to the extent such
third party's claims arise as a result of or in connection with Tenant's
activities.
13. Notices. Landlord's new address for receipt of notices under the Lease
is as follows:
Landlord: CarrAmerica Realty Corporation
4410 Rosewood Drive, Suite 1100
Pleasanton, California 94588
Attn: Vice President - Market Officer
with copy to: CarrAmerica Realty Corporation
1700 Pennsylvania Ave., N.W.
Washington, D.C. 20006
Attn: Lease Administrator
14. Landlord's Exculpation. Landlord's (which term includes Landlord's
shareholders, officers, directors, partners, employees, agents and their
representatives) liability to Tenant under this Lease in the event of
default breach or violation by Landlord of any of Landlord's obligations
under this Lease, or for any other reason, shall be limited to
Landlord's ownership interest in the Building or the proceeds of a
public sale of the ownership interest pursuant to the foreclosure of a
judgment against Landlord. Landlord shall not be personally liable or
liable in any event for any deficiency beyond its ownership interest in
the Building.
15. Paragraph 50(A) of Addendum to Initial Lease. Paragraph 50(A) of the
Addendum to the Initial Lease (i.e., Option to Renew) is hereby amended
to delete the reference therein to "95%" and to insert in its place
"100%".
16. Deletion of Paragraph 50(B) in Addendum to Initial Lease, Paragraph
50(B) (i.e., Tenant Improvements) is hereby deleted in its entirety.
17. Exhibit B. The reference to "The Building" in the heading of Exhibit B
to the Initial Lease is hereby deleted and replaced with "The Building 2
and Building 3 Land".
18. Governing Law. This Amendment shall be governed by and be construed
under the laws of the State of California.
5.
<PAGE> 6
19. Attorneys' Fees. In any arbitration, quasi-judicial or administrative
proceedings or any action in any court of competent jurisdiction,
brought by either party to enforce any covenant or any of such party's
rights or remedies under this covenant or any of such party's rights or
remedies under this Amendment, including any action for declaratory
relief, or any action to collect any payments required under this
Amendment or to quiet title against the other party, the prevailing
party shall be entitled to reasonable attorneys' fees and all costs,
expenses and disbursements in connection with such action, including the
costs of reasonable investigation, preparation and professional or
expert consultation, which sums may be included in any judgment or
decree entered in such action in favor of the prevailing party.
20. Successors. All terms and provisions of this Amendment shall be binding
upon, be enforceable by, and shall inure to the benefit of, the
respective assignees and successors of the parties hereof.
21. Confirmation of Lease. Except as amended by this Amendment, the parties
hereby agree and confirm that the Lease is in full force and effect. In
the event of any conflict between the Initial Lease, as amended by the
Addendum and Addendum II, and this Amendment, the terms of this
Amendment shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
"Tenant"
WIRE NETWORKS, INC.
By: /s/ Marleen McDaniel
--------------------------
Name: Marleen McDaniel
------------------------
Its:CEO and President Date: 7/22/97
------------------------- -----------------
"Landlord"
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ Philip L. Hawkins
--------------------------
Name: Philip L. Hawkins
Its: Managing Director Date: 7/25/97
------------------
6.
<PAGE> 1
EXHIBIT 10.14
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (this "Amendment") is dated for reference
purposes only as August 31, 1997, by and between CARRAMERICA REALTY CORPORATION,
a Maryland corporation ("Landlord"), and WIRE NETWORKS, INC. ("Tenant").
RECITALS
A. Golden Century Investment Company ("Golden Century"), Landlord's
predecessor in interest, and Tenant entered into that certain Lease
Agreement dated November 7, 1994, and the Addendum thereto
(collectively, the "Initial Lease") for Suite 150 (approximately 6,500
rentable square feet) of that certain building commonly known as 1820
Gateway Drive in San Mateo, California ("Building 3" or the "Building").
Golden Century and Tenant entered into that certain Addendum II to the
Initial Lease pursuant to which the size of Suite 150 was increased by
3,041 rentable square feet for a total of 9,541 rentable square feet
(the "Initial Premises"). Landlord and Tenant agree and acknowledge that
the date of the Initial Lease is incorrectly identified as November 8,
1994 (instead of November 7, 1994) in both Addendum and Addendum II.
B. Landlord and Tenant entered into that certain First Amendment to Lease
dated July 21, 1997 (the "First Amendment"), pursuant to which the size
of the Leased Premises was expanded to include Suites 105, 106, 107 and
108 (the "Expansion Premises") and the Lease Term was extended.
C. The Initial Lease as amended by the Addendum, Addendum II, the First
Amendment and this Amendment shall be referred to herein as the Lease.
D. Landlord and Tenant desire to enter into this Amendment in order to
amend the dates by which possession of the Expansion Premises shall be
delivered to Tenant.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereby mutually promise,
covenant and agree as follows:
1. COMMENCEMENT DATE. Notwithstanding anything to the contrary set forth in the
First Amendment, Tenant shall commence to perform all of its covenants and
obligations under the Lease with respect to each suite comprising the Expansion
Premises, including the obligation to pay rent (the "Commencement Date") as
follows:
a. SUITES 105, 106 AND 107. With respect to Suites 105, 106 and
107, the Commencement Date shall be January 1, 1998.
Notwithstanding the foregoing, Landlord shall exercise
commercially reasonable efforts to make Suites 105, 106 and 107
available to Tenant for early occupancy on or about December 1,
1997 for the purpose of constructing certain interior
improvements therein. Any early
1.
<PAGE> 2
occupancy of such suites by Tenant shall be subject to the terms
of the Lease, except that Tenant's obligation to pay Landlord
the Base Monthly Rental for such occupied space shall not
commence until January 1, 1998 (i.e., the Commencement Date for
such space).
b. SUITE 108. With respect to Suite 108, the "Commencement Date"
shall be September 1, 1997. Notwithstanding the foregoing,
Landlord shall exercise commercially reasonable efforts to make
Suite 108 available to Tenant for early occupancy on or about
July 15, 1997 for the purpose of constructing certain interior
improvements therein. Any early occupancy of such suite by
Tenant shall be subject to the terms of the Lease, except that
Tenant's obligation to pay Landlord the Base Monthly Rental for
such occupied space shall not commence until September 1, 1997
(i.e., the Commencement Date for such space).
2. RENT. Notwithstanding anything to the contrary set forth in the First
Amendment, as of the applicable Commencement Date for each suite which is a part
of the Expansion Premises, and in the case of the Initial Leased Premises as of
September 1, 1997, the first sentence of Section 3(a) of the Lease shall be
amended in its entirety to read as follows:
Tenant agrees to pay a base monthly rental ("Base Monthly
Rental") for the Premises during the Term in the following
amounts:
(1) Suite 150: Months Base Monthly Rent
------ -----------------
9/1/97 - 8/31/98 $25,569.88
9/1/98 - 8/31/99 $26,046.93
9/1/99 - 8/31/2000 $26,523.98
9/1/2000 - 8/31/2001 $27,001.03
(2) Suite 105: Months Base Monthly Rent
------ -----------------
1/1/98 - 8/31/98 $1,152.39
9/1/98 - 8/31/99 $1,176.63
9/1/99 - 8/31/2000 $1,198.18
9/1/2000 - 8/31/2001 $1,219.73
(3) Suite 106: Months Base Monthly Rent
------ -----------------
1/1/98 - 8/31/98 $3,201.93
9/1/98 - 8/31/99 $3,292.38
9/1/99 - 8/31/2000 $3,352.68
9/1/2000 - 8/31/2001 $3,412.98
(4) Suite 107: Months Base Monthly Rent
------ -----------------
1/1/98 - 8/31/98 $1,949.16
9/1/98 - 8/31/99 $1,990.17
9/1/99 - 8/31/2000 $2,026.62
9/1/2000 - 8/31/2001 $2,063.07
2.
<PAGE> 3
(5) Suite 108: Months Base Monthly Rent
------ -----------------
9/1/97 - 8/31/98 $5,904.04
9/1/98 - 8/31/99 $6,014.19
9/1/99 - 8/31/2000 $6,124.34
9/1/2000 - 8/31/2001 $6,234.49
The foregoing amounts shall be payable in advance each month on the
first (1st) day of the month and shall become delinquent on the fifth
(5th) day of each month and shall be payable to Landlord at the address
and in the manner set forth below:
If by check: CarrAmerica Realty Corporation
t/a: San Mateo II & III
P.O. Box 100341
Atlanta, GA 30384-0341
If by wire transfer: Bank Name: NationsBank of Georgia
ABA Number: 061-000-052
Account Name: CarrAmerica Realty Corporation
t/a: San Mateo II & III
Account Number: 3255808026
Notification: Mr. Marc Sterling (CarrAmerica)
Telephone Number: (202) 624-1759
3. GOVERNING LAW. This Amendment shall be governed by and be construed under the
laws of the State of California.
4. ATTORNEYS' FEES. In any arbitration, quasi-judicial or administrative
proceedings or any action in any court of competent jurisdiction, brought by
either party to enforce any covenant or any of such party's rights or remedies
under this covenant or any of such party's rights or remedies under this
Amendment, including any action for declaratory relief, or any action to collect
any payments required under this Amendment or to quiet title against the other
party, the prevailing party shall be entitled to reasonable attorneys' fees and
all costs, expenses and disbursements in connection with such action, including
the costs of reasonable investigation, preparation and professional or expert
consultation, which sums may be included in any judgment or decree entered in
such action in favor of the prevailing party.
5. SUCCESSORS. All terms and provisions of this Amendment shall be binding upon,
be enforceable by, and shall inure to the benefit of, the respective assignees
and successors of the parties hereof.
6. CONFIRMATION OF LEASE. Except as amended by this Amendment, the parties
hereby agree and confirm that the Lease is in full force and effect. In the
event of any conflict between the Initial Lease, as amended by the Addendum,
Addendum II, the First Amendment, and this Amendment, the terms of this
Amendment shall control.
3.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
"Tenant" "Landlord"
WIRE NETWORKS, INC. CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ Jeffrey Chew By: /s/ Philip Hawkins
---------------------- ------------------------
Name: Jeffrey Chew Name: Philip Hawkins
---------------------- ------------------------
Its: CFO Its: Managing Director
---------------------- ------------------------
Date: 8/28/97 Date: 9/4/97
---------------------- ------------------------
4.
<PAGE> 1
EXHIBIT 10.15
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE (this "Amendment") is dated for reference
purposes only as October 27, 1998, by and between CARRAMERICA REALTY
CORPORATION, a Maryland corporation ("Landlord"), and WIRE NETWORKS, INC.
("Tenant").
RECITALS
A. Golden Century Investment Company ("Golden Century"), Landlord's
predecessor in interest, and Tenant entered into that certain Lease
Agreement dated November 7, 1994, and the Addendum thereto
(collectively, the "Original Lease") for Suite 150 (approximately 6,500
rentable square feet) of that certain building commonly known as 1820
Gateway Drive in San Mateo, California ("Building 3"). Golden Century
and Tenant entered into that certain Addendum II to the Original Lease
pursuant to which the size of Suite 150 was increased by 3,041 rentable
square feet for a total of 9,541 rentable square feet (the "Initial
Premises"). Landlord and Tenant agree and acknowledge that the date of
the Original Lease is incorrectly identified as November 8, 1994
(instead of November 7, 1994) in both Addendum and Addendum II.
B. Landlord and Tenant entered into that certain First Amendment to Lease
dated July 21, 1997 (the "First Amendment"), pursuant to which the size
of the Initial Premises was expanded to include Suites 105, 107 and 108
(collectively, the "Original Premises"), and the Lease Term was
extended.
C. Landlord and Tenant entered into that certain Second Amendment to Lease
dated August 31, 1997 (the "Second Amendment"), pursuant to which the
commencement dates for the expansion space added by the First Amendment
were modified.
D. The Initial Lease as amended by the Addendum, Addendum II, the First
Amendment, Second Amendment, and this Amendment shall be referred to
herein as the Lease.
E. Landlord and Tenant desire to further expand the size of the Premises
and to extend the Term, pursuant to the terms and conditions set forth
below.
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereby mutually promise, covenant and
agree as follows:
Effectiveness of Amendment. Notwithstanding any provision herein to the
contrary, the effectiveness of this Amendment shall be expressly conditioned
upon the Landlord's receipt of the cash sum of $18,563.70 (i.e., the increase in
the Security Deposit referred to in paragraph 7 below).
Premises. As of the Expansion Space Commencement Date (as defined in
paragraph 3 below), Section 1 of the Lease shall be amended to include
approximately 3,376 rentable square
1
<PAGE> 2
feet identified as Suite 110 in Building 2 (the "Expansion Space") and described
in more detail in Exhibit A, attached hereto. Any reference in the Lease to the
"Building" shall mean a reference to Building 2 and/or Building 3, as
appropriate. As the Expansion Space Commencement Date, the term "Premises" shall
mean all of the Original Premises and the Expansion Space, which totals
approximately 17,486 rentable square feet. Landlord and Tenant hereby agree that
as of the Expansion Space Commencement Date, (i) the rentable square footage of
the Premises shall be 17,486 rentable square feet, and (ii) neither Tenant nor
Landlord shall have the right to remeasure the square footage of the Premises
during the "Term" of this Lease (as defined below).
Term. Commencing on January 1, 1999 (the "Expansion Space Commencement
Date") and continuing through and including December 31, 2001 (the "Expansion
Space Expiration Date"), Tenant shall commence to perform all of its covenants
and obligations under the Lease with respect to the Expansion Space, including
the obligation to pay rent and all other amounts due under the Lease.
Notwithstanding the foregoing, Landlord shall exercise commercially reasonable
efforts to make the Expansion Space available to Tenant for early occupancy on
or about November 1, 1998, for the sole purpose of installing certain equipment,
trade fixtures and furniture therein. Any early occupancy of the Expansion Space
by Tenant shall be subject to the terms of the Lease, except that Tenant's
obligation to pay Landlord the Base Monthly Rental for the Expansion Space shall
not commence until the Expansion Space Commencement Date. The Expansion Space
Commencement Date shall not be dependent upon the completion of any interior
tenant improvements. Section 2 of the Lease is further amended to provide that
the Term for the Original Premises shall be extended by four (4) months so that
"Expiration Date" for the entire Premises shall now be December 31, 200l.
Rent. As of the Commencement Date (as described in Section 3 of this
Amendment), the first sentence of Section 3(a) of the Lease shall be amended to
set forth the
Base Monthly Rental for the Expansion Space as follows:
<TABLE>
<CAPTION>
Expansion Space
Period Base Monthly Rental:
- ------ --------------------
<S> <C>
January 1, 1999 through December 31, 1999 $10,128.00 per month
January 1, 2000 through December 31, 2000 $10,465.60 per month
January 1, 2001 through December 31, 2001 $10,803.20 per month
</TABLE>
In addition to the foregoing amounts, commencing on September 1, 2001
and on the first of each month thereafter for the remainder of the Term, Tenant
shall pay Base Monthly Rental to Landlord in the amount of $47,974.00 (i.e.
$3.40 per rentable square foot) per month for the Original Premises.
Base Year. As of the Commencement Date, Section 3(b) of the Lease shall
be amended to establish the "Base Year" for the Expansion Premises only as the
1999 calendar year.
Tenant's Proportionate Share. As of the Expansion Space Commencement
Date, the Tenant's Proportionate Share of Building 2 for the Expansion Space
shall be 4.82%. Thus as of the Expansion Space Commencement Date, Tenant's
aggregate Proportionate Share of Building 3 shall be 20.16%
2
<PAGE> 3
Security Deposit. Section 4 of the Lease is amended to increase the
amount of the Security Deposit from $40,213.50 to $58,777.2. Concurrently with
Tenant's execution and delivery of this Amendment, Tenant shall deliver to
Landlord the amount of $18,563.70 so that the total amount of Security Deposit
held by Landlord pursuant to Section 4 of the Lease shall be equal to the total
Base Monthly Rental to be paid by Tenant for the entire Premises during the last
month of the Term (i.e., $47,974.00 for the Original Premises and $10,803.20 for
the Expansion Space).
Tenant Improvements. Tenant agrees and acknowledges that Landlord shall
provide the Expansion Space in its "as-is" condition with existing paint and
carpet, except that Landlord shall provide the HVAC, electrical, plumbing and
roof systems for the Expansion Space in good working condition as of the
Expansion Space Commencement Date. Tenant may, at its own cost, construct any
interior improvements or alterations within the Expansion Space, subject to
Landlord's prior written approval, which shall not be unreasonably withheld.
Landlord agrees to reimburse Tenant for the costs associated with the
construction of such approved interior improvements or alterations within the
Expansion Space (the "Expansion Space Tenant Improvements"), subject to the
following terms and conditions: (i) in no event shall Landlord be obligated to
reimburse Tenant for any Tenant Improvements costs incurred in excess of
$3,376.00 (the "Expansion Space Tenant Improvements Allowance"), (ii) Tenant
shall deliver a written request to Landlord for reimbursement out of the
Expansion Space Tenant Improvements Allowance (including reasonable evidence
showing that such costs have been incurred in connection with the improvement of
the Expansion Space), (iii) all proposed work must be approved by Landlord in
writing prior to the commencement thereof, and (iv) Landlord must receive
Tenant's reimbursement request (including the supporting documentation) on or
before January 31, 1999.
Real Estate Broker. Tenant warrants for Landlord's benefit that it has
not had any dealings with any real estate brokers or salesmen or incurred any
obligations for the payment of real estate brokerage commissions or finder's
fees which would be earned or due and payable by reason of the execution of this
Amendment, except for the leasing commission to be paid to Cushman & Wakefield
to be paid by Landlord, and Tenant agrees to indemnify, defend and hold Landlord
harmless from any claims made any party other than Cushman & Wakefield to the
extent such third party's claims arise as a result of or in connection with
Tenant's activities.
Governing Law. This Amendment shall be governed by and be construed
under the laws of the State of California.
Attorneys' Fees. in any arbitration, quasi-judicial or administrative
proceedings or any action in any court of competent jurisdiction, brought by
either party to enforce any covenant or any of such party's rights or remedies
under this covenant or any of such party's rights or remedies under this
Amendment, including any action for declaratory relief, or any action to collect
any payments required under this Amendment or to quiet title against the other
party, the prevailing party shall be entitled to reasonable attorneys' fees and
all costs, expenses and disbursements in connection with such action, including
the costs of reasonable investigation, preparation and professional or expert
consultation, which sums may be included in any judgment or decree entered in
such action in favor of the prevailing party.
3
<PAGE> 4
Successors. All terms and provisions of this Amendment shall be binding
upon, be enforceable by, and shall inure to the benefit of, the respective
assignees and successors of the parties hereof.
Confirmation of Lease. Except as amended by this Third Amendment, the
parties hereby agree and confirm that the Lease is in full force and effect. In
the event of any conflict between the Lease and this Third Amendment, the terms
of this Third Amendment shall control.
IN WITNESS HEREOF, the parties hereto have executed this Third Amendment
as of the date first written above.
"Tenant"
WIRE NETWORKS, INC.
By: /s/ Michael D. Perry
-------------------------------
Name: Michael D. Perry
-----------------------------
Its: CFO Date: 10/27/98
------------------------------ -------------------------------
"Landlord"
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ Philip Hawkins
-------------------------------
Name: Philip L. Hawkins
-----------------------------
Its: Chief Operating Officer Date: 10/27/98
------------------------------ -------------------------------
4
<PAGE> 5
Exhibit A
Description of Expansion Space
[MAP]
5
<PAGE> 1
EXHIBIT 10.16
WOMEN.COM NETWORKS
LOAN AND SECURITY AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. DEFINITIONS AND CONSTRUCTION.........................................................1
1.1 Definitions...................................................................1
1.2 Accounting Terms.............................................................10
2. LOAN AND TERMS OF PAYMENT...........................................................10
2.1 Credit Extensions............................................................10
2.2 Overadvances.................................................................11
2.3 Interest Rates, Payments, and Calculations...................................12
2.4 Crediting Payments...........................................................12
2.5 Fees.........................................................................13
2.6 Term.........................................................................13
3. CONDITIONS OF LOANS.................................................................13
3.1 Conditions Precedent to Initial Credit Extension.............................13
3.2 Conditions Precedent to all Credit Extensions................................13
4. CREATION OF SECURITY INTEREST.......................................................14
4.1 Grant of Security Interest...................................................14
4.2 Delivery of Additional Documentation Required................................14
4.3 Right to Inspect.............................................................14
5. REPRESENTATIONS AND WARRANTIES......................................................14
5.1 Due Organization and Qualification...........................................14
5.2 Due Authorization: No Conflict...............................................14
5.3 No Prior Encumbrances........................................................15
5.4 Bona Fide Eligible Accounts..................................................15
5.5 Merchantable Inventory.......................................................15
5.6 Name; Location of Chief Executive Office.....................................15
5.7 Litigation...................................................................15
5.8 No Material Adverse Change in Financial Statements...........................15
5.9 Regulatory Compliance........................................................15
5.10 Environmental Condition......................................................16
5.11 Taxes........................................................................16
5.12 Subsidiaries ................................................................16
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.13 Government Consents..........................................................16
5.14 Full Disclosure..............................................................16
6. AFFIRMATIVE COVENANTS...............................................................16
6.1 Good Standing................................................................16
6.2 Government Compliance........................................................17
6.3 Financial Statements, Reports, Certificates..................................17
6.4 Inventory; Returns...........................................................17
6.5 Taxes........................................................................17
6.6 Insurance....................................................................18
6.7 Principal Depository.........................................................18
6.8 Quick Ratio..................................................................18
6.9 Net Sales....................................................................18
6.10 Profitability................................................................18
6.11 Tangible Net Worth...........................................................18
6.12 Registration of Intellectual Property Rights.................................19
6.13 Further Assurances...........................................................19
7. NEGATIVE COVENANTS..................................................................19
7.1 Dispositions.................................................................19
7.2 Change in Business...........................................................20
7.3 Mergers or Acquisitions......................................................20
7.4 Indebtedness.................................................................20
7.5 Encumbrances.................................................................20
7.6 Distributions................................................................20
7.7 Investments..................................................................20
7.8 Transactions with Affiliates.................................................20
7.9 Subordinated Debt............................................................20
7.10 Inventory....................................................................20
7.11 Compliance...................................................................21
8. EVENTS OF DEFAULT...................................................................21
8.1 Payment Default .............................................................21
</TABLE>
II.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.2 Covenant Default.............................................................21
8.3 Material Adverse Change......................................................21
8.4 Attachment...................................................................21
8.5 Insolvency...................................................................22
8.6 Other Agreements.............................................................22
8.7 Subordinated Debt............................................................22
8.8 Judgments....................................................................22
8.9 Misrepresentations...........................................................22
9. BANK'S RIGHTS AND REMEDIES..........................................................22
9.1 Rights and Remedies..........................................................22
9.2 Power of Attorney............................................................23
9.3 Accounts Collection..........................................................24
9.4 Bank Expenses................................................................24
9.5 Bank's Liability for Collateral..............................................24
9.6 Remedies Cumulative..........................................................24
9.7 Demand; Protest..............................................................24
10. NOTICES.............................................................................25
11. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER..........................................25
12. GENERAL PROVISIONS..................................................................26
12.1 Successors and Assigns.......................................................26
12.2 Indemnification..............................................................26
12.3 Time of Essence..............................................................26
12.4 Severability of Provisions...................................................26
12.5 Amendments in Writing, Integration...........................................26
12.6 Counterparts.................................................................26
12.7 Survival.....................................................................26
13. JUDICIAL REFERENCE..................................................................26
14. CONFIDENTIALITY.....................................................................28
</TABLE>
iii.
<PAGE> 5
This LOAN AND SECURITY AGREEMENT is entered into as of April 9, 1998, by
and between IMPERIAL BANK ("Bank") and WOMEN.COM NETWORKS (`"Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a cash advance under the Revolving
Facility, including Nonformula Advances.
"Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to eighty percent (80%) of
Eligible Accounts (as hereinafter defined) with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
1.
<PAGE> 6
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to
Three Million Dollars ($3,000,000).
"Contingent Obligation"' means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, Term Advance, or any other
extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness
2.
<PAGE> 7
is renewable or extendible at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank as a
consequence of any Collateral audits done pursuant to Section 6.3 in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, twenty-five
percent (25%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates. whose total obligations to Borrower exceed twenty
percent (20%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
3.
<PAGE> 8
(k) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank, or
(ii) that Bank approves on a case-by-case basis.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Term Advance" has the meaning set forth in Section 2.1.2.
"Equipment Line" means a credit extension of Five Hundred
Thousand Dollars ($500,000).
"Equipment Maturity Date" means June 30, 2001.
"Equity Event" means the receipt by Borrower of not less than
$10,000,000 of proceeds from the sale or issuance of its equity securities.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief
"Intellectual Property Collateral" means:
(l) Copyrights, Trademarks and Patents;
4.
<PAGE> 9
(m) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(n) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(o) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;
(p) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(q) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(r) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
5.
<PAGE> 10
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Nonformula Advance" or "Nonformula Advances" means a cash
advance under the Revolving Facility in addition to those Advances made with
reference to the Borrowing Base.
"Nonformula Allowance" means $500,000; provided that Nonformula
Allowance shall mean $1,000,000 upon receipt by Bank of evidence that Borrower
received revenue of not less than $1,500,000 for the fiscal quarter ending June
30, 1998; provided further that Nonformula Allowance shall mean $1,500,000 upon
either (a) confirmation satisfactory to Bank from BT Alex Brown of commitments
to invest not less than $10,000,000 in Borrower, or (b) signed and accepted term
sheets from Persons acceptable to Bank upon terms acceptable to Bank relating to
the sale or issuance of Borrower's equity securities generating proceeds to
Borrower of not less than $10,000,000. The Nonformula Allowance shall be zero on
the earlier of September 30, 1998 or the date of the Equity Event.
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement (not including the Warrant), whether absolute or contingent, due
or to become due, now existing or hereafter arising, including any interest that
accrues after the commencement of an Insolvency Proceeding and including any
debt, liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
6.
<PAGE> 11
(c) Indebtedness secured by a lien described in clause (c) or (d)
of the defined term "Permitted Liens," provided such Indebtedness does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Indebtedness;
(d) Subordinated Debt;
(e) Indebtedness at any time outstanding in an amount not
exceeding $100,000;
(f) Indebtedness to trade creditors incurred in the ordinary
course of business;
(g) Contingent obligations of Borrowers consisting of guarantees
(and other credit support) of the obligations of vendors and suppliers of
Borrower in respect of transactions entered into in the ordinary course of
business;
(h) Indebtedness with respect to domestic capital lease
obligations (including leases of real property);
(i) Prepaid royalties and deferred revenue in connection with
prepaid support services; and
(j) Extensions, renewals, refundings, refinancings,
modifications, amendments and restatements of any of the items of Permitted
Indebtedness (a) through (i) above, provided that the principal amount thereof
is not increased or the terms thereof are not modified to impose more burdensome
terms upon Borrower.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having rating of at least A-2 or P-2 from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of
deposit maturing no more than one (1) year from the date of investment therein
issued by Bank, (iv) money and (v) Investments made in connection with
transactions permitted and Section 7.3;
(c) Extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(d) Investments consisting of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business;
(e) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of business;
7.
<PAGE> 12
(f) Investments consisting of (i) of employees, officers and
directors of Borrower so long as the Board of Directors of Borrower determines
that such compensation is in the best interests of Borrower, (ii) travel
advances, employee relocation loans and other employee loans and advances in the
ordinary course of business, (iii) loans to employees, officers or directors
relating to the purchase of equity securities of Borrower, and (iv) other loans
to officers and employees approved by the Board of Directors; and
(g) Other Investments aggregating not in excess of $100,000 at
any time.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Borrower's business not interfering in any
material respect with the business of Borrower and its Subsidiaries taken as a
whole, and any interest or title of a lessor, licensor or under any leases,
subleases, licenses, and sublicenses do not prohibit the grant of the security
interest granted hereunder;
(e) Liens securing capital lease obligations on assets subject to
such capital leases;
(f) Liens on equipment ]eased by Borrower pursuant to an
operating lease (including sale-leaseback transactions) in the ordinary course
of business (including proceeds thereof and accessions thereto) incurred solely
for the purpose of financing the lease of such equipment (including Liens
arising from UCC financing statements regarding leases permitted by this
Agreement);
(g) Liens arising from judgments, decrees or attachments to the
extent and only so long as such judgment, decree or attachment has not caused or
resulted in an Event of Default,
(h) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar Liens affecting real
property not interfering in any material respect with the ordinary conduct of
the business of Borrower;
8.
<PAGE> 13
(i) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;
(j) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution;
(k) Liens, not otherwise permitted, which Liens do not in the
aggregate exceed $100,000 at any time; and
(l) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (k) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 360 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Maturity Date" means September 30, 1998, provided
that, upon receipt by Bank of evidence that Borrower has received not less than
$10,000,000 from the sale or issuance of its equity securities, Revolving
Maturity Date shall mean the day before the first anniversary of the Closing
Date.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time
9.
<PAGE> 14
as of which any determination is being made, be owned by Borrower, either
directly or through an Affiliate.
"Tangible Net Worth"' means at any date as of which the amount
thereof shall be determined, the financial statement net worth of Borrower and
its Subsidiaries minus intangible assets, plus Subordinated Debt, on a
consolidated basis determined in accordance with GAAP.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT.
2.1 Credit Extensions.
Borrower promises to pay to the order of Bank, in ]awful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof
2.1.1 Revolving Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Committed Revolving Line or (ii) the Borrowing
Base. Borrower may request additional Nonformula Advances in an amount not to
exceed the Nonformula Allowance, provided the sum of the aggregate outstanding
Advances and Nonformula Advances may not at any time exceed the Committed
Revolving Line. Borrower shall repay all Nonformula Advances on the earlier of
the Equity Event or September 30, 1998. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1.1 may be repaid
and reborrowed at any time prior to the Revolving Maturity Date, at which time
all Advances under this Section 2.1.1 shall be immediately due and payable.
Borrower may prepay any Advances without penalty or premium.
(b) Whenever Borrower desires an Advance, Borrower will
notify by facsimile transmission or telephone no later than 3:00 p.m. Pacific
Time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially in the
form of Exhibit B hereto. Bank is authorized to make Advances under this
Agreement, based upon instructions received from a Responsible Officer or a
designee of a Responsible Officer, or without instructions if in Bank's
discretion
10.
<PAGE> 15
such Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1.1 to Borrower's deposit account.
2.1.2 Term Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through the Revolving Maturity Date,
Bank agrees to make advances (each a "Term Advance" and, collectively, the "Term
Advances") to Borrower in an aggregate outstanding amount not to exceed the
Equipment Line. The initial Term Advance shall be equal to the amount that
Borrower owes to Silicon Valley Bank on the Closing Date. Borrower shall use the
proceeds of such initial Term Advance to repay all amounts that it owes to
Silicon Valley Bank. Each subsequent Term Advance shall not exceed ninety
percent (90%) of the invoice amount of equipment and re-assignable software
approved by Bank from time to time (which Borrower shall, in any case, have
purchased after January 1, 1998), excluding taxes, shipping, warranty charges,
freight discounts and installation expense, provided that Term Advances for
software and telephone equipment shall not exceed seventy percent (70%) of the
invoice amount therefor, and the aggregate Term Advances for software and
telephone equipment shall in no case exceed $100,000.
(b) Interest shall accrue from the date of each Term
Advance at the rate specified in Section 2.3(a), and shall be payable monthly on
the twenty-sixth day of each month through the Revolving Maturity Date. Any Term
Advances that are outstanding on the Revolving Maturity Date shall be payable in
equal monthly installments of principal, plus all accrued interest, beginning on
April 26, 1999, and continuing on the same day of each month thereafter through
the Equipment Maturity Date, at which time all amounts due under this Section
2.1.2 and any other amounts due under this Agreement shall be immediately due
and payable. Term Advances, once repaid, may not be reborrowed. Borrower may
prepay any Term Advances without penalty or premium.
(c) When Borrower desires to obtain an Term Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific Time one (1)
Business Day before the day on which the Term Advance is to be made. Such notice
shall be substantially in the form of Exhibit B. The notice shall be signed by a
Responsible Officer or its designee and include a copy of the invoice for any
Equipment to be financed.
2.2 Overadvances. The aggregate outstanding balance under the Revolving
Facility in excess of the Borrowing Base shall be deemed to consist of
Nonformula Advances. If any Advances hereunder exceed the lesser of the
Borrowing Base plus the Nonformula Allowance or the Committed Revolving Line,
Borrower shall immediately pay to Bank, in cash, the amount of such excess. If
at any time the sum of the outstanding Advances and Term Advances exceeds
$3,000,000, Borrower shall immediately pay to Bank, in cash, the amount of such
excess, which Bank shall apply against outstanding Advances.
11.
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2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rates.
(i) Advances and Nonformula Advances. Except as set forth
in Section 2.3(b), the Advances and Nonformula Advances shall bear interest, on
the outstanding daily balance thereof, at a rate equal to the Prime Rate.
(ii) Term Advances. Except as set forth in Section 2.3(b),
the Term Advances shall bear interest, on the outstanding daily balance thereof,
at a rate equal to One Half Percent (0.5%) above the Prime Rate.
(b) Late Fee: Default Rate. If any payment is not made within ten
(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
an Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
twenty-sixth calendar day of each month during the term hereof. Bank shall, at
its option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Revolving
Line, in which case those amounts shall thereafter accrue interest at the rate
then applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder. Bank shall deliver to Borrower
statements of account in the ordinary course of business reflecting charges made
hereunder.
(d) Computation. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 1:00 p.m. California time shall be deemed to have been received by
Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a
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Business Day, such payment shall instead be due on the next Business Day, and
additional fees or interest, as the case may be, shall accrue and be payable for
the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. On the Closing Date, a Facility Fee equal to
Four Thousand Dollars ($4,000), which shall be nonrefundable;
(b) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses and, after the Closing Date, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 Term. This Agreement shall become effective on the Closing Date and,
subject to Section 12.7, shall continue in full force and effect for a term,
ending on the Equipment Maturity Date. Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS.
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a financing statement (Form UCC-1);
(d) an intellectual property security agreement;
(e) a warrant to purchase stock (the "Warrant");
(f) an audit of the Accounts, the results of which shall be
satisfactory to Bank; and
(g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
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(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension
(provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof
subject to Permitted Liens.
4.2 Delivery of Additional Documentation Required. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, at its own expense, except during the continuance
of an Event of Default and as specified in Sections 6.3 and 6.4, upon reasonable
prior notice, from time to time during Borrower's usual business hours but no
more than once a year (unless an Event of Default has occurred and is
continuing), to inspect Borrower's Books and to make copies thereof and to
check, test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, condition of, or any other matter relating to, the
Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is
a corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where failure to so qualify would not have a Material Adverse Effect.
5.2 Due Authorization: No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in
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conflict with nor constitute a breach of any provision contained in Borrower's
Articles of Incorporation or Bylaws, nor will they constitute an event of
default under any material agreement to which Borrower is a party or by which
Borrower is bound. Borrower is not in default under any agreement to which it is
a party or by which it is bound, which default is reasonably likely to have a
Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor,
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
good and marketable quality, free from all material defects, except for
Inventory for which adequate reserves have been made.
5.6 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision is reasonably
likely to have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Bank's security interest in the Collateral.
5.8 No Material Adverse Change in Financial Statements. All consolidated
financial statements related to Borrower and any Subsidiary that are delivered
by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to
Bank.
5.9 Regulatory Compliance. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result In Borrower's incurring
any liability that is reasonably likely to have a Material Adverse Effect.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of the important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). Borrower has compiled with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not
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violated any statutes, laws, ordinances or rules applicable to it, violation of
which would be reasonably likely to have a Material Adverse Effect.
5.10 Environmental Condition. Except as disclosed in the Schedule, none
of Borrower's or any Subsidiary's properties or assets has ever been used by
Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous
owners or operators, in the disposal of, or to produce, store, handle, treat,
release, or transport, any hazardous waste or hazardous substance other than in
accordance with applicable law; to the best of Borrower's knowledge, none of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental Protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental. Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.11 Taxes. Borrower and each Subsidiary has filed or caused to be filed
all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.12 SUBSIDIARIES. Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.13 Government Consents. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which would be reasonably likely to have a Material Adverse
Effect.
5.14 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
is reasonably likely to have a Material Adverse Effect. Borrower shall maintain,
and shall cause each of its Subsidiaries to maintain, to the extent consistent
with prudent management of Borrower's business, in force all licenses,
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<PAGE> 21
approvals and agreements, the loss of which would be reasonably likely to have a
Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which would be reasonably likely to have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver
to Bank: (a) as soon as available, but in any event within twenty-five (25) days
after the end of each calendar month, a company prepared consolidated and
consolidating balance sheet and income statement covering Borrower's
consolidated operations during such period, in a form and certified by a
Responsible Officer; (b) as soon as available, but in any event within ninety
(90) days after the end of Borrower's fiscal year, unqualified audited
consolidated and consolidating financial statements of Borrower prepared in
accordance with GAAP, consistently applied; (c) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that is reasonably likely to result in damages or costs to
Borrower or any Subsidiary of Fifty Thousand Dollars ($50,000) or more; and (d)
such budgets, sales projections, operating plans or other financial information
as Bank may reasonably request from time to time generally prepared by Borrower
in the ordinary course of business.
Within fifteen (15) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable and accounts payable.
Borrower shall deliver to Bank with the monthly financial
statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts and appraise Collateral at Borrower's expense, provided that
such audits will be conducted no more often than every twelve (12) months unless
an Event of Default has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate
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certificates attesting to the payment or deposit thereof, and Borrower will
make, and will cause each Subsidiary to make, timely payment or deposit of all
material tax payments and withholding taxes required of it by applicable laws,
including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state and federal income taxes, and will, upon request,
furnish Bank with proof satisfactory to Bank indicating that Borrower or a
Subsidiary has made such payments or deposits; provided that Borrower or a
Subsidiary need not make any payment if the amount or validity of such payment
is contested in good faith by appropriate proceedings and is reserved against
(to the extent required by GAAP) by Borrower.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
over $50,000 payable under any such policy shall, at the option of Bank, be
payable to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.8 Quick Ratio. Beginning with the earlier of the date of the Equity
Event or September 30, 1999, Borrower shall maintain, as of the last day of each
calendar month, a ratio of Quick Current Liabilities, excluding deferred
revenue, of at least 1.50 to 1.00.
6.9 Net Sales. Unless the Equity Event shall have first occurred,
Borrower shall provide evidence satisfactory to Bank of net sales for the fiscal
quarter ending June 30, 1998 of not less than $1,350,000.
6.10 Profitability. Before the occurrence of the Equity Event, Borrower
shall not suffer a loss in any month in excess of $1,000,000. After the earlier
of September 30, 1998 or at the date of the Equity Event, Borrower shall not
suffer a loss in any fiscal quarter in excess of $3,000,000.
6.11 Tangible Net Worth. After the earlier of September 30, 1998 or the
date of the Equity Event, Borrower shall maintain, as of the last day of each
month, a Tangible Net Worth of at least $5,000,000.
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6.12 Registration of Intellectual Property Rights.
(a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within thirty (30) days of the date of this
Agreement. Borrower shall register or cause to be registered with The United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those additional intellectual property rights developed or acquired
by Borrower from time to time in connection with any product prior to the sale
or licensing of such product to my third party, including without limitation
major revisions or additions to the intellectual property rights listed am such
Exhibits A, B and C.
(b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.
(c) Borrower shall (i) use reasonable commercial efforts to
Protect, defend and maintain the validity and enforceability of the Trademarks,
Patents and Copyrights, (ii) use its best efforts to detect infringements of the
Trademarks, Patents and Copyrights and promptly advise Bank in writing of
infringements detected and (iii) not allow any material Trademarks, Patents or
Copyrights to be abandoned, forfeited or dedicated to the public without the
written consent of Bank, which shall not be unreasonably withheld.
(d) Bank may audit Borrower's Intellectual Property Collateral at
Bank's expense, unless an Event of Default is continuing, to confirm compliance
with this Section 6.12, provided such audit may not occur more often than once
per year, unless an Event of Default has occurred and is continuing. Bank shall
have the right, but not the obligation, to take, at Borrower's sole expense, any
actions that Borrower is required under this Section 6.12 to take but which
Borrower fails to take, after fifteen (15) days' notice to Borrower. Borrower
shall reimburse and indemnify Bank for all reasonable costs and reasonable
expenses incurred in the reasonable exercise of its rights under this Section
6.12.
6.13 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than: (i) Transfers of Inventory
in the ordinary course of business; (ii) Transfers of non-exclusive licenses and
similar arrangements for the use of the property of Borrower or its
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Subsidiaries; (iii) Transfers of surplus, worn-out or obsolete Equipment; or
(iv) other transfers in an aggregate amount per year of not more than $100,000.
7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days written
notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income. including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may repurchase the stock of former employees
pursuant to stock repurchase agreements as long as an Event of Default does not
exist or would not exist after giving effect to such repurchase.
7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory; provided, however, that Borrower may deposit software
code in escrow for customers in the ordinary course of business. Except for
Inventory sold in the ordinary course of business and except for such other
locations as Bank may approve in writing, Borrower shall keep the Inventory only
at the location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.
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7.11 Compliance. Become an "investment company" or be controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation is reasonably likely to have a Material Adverse
Effect or a material adverse effect on the Collateral or the priority of Bank's
Lien on the Collateral, or permit any of its Subsidiaries to do any of the
foregoing.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower falls to pay, when due, any of the
Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation under
Article 6 or violates any of the covenants contained in Sections 6.8, 6.9, 6.10,
6.11 or 6.12 of this Agreement, or fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Credit Extensions will
be required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse change
in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
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municipal, or governmental agency, and the same is not paid within twenty (20)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within forty-five (45) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that is reasonably likely to have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of thirty (30) days (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
misstatement existed at the time such representation and warrant was made in any
warranty or representation set forth herein or in any certificate delivered to
Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to
enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence and during the continuance
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
22.
<PAGE> 27
(d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Bank;
(f) Ship, reclaim, recover, store, furnish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; and (f)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; provided Bank may exercise such power of attorney to sign the name
of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The
23.
<PAGE> 28
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuance
of an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and immediately deliver such payments to Bank in
their original form as received from the account debtor, with proper
endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following after
reasonable notice to Borrower: (a) make payment of the same or any part thereof,
(b) set up such reserves under the Revolving Facility as Bank deems necessary to
protect Bank from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type discussed in Section 6.6 of this
Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower, except
for those caused by Bank's gross negligence or willful misconduct.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
24.
<PAGE> 29
10. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Women.com Networks
1820 Gateway Drive, Suite 100
San Mateo, CA 94404
Attn: Jeff Chew
Fax: (650) 378-6599
If to Bank: Imperial Bank
226 Airport Parkway
San Jose, CA 95110-1024
Attn: Corporate Banking Center
FAX: (408) 451-8523
with a copy to: Imperial Bank
2460 Sand Hill Road, Suite 102
Menlo Park, CA 94025
Attn: David Sousa
FAX: (650) 233-3020
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE: JURY TRIAL WAIVER.
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the nonexclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
25.
<PAGE> 30
12. GENERAL PROVISIONS.
12.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower Without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement; and (b) all
losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a
result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
13. JUDICIAL REFERENCE.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to this
Agreement, which controversy, dispute or claim is not settled in writing within
thirty (30) days after the "Claim Date" (defined as the date on which a party
subject to this Agreement gives
26.
<PAGE> 31
written notice to all other parties that a controversy, dispute or claim
exists), will be settled by a reference proceeding in California in accordance
with the provisions of Section 638 et seq. of the California Code of Civil
Procedure, or their successor section ("CCP"), which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Agreement, including whether such controversy, dispute or claim
is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the Real Property, if any, is located or Santa Clara County if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of the Court
(or any subsequently enacted Rule). Each party shall have one peremptory
challenge pursuant to CCP Section 170.6. The referee shall (a) be requested to
set the matter for hearing within sixty (60) days after the date of selection of
the referee and (b) try any and all issues of law or fact and report a statement
of decision upon them, if possible, within ninety (90) days of the Claim Date.
Any decision rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery or unavailability of a witness
due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Depositions may be taken by either party upon seven (7)
days written notice, and request for production or inspection of documents which
cannot be resolved by the parties shall be submitted to the referee as provided
herein. The Superior Court is empowered to issue temporary and/or provisions
remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence, and
all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial, shall be conducted without a court reporter except that when any
party so requests, a court reporter will be used at any hearing conducted before
the referee. The party making such a request shall have the obligation to
arrange for and pay for the court reporter. The costs of the court reporter at
the trial shall be borne equally by the parties.
(c) The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of California. The
rules of evidence applicable to proceedings at law in the State of California
will be applicable to the reference proceeding. The referee shall be empowered
to enter equitable as well as legal relief, to provide all temporary and/or
provisional remedies and to enter equitable orders that will be binding upon the
parties. The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that re the
subject of the reference. The parties hereto
27.
<PAGE> 32
expressly reserve the right to contest or appeal from the final judgment or any
appealable order or appealable judgment entered by the referee. The parties
hereto expressly reserve the right to findings of fact, conclusions of laws, a
written statement of decision, and the right to move for a new trial or a
different judgment, which new trial, if granted, is also to be a reference
proceeding under these provisions.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
14. CONFIDENTIALITY.
In handling any confidential information Bank shall exercise the same
degree of care that it exercises with respect to its own proprietary information
of the same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the subsidiaries or affiliates of Bank in
connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Advances or
Term Advances, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order, (iv) as may be required in connection with the examination, audit or
similar investigation of Bank and (v) as Bank may determine in connection with
the enforcement of any remedies hereunder. Confidential information hereunder
shall not include information that either: (a) is in the public domain or in the
knowledge or possession of Bank when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank through no fault of Bank; or (b) is
disclosed to Bank by a third party, provided Bank does not have actual knowledge
that such third party is prohibited from disclosing such information.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WOMEN.COM NETWORKS
By: /s/ Jeffrey Chew
-------------------------------
Title: CFO
----------------------------
IMPERIAL BANK
By: /s/ IMPERIAL BANK
-------------------------------
Title:
-----------------------------
28.
<PAGE> 33
THE LIST OF DEBTS AS OF MARCH 31, 1998
<TABLE>
<S> <C>
Accounts Payable $327,239.94
Silicon Valley Bank Loan $240,218.97
Venture Lease Payable $ 49,618.94
Assumed liabilities (4/20/98) $123,672.43
TOTAL $740,750.28
</TABLE>
29.
<PAGE> 34
EXHIBIT A
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:
(i) all accounts receivable, accounts, chattel paper, contract rights
(including, without limitation, royalty agreements, license agreements and
distribution agreements), documents, instruments, money, deposit accounts and
general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all investment property, including securities and securities
entitlements;
(ii) all software, computer source codes and other computer programs
(collectively, the "Software Products"), and all common law and statutory
copyrights and copyright registrations, applications for registration, now
existing or hereafter arising, United States of America and foreign, obtained or
to be obtained on or in connection with the Software Products, or any parts
thereof or any underlying or component elements of the Software Products
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Bank (herein referred to as
"Bank" or "Secured Party") to sue in its own name and/or the name of the Debtor
for past, present and future infringements of copyright;
(iii) all goods, including, without limitation, equipment and inventory
(including, without limitation, all export inventory);
(iv) all guarantees and other security therefor;
(v) all trademarks, service marks, trade names and service names and the
goodwill associated therewith;
(vi) (a) all patents and patent applications filed in the United States
Patent and Trademark Office or any similar office of any foreign jurisdiction,
and interests under patent license agreements including, without limitation, the
inventions and improvements described and claimed therein, (b) licenses
pertaining to any patent whether Debtor is licensor or licensee, (c) all income,
royalties, damages payments, accounts receivable now or hereafter due, and/or
payable under and with respect thereto, including, without limitation, damages
and payments for past, present or future infringements thereof, (d) the right
(but not the obligation) to sue for past, present and future infringements
thereof, (e) all rights corresponding thereto throughout the world in all
jurisdictions in which such patents have been issued or applied for, and (f) the
reissues, divisions, continuations, renewals, extensions and
continuations-in-part with any of the foregoing (all of the foregoing patents
and applications and interests under patent license agreements, together with
the items described in clauses (a) through (f) in this paragraph are sometimes
herein individually and collectively referred to as the "Patents"); and
(vii) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.
30.
<PAGE> 35
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., Pacific Time
TO: EMERGING GROWTH INDUSTRIES DATE:_________________________
FAX#: (650) 233-3020 TIME:_________________________
FROM:__________________________________________________________________________
CLIENT NAME BORROWER
REQUESTED BY:__________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:__________________________________________________________
PHONE NUMBER:__________________________________________________________________
FROM ACCOUNT # ________________________ TO ACCOUNT #_______________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $________________________
PRINCIPAL PAYMENT (ONLY) $________________________
INTEREST PAYMENT (ONLY) $________________________
PRINCIPAL AND INTEREST (PAYMENT) $________________________
OTHER INSTRUCTIONS:_____________________________________________________________
All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided. however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
________________________________________________________________________________
BANK USE ONLY
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
__________________________________ __________________________________
Authorized Requester Phone #
__________________________________ __________________________________
Authorized Requester Phone
_______________________________________________________________________________
Authorized Signature (Blank)
31.
<PAGE> 36
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Women.com Networks Lender: Imperial Bank
Commitment Amount: $3,000,000
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE:
1. Accounts Receivable Book Value as of _____ $_____________________
2. Additions (please explain on reverse) $_____________________
3. TOTAL ACCOUNTS RECEIVABLE $_____________________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_____________________
5. Balance of 25% over 90 day accounts
6. Concentration Limits
7. Foreign Accounts
8. Governmental Accounts
9. Contra Accounts
10. Demo Accounts
11 Intercompany/Employee Accounts
12. Other (please explain on reverse)
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
14. Eligible Accounts (#3 minus #13) $_____________________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $_____________________
NONFORMULA ADVANCES
16. Nonformula Advances and Term Advances $_____________________
BALANCES
17. Maximum Loan Amount $3,000,000
18 Total Funds Available [Lesser of #15 plus $_____________________
Nonformula Allowance or #17]
19. Present balance owing on Line of Credit $_____________________
20. Outstanding under Sublimits ( ) $_____________________
21. RESERVE POSITION (#18 minus #19 and #20) $_____________________
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Imperial Bank.
Women. com Networks
By:_______________________________
Authorized Signer
32.
<PAGE> 37
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: IMPERIAL BANK
FROM: Women.com Networks
The undersigned authorized officer of Women.com Networks hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _____________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies"
column.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C> <C>
Monthly financial statements Monthly within 25 Yes No
days
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 15 Yes No
days
A/R Audit Initial and Semi-Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL No COMPLIES
------------------ -------- ------ -- --------
<S> <C> <C> <C> <C>
Maintain on a Monthly 1.50:1.00 _______:1.00 Yes No
Basis: Minimum Quick
Ratio1
Minimum 6/30/98 Net Sales $1,500,000 $__________ Yes No
Minimum Profit $2 ___________ Yes No
(Quarterly)
Minimum TNW $5,000,000 $__________ Yes No
</TABLE>
1 Less deferred revenue
2 Pre-Equity Event monthly loss <$1,000,000; post-Equity Event quarterly
loss
<$3,000,000
Comments Regarding Exceptions: See Attached.
Sincerely, BANK USE ONLY
Received by:
- ------------------------------- ---------------------
SIGNATURE AUTHORIZED SIGNER
- ------------------------------- Date:
TITLE ----------------------------
Verified:
- ------------------------------- ------------------------
DATE AUTHORIZED SIGNER
Compliance Status: Yes No
33.
<PAGE> 38
CORPORATE RESOLUTIONS TO BORROW
Borrower: Women.com Networks
I, the undersigned Secretary or Assistant Secretary of Women.com
Networks (the "Corporation"), H:EREBY CERTIFY that the Corporation is organized
and existing under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Articles of Incorporation, as amended and the
Restated Bylaws of the Corporation, each of which is in fall force and effect on
the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
<S> <C> <C>
Marleen McDaniel CEO and President /s/Marleen R. McDaniel
- ----------------------- ------------------------ ----------------------------
Ellen Pack Vice President /s/Ellen Pack
- ----------------------- ------------------------ ----------------------------
Jeffrey Chew CFO /s/Jeffrey Chew
- ----------------------- ------------------------ ----------------------------
- ----------------------- ------------------------ ----------------------------
</TABLE>
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
BORROW MONEY. To borrow from time to time from Imperial Bank ("Bank"),
on such terms as may be agreed upon between the officers, employees, or agents
and Bank, such sum or sums of money as in their judgment should be borrowed,
without limitation, including such sums as are specified in that certain Loan
and Security Agreement dated as of April 9, 1998 (the "Loan Agreement").
EXECUTE LOAN AGREEMENT. To execute and deliver to Bank the Loan
Agreement, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, refinancings, consolidations, or substitutions for
one or more of the notes, or any portion of the notes.
GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such
1.
<PAGE> 39
proceeds to be credited to the account of the Corporation with Bank, or to cause
such other disposition of the proceeds derived therefrom as they may deem
advisable.
WARRANTS. To issue a warrant to purchase the Corporation's capital .
FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on April 27, 1998 and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/Ellen Pack
-------------------------------
2.
<PAGE> 40
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of
April 9, 1998 by and between IMPERIAL BANK ("Bank") and WOMEN.COM NETWORKS
("Grantor").
RECITALS
A. Bank has agreed to make certain advances of money and to extend
certain financial accommodation to Grantor (the "Loans") in the amounts and
manner set forth in that certain Loan and Security Agreement by and between Bank
and Grantor dated of even date herewith (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks and Patents
to secure the obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents and Trademarks listed on Schedules
A, B and C hereto), and including without limitation all proceeds thereof (such
as, by way of example but not by way of limitation, license royalties and
proceeds of infringement suits), the right to sue for past, present and future
infringements, all rights corresponding thereto throughout the world and all
re-issues, divisions continuations, renewals, extensions and
continuations-in-part thereof.
This security interest is granted in conjunction with the security
interest granted to Bank under the Loan Agreement. The rights and remedies of
Bank with respect to the security interest granted hereby are in addition to
those set forth in the Loan Agreement and the other Loan Documents, and those
which are now or hereafter available to Bank as a matter of law or equity. Each
right, power and remedy of Bank provided for herein or in the Loan Agreement or
any of the Loan Documents, or now or hereafter existing at law or in equity
shall be cumulative and concurrent and shall be in addition to every right,
power or remedy provided for herein and the exercise by Bank of any one or more
of the rights, powers or remedies provided for in this Intellectual Property
Security Agreement, the Loan Agreement or any of the other Loan Documents, or
now or hereafter existing at law or in equity, shall not preclude the
simultaneous or later exercise by any person, including Bank, of any or all
other rights, powers or remedies.
1.
<PAGE> 41
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
GRANTOR:
Address of Grantor: WOMEN.COM NETWORKS
1820 Gateway Drive, Suite 100
San Mateo, CA 94404 By: /s/Marleen R. McDaniel
-------------------------------
Attn: Title: CEO and President
-------------------------- -------------------------------
BANK:
IMPERIAL BANK
Address of Bank:
226 Airport Parkway By: /s/ IMPERIAL BANK
-------------------------------
San Jose, CA 93110 Title:
-------------------------------
Attn: Corporate Banking Center
2.
<PAGE> 42
EXHIBIT A
Copyrights
<TABLE>
<CAPTION>
Registration/ Registration/
Application Application
Description Number Date
----------- ------ ----
<S> <C> <C>
</TABLE>
1.
<PAGE> 43
EXHIBIT B
Patents
<TABLE>
<CAPTION>
Registration/ Registration/
Application Application
Description Number Date
----------- ------ ----
<S> <C> <C>
</TABLE>
1.
<PAGE> 44
EXHIBIT C
Trademarks
<TABLE>
<CAPTION>
Registration/ Registration/
Application Application
Description Number Date
----------- ------ ----
<S> <C> <C>
</TABLE>
1.
<PAGE> 45
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
<TABLE>
<S> <C>
Corporation: Women.com Networks
Number of Shares: 24,671, subject to adjustment
Class of Stock: Series C Preferred, subject to adjustment
Initial Exercise Price: $3.04, subject to adjustment
Issue Date: April 9, 1998
Expiration Date: April 9, 2003
</TABLE>
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $ 1.00 and for
other good and valuable consideration, IMPERIAL BANK ("Holder") is entitled to
purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth herein and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth of this Warrant. If the aggregate
Nonformula Advances under the Loan and Security Agreement between the Company
and Holder dated as of the Issue Date (the "Loan Agreement") do not at any time
exceed $1,000,000, the number of Shares subject to this Warrant shall be 16,447.
If the aggregate Nonformula Advances under the Loan Agreement do not at any time
exceed $500,000, the number of Shares subject to this Warrant shall be 8,224. If
Borrower receives not less than $10,000,000 from the sale or issuance of its
equity securities not later than July 31, 1998 (an "Equity Event"), then this
Warrant shall be for the type of securities issued in the Equity Event, and the
Initial Exercise Price shall be the price per share at which such securities
were issued. If the Equity Event occurs after July 31, 1998 but not later than
September 30, 1998, then this Warrant shall be for the type of securities issued
in the Equity Event, and the Initial Exercise Price shall be the average of (a)
$3.04 and (b) the price per share at which such securities were issued. Holder
shall be entitled to purchase an additional 1,000 Shares per day under this
Warrant for each day after September 30, 1998 that any Nonformula Advance is
outstanding, provided the number of such additional Shares shall not exceed the
quotient derived by dividing ten percent of the outstanding Nonformula Advance
by the Warrant Price.
ARTICLE 1 EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
I to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.
<PAGE> 46
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 No Rights as Shareholder. This Warrant does not entitle Holder to
any voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of tile Company shall determine fair market value in its
reasonable good faith judgment.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its legal counsel or, in the case of mutilation, or surrender and
cancellation of this Warrant, the Company shall execute and deliver, in lieu of
this Warrant, a new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1 "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company in which the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. If, upon the closing of any
Acquisition, the successor entity shall elect to assume the obligations of this
Warrant, and this Warrant shall be exercisable for the same securities, cash,
and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly. If the successor entity does not assume the obligations
of this Warrant, this Warrant shall be deemed converted in full pursuant to
Section 1.2, effective immediately prior to the closing of such Acquisition.
2.
<PAGE> 47
ARTICLE 2 ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation (the "Articles") upon the closing of a registered public offering
of the Company's common stock. The Company or its successor shall promptly issue
to Holder a new Warrant for such new securities or other property. The new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Article 2 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 2.2 shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The number of shares of common
stock issuable upon conversion of the Shares, shall be subject to adjustment,
from time to time in accordance with the provisions of the Articles of
Incorporation in the form provided to Bank which apply to a "sale of Shares
below the Series Preferred Conversion Price."
2.5 No Impairment. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article 2 against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the
3.
<PAGE> 48
nearest whole Share. If a fractional share interest arises upon any exercise or
conversion of the Warrant, the Company shall eliminate such fractional share
interest by paying Holder amount computed by multiplying the fractional interest
by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company shall promptly compute such adjustment, and furnish Holder
with a certificate of its Chief Financial Officer setting forth such adjustment
and the facts upon which such adjustment is based. The Company shall, upon
written request with reasonable notice, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3 REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares (assuming payment of the Warrant Price),
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under applicable federal and state securities
laws. The issued and outstanding shares of the Company on the Issue Date are set
forth in the capitalization table attached hereto.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to effect any reclassification or recapitalization of common stock; or (c)
to merge or consolidate with or into any other corporation, or sell, or
otherwise convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; then, in connection with each such event, the Company shall
give Holder such notice as is required under the Amended and Restated Investor
Rights Agreement or, if such does not apply, (1) in respect of the matters
referred to in (b) and (c) above, at least 20 days prior written notice of the
date on which a record will be taken for such dividend or distribution rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any; and (2) in the case of the
matters referred to in (b) and (c) above at least 20 days prior written notice
of the date when the same will take place (and specifying the date on which the
holders of common stock will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder promptly after
mailing, copies of all notices or other written communications it would be
entitled to were it a shareholder.
3.4 Registration Under Securities Act of 1933, as amended. The Holder of
the Warrant shall become a party to the Amended and Restated Investor Rights
Agreement, and the common stock into which the Shares are convertible shall be
subject to the registration rights granted to the purchasers in the Equity Event
or, if this Warrant is for another Series of Preferred Stock, then the
registration rights held by the purchasers of such Preferred Stock.
4.
<PAGE> 49
ARTICLE 4 REPRESENTATIONS AND COVENANTS OF HOLDER.
This Warrant has been entered into by the Company in reliance upon the
following representations and covenants of Holder, which by its acceptance
hereof the Holder (including any permitted transferee of Holder on behalf of
such transferee) hereby confirms:
4.1 Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of Holder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof, and the Holder has no present intention of selling or engaging
in any public distribution of the same except pursuant to a registration or
exemption.
4.2 Private Issue. Holder understands (i) that the Preferred Stock,
issuable upon exercise of the Holder's rights contained herein is not registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant Agreement will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 4.
4.3 Financial Risk. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
4.4 Risk of No Registration. Holder understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 12
of the 1933 Act, or file reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the 1933 Act is not in effect when it desires to sell (i)
the rights to purchase Preferred Stock pursuant to this Warrant Agreement, or
(ii) the Preferred Stock issuable upon exercise of the right to purchase, it may
be required to hold such securities for an indefinite period. The Holder also
understands that any sale of the rights of the Holder to purchase Preferred
Stock which might be made by it in reliance upon Rule 144 under the 1933 Act may
be made only in accordance with the terms and conditions of that Rule.
4.5 Accredited Investor. Holder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Act, as presently in effect.
ARTICLE 5 MISCELLANEOUS.
5.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date.
5.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED
5.
<PAGE> 50
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR
PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
5.4 Transfer Procedure. Subject to the provisions of Sections 4.2 and
4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
5.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
6.
<PAGE> 51
5.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
WOMEN.COM NETWORKS
By: /s/Marleen R. McDaniel
-------------------------------
Title: CFO and President
-------------------------------
7.
<PAGE> 52
APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______ shares of the
Common/Series ___________ Preferred [strike one] Stock of
_________________________ pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised with
respect to _________________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
-------------------------------
(Name)
-------------------------------
-------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
- -------------------------------
(Signature)
- -------------------------------
(Date)
1.
<PAGE> 53
AGREEMENT TO PROVIDE INSURANCE
TO: IMPERIAL BANK Date: April 9, 1998
226 Airport Parkway Borrower: Women.com Networks
San Jose, California 95110
In consideration of a loan in the amount of $3.000,000, secured by all
tangible personal property including Inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force
during the term of the loan.
We also agree to advise the below named agent to add Imperial Bank as
loss payee on the new or existing Insurance policy, and to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
(a) The amount of the loan, OR
(b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements on
the real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of
Imperial Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent Telephone No.:
Agent's Address:
Signature of Obligor: /s/ JEFFREY CHEW
-----------------------------
Signature of Obligor: /s/Marleen R. McDaniel
-----------------------------
FOR BANK USE ONLY
INSURANCE VERIFICATION: Date:______
Person Spoken to:__________________
Policy Number:_____________________
Effective Form:____________ To: ___
Verified By:_______________________
1.
<PAGE> 54
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
Name(s): Date:
$ paid to you directly by Cashiers Check No.
$ credited to deposit account No. __________ when Advances
arc requested
$ paid to Silicon Valley Bank $
$ amounts paid to Bank for
Amounts paid to others on your behalf:
$4,000 to Imperial Bank for Loan Fee
$0 to Imperial Bank for Document Fee
$0 to Imperial Bank for accounts receivable audit
(estimate)
$ to Bank counsel fees and expenses
$ to
$ to
TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
__________________ Disburse from Loan Proceeds
__________________ Debit from Account
__________________ Payable with Borrower's check
Check one. Payments will be disbursed from loan proceeds unless directed
otherwise.)
/s/ JEFFREY CHEW /s/Marleen R. McDaniel
- ------------------------------- -------------------------------
Signature Signature
1.
<PAGE> 55
IMPERIAL BANK
AUTOMATIC DEBIT AUTHORIZATION
California's Business-Banks
Member FDIC
To: Imperial Bank
Re: Loan #__________________________
You are hereby authorized and instructed to charge account No. ______________ in
the name of WOMEN.COM NETWORKS for principal and interest payments due on above
referenced loan as set forth below and credit the loan referenced above.
[X] Debit each interest payment as it becomes due according to the terms of the
note and any renewals or amendments thereof.
[ ] Debit each principal payment is at becomes due according to the terms of the
note and any renewals or amendments thereof.
This Authorization is to remain in full force and effect until revoked in
writing.
Borrower Signature Date 4/17/98
- ------------------------------- -------------------------
Marleen R. McDaniel 4/18/98
1.
<PAGE> 1
EXHIBIT 10.17
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
<TABLE>
<S> <C>
Corporation: Women.com Networks
Number of Shares: 24,671, subject to adjustment
Class of Stock: Series C Preferred, subject to adjustment
Initial Exercise Price: $3.04, subject to adjustment
Issue Date: April 9, 1998
Expiration Date: April 9, 2003
</TABLE>
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, IMPERIAL BANK ("Holder") is entitled to
purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares') of the corporation (the "Company') at the initial
exercise price per Share (the "Warrant Price') all as set forth herein and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth of this Warrant. If the aggregate
Nonformula Advances under the Loan and Security Agreement between the Company
and Holder dated as of the Issue Date (the "Loan Agreement") do not at anytime
exceed $1,000,000, the number of Shares subject to this Warrant shall be 16,447.
If the aggregate Nonformula Advances under the Loan Agreement do not at any time
exceed $500,000, the number of Shares subject to this Warrant shall be 8,224. If
Borrower receives not less than $10,000,000 from the sale or issuance of its
equity securities not later than July 31, 1999 (an "Equity Event), then this
Warrant shall be for the type of securities issued in the Equity Event, and the
Initial Exercise Price shall be the price per share at which such securities
were issued. If the Equity Event occurs after July 31, 1998 but not later than
September 30, 1998, then this Warrant shall be for the type of securities issued
in the Equity Event, and the Initial Exercise Price shall be the average of (a)
$3.04 and (b) the price per share at which such securities were issued. Holder
shall be entitled to purchase an additional 1,000 Shares per day under this
Warrant for each day after September 30, 1998 that any Nonformula Advance is
outstanding, provided the number of such additional Shares shall not exceed the
quotient derived by dividing ten percent of the outstanding Nonformula Advance
by the Warrant Price.
ARTICLE 1 EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon
1.
<PAGE> 2
exercise of this Warrant minus the aggregate Warrant Price of such Shares by (b)
the fair market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 No Rights as Shareholder. This Warrant does not entitle Holder to
any voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
and its legal counsel or, in the case of mutilation, or surrender and
cancellation of this Warrant, the Company shall execute and deliver, in lieu of
this Warrant, a new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1 "Acquisition." For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company in which the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. If, upon the closing of any
Acquisition, the successor entity shall elect to assume the obligations of this
Warrant, and this Warrant shall be exercisable for the same securities, cash,
and property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly. If the successor entity does not assume the obligations
of this Warrant, this Warrant shall be deemed converted in full pursuant to
Section 1.2, effective immediately prior to the closing of such Acquisition.
ARTICLE 2 ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.
<PAGE> 3
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation (the "Articles") upon the closing of a registered public offering
of the Company's common stock. The Company or its successor shall promptly issue
to Holder a new Warrant for such new securities or other property. The new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Article 2 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 2.2 shall similarly apply to successive reclassifications,
exchange, substitutions, or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The number of shares of common
stock issuable upon conversion of the Shares, shall be subject to adjustment,
from time to time in accordance with the provisions of the Articles of
Incorporation in the form provided to Bank which apply to a "sale of Shares
below the Series Preferred Conversion Price."
2.5 No Impairment. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article 2 against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company shall promptly compute such adjustment, and furnish Holder
with a certificate of its Chief Financial Officer setting forth such adjustment
and the facts upon which such adjustment is based. The Company shall, upon
written request with reasonable notice, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and there series of
adjustments leading to such Warrant Price.
ARTICLE 3 REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares (assuming payment of the Warrant Price),
shall, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable, and free of any liens and encumbrances except for restrictions on
transfer provided for herein or under
3.
<PAGE> 4
applicable federal and state securities laws. The issued and outstanding shares
of the Company on the Issue Date are set forth in the capitalization table
attached hereto.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to effect any reclassification or recapitalization of common stock; or (c)
to merge or consolidate with or into any other corporation, or sell, or
otherwise convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; then, in connection with each such event, the Company shall
give Holder such notice as is required under the Amended and Restated Investor
Rights Agreement or, if such does not apply, (1) in respect of the matters
referred to in (b) and (c) above, at least 20 days prior written notice of the
date on which a record will be taken for such dividend or distribution rights
(and specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any; and (2) in the case of the
matters referred to in (b) and (c) above at least 20 days prior written notice
of the date when the same will take place (and specifying the date on which the
holders of common stock will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event).
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder promptly after
mailing, copies of all notices or other written communications it would be
entitled to were it a shareholder.
3.4 Registration Under Securities Act of 1933, as amended. The Holder of
the Warrant shall become a party to the Amended and Restated Investor Rights
Agreement, and the common stock into which the Shares are convertible shall be
subject to the registration rights granted to the purchasers in the Equity Event
or, if this Warrant is for another Series of Preferred Stock, then the
registration rights held by the purchasers of such Preferred Stock.
ARTICLE 4 REPRESENTATIONS AND COVENANTS OF HOLDER.
This Warrant has been entered into by the Company in reliance upon the
following representations and covenants of Holder, which by its acceptance
hereof the Holder (including any permitted transferee of Holder on behalf of
such transferee) hereby confirms:
4.1 Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of Holder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof, and the Holder has no present intention of selling or engaging
in any public distribution of the same except pursuant to a registration or
exemption.
4.2 Private Issue. Holder understands (i) that the Preferred Stock,
issuable upon exercise of the Holder's rights contained herein is not registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant Agreement will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 4.
4.3 Financial Risk. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
4.4 Risk of No Registration. Holder understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 12
of the 1933 Act, or file reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement
4.
<PAGE> 5
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Holder also understands that any sale of the rights of the Holder to
purchase Preferred Stock which might be made by it in reliance upon Rule 144
under the 1933 Act may be made only in accordance with the terms and conditions
of that Rule.
4.5 Accredited Investor. Holder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Act, as presently in effect
ARTICLE 5 MISCELLANEOUS.
5.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date.
5.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
5.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
5.4 Transfer Procedure. Subject to the provisions of Sections 4.2 and
4.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
5.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.
<PAGE> 6
5.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
WOMEN.COM NETWORKS
By: /s/ Marleen McDaniel
---------------------------------
Title: CEO and President
------------------------------
6.
<PAGE> 7
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______ shares of the
Common/Series Preferred [strike one] Stock of _______________________ pursuant
to the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares in the manner specified in the Warrant. This conversion is exercised with
respect to _______________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
3. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
------------------------------------
(Name)
------------------------------------
------------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
- ------------------------------------
(Signature)
- ------------------------------------
(Date)
1.
<PAGE> 1
EXHIBIT 10.18
WIRE NETWORKS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES C PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of July 9, 1997, by and among WIRE NETWORKS, INC., a California
corporation (the "Company"), and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (which persons and entities are hereinafter
collectively referred to as "Purchasers" and each individually as a
"Purchaser").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of 4,000,000 shares of its Series C Preferred Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein;
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
AGREEMENT
SECTION 1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (i) the sale and issuance to
Purchasers of the Shares and (ii) the issuance of the shares of Common Stock to
be issued on conversion of the Shares (the "Conversion Shares"). The Shares and
the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Amended and Restated Articles of Incorporation of
the Company, in the form attached hereto as Exhibit B (the "Restated Articles").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company hereby agrees to issue and sell
to each Purchaser and each
1.
<PAGE> 2
Purchaser agrees to purchase from the Company, the number of Shares set forth
opposite such Purchaser's name on Exhibit A, at a purchase price of $3.04 per
Share.
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall take place on the date of this Agreement, at the
offices of the Company or at such other time and place upon which the Company
and a majority of the Purchasers shall agree.
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Closing by each Purchaser, against
payment of the purchase price therefor by check or wire transfer made payable to
the order of the Company, cancellation of indebtedness or any combination of the
foregoing.
2.3 SUBSEQUENT SALES OF SHARES. At any time on or before the 90th day
following the Closing, the Company may sell up to the balance of the authorized
shares of Series C Preferred Stock not sold at the Closing to such persons as
may be approved by the Board of Directors of the Company. All such sales shall
be made on the terms and conditions set forth in this Agreement, including,
without limitation, the representations and warranties by such Purchasers as set
forth in Section 4. Any Shares of Series C Preferred Stock sold pursuant to this
Section 2.3 shall be deemed to be "Shares" for all purposes under this Agreement
and any purchasers thereof shall be deemed to be "Purchasers" for all purposes
under this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to each Purchaser as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amended and Restated Investors' Rights Agreement in the form
attached hereto as Exhibit D (the "Investors' Rights Agreement"), the Amended
and Restated Co-Sale and Voting Agreement in the form attached as Exhibit E (the
"Co-Sale Agreement"), to issue and sell the Shares, to issue the Conversion
Shares, to carry out the provisions of this Agreement, the Investors' Rights
Agreement, the Co-Sale Agreement and the Restated Articles and to carry on its
business as presently conducted and as presently proposed to be conducted. The
Company is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or its business. The
Company owns no equity securities of any other corporation, limited partnership
or similar entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
2.
<PAGE> 3
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company, immediately prior to the Closing, will consist of: twelve million
(12,000,000) shares of Common Stock, seven hundred thirty thousand nine hundred
eighty-eight (730,988) shares of which are issued and outstanding and nine
hundred thirty-three thousand twenty-seven (933,027) shares of which are
reserved for future issuance to employees and outside directors upon the
exercise of options to purchase the Company's Common Stock; and nine million
(9,000,000) shares of Preferred Stock, of which two million seven hundred seven
thousand four hundred three (2,707,403) shares are designated Series A Preferred
Stock, of which two million six hundred eighty-five thousand one hundred
eighty-one (2,685,181) shares are issued and outstanding, of which five hundred
seventy-nine thousand four hundred seven (579,407) shares are designated Series
B Preferred Stock, of which five hundred seventy-nine thousand four hundred
seven (579,407) shares are issued and outstanding and of which five million
(5,000,000) shares are designated Series C Preferred Stock, none of which are
issued and outstanding. All issued and outstanding shares of the Company's
Common Stock, Series A Preferred Stock and Series B Preferred Stock (i) have
been duly authorized and validly issued to the persons listed on Exhibit F
hereto, (ii) are fully paid and nonassessable, and (iii) were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. The rights, preferences, privileges and restrictions of the Shares
are as stated in the Restated Articles. The Conversion Shares have been duly and
validly reserved for issuance. Other than as set forth on Exhibit F, and except
(i) as may be granted pursuant to the Investors' Rights Agreement and the
Co-Sale Agreement, (ii) a warrant for the purchase of an aggregate of 22,222
shares of Series A Preferred Stock and (iii) a warrant for the purchase of an
aggregate of 21,357 shares of Common Stock, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. When issued
in compliance with the provisions of this Agreement and the Restated Articles,
the Shares and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares and the Conversion Shares may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the Conversion Shares pursuant to the Restated
Articles, has been taken or will be taken prior to the Closing. The Agreement,
the Investors' Rights Agreement and the Co-Sale Agreement, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (ii) general principles of equity
that restrict the availability of equitable remedies; and (iii) to the extent
that the enforceability of the indemnification provisions in Section 2.9 of the
Investors' Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of Shares into
3.
<PAGE> 4
Conversion Shares are not and will not be subject to any preemptive rights or
rights of first refusal other than the right of first refusal set forth in the
Investors' Rights Agreement.
3.4 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
(i) its unaudited balance sheet as at December 31, 1996 and unaudited statement
of income for the year ending December 31, 1996 and (ii) its unaudited balance
sheet as at March 31, 1997 and unaudited statement of income for the three month
period ending March 31, 1997 (collectively, the "Financial Statements"), copies
of which are attached hereto as Exhibit G. The Financial Statements, together
with the notes thereto, are complete and correct in all material respects, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except as
disclosed therein, and present fairly the financial condition and position of
the Company as of December 31, 1996 and March 31, 1997, provided, however, that
the interim financial statements are subject to normal recurring year-end audit
adjustments (which are not expected to be material), and do not contain all
footnotes required under generally accepted accounting principles.
3.5 LIABILITIES. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to March 31, 1997, which in the aggregate do not
exceed $100,000.
3.6 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company (other than licenses arising
from the purchase of "off the shelf" or other standard products), or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services, or (iv) indemnification by the Company
with respect to infringements of proprietary rights (other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements) individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the
4.
<PAGE> 5
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company, or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company, (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company), (d) the Investors' Rights Agreement, and (e) the
Co-Sale Agreement.
3.8 CHANGES. Since March 31, 1997, there has not been to the Company's
knowledge:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition or operations of
the Company;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
5.
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(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company, including compensation agreements with the Company's employees; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS. ETC. The Company has good and
marketable title to its tangible properties and assets, including the tangible
properties and assets reflected in the balance sheet as at March 31, 1997
(included in the Financial Statements), and good title to its leasehold estates,
to the Company's knowledge, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) those resulting from taxes which
have not yet become delinquent, (ii) minor liens and encumbrances which do not
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and (iii) those that have otherwise arisen
in the ordinary course of business.
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3.10 PATENTS AND TRADEMARKS. The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information and other proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted, without any
known infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of "off the shelf" or standard products. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Restated Articles or Bylaws, or of any provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order, writ or,
to its knowledge, any statute, rule or regulation applicable to the Company
which would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. The execution,
delivery, and performance of and compliance with this Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement and the issuance and sale of the
Shares pursuant hereto and of the Conversion Shares pursuant to the Restated
Articles, will not result in any such material violation, or be in conflict with
or constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
3.12 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company
that questions the validity of this Agreement, the Investors' Rights Agreement
or the Co-Sale Agreement or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated
7.
<PAGE> 8
hereby or thereby, or which might result, either individually or in the
aggregate, in any material adverse change in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware of any such material
unasserted claim which, if asserted, would likely be determined adversely to the
Company. The foregoing includes, without limitation, actions pending or
threatened or unasserted claims (as described in the preceding sentence)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.13 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing have been paid or will be paid prior to the time they become delinquent.
3.14 EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge, threatened with respect to the Company. No employee has
any agreement or contract, written or verbal, regarding his or her employment.
To the Company's knowledge, no employee of the Company, nor any consultant with
whom the Company has contracted, is in violation of any term of any employment
contract, patent disclosure agreement or any other agreement relating to the
right of any such individual to be employed by, or to contract with, the Company
because of the nature of the business to be conducted by the Company; and to the
Company's knowledge the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice alleging that any such violation has occurred. Each employee is
employed on an "at will" basis and has no right to any material compensation
following termination of employment with the Company. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any officer, key employee or group of
key employees.
3.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each key
employee, officer and director of the Company has executed a Proprietary
Information and Inventions Agreement substantially in the form of Exhibit H
attached hereto.
3.16 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is currently
devoting one hundred percent (100%) of his or her business time to the conduct
of the business of the Company. The Company is not aware of any officer or key
employee of the Company planning to work less than full time at the Company in
the future.
8.
<PAGE> 9
3.17 REGISTRATION RIGHTS. Except as required pursuant to the Investors'
Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1.1 of the Investors'
Rights Agreement) any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
3.18 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is not
in violation of any applicable statute, rule, regulation, order or restriction
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Shares or the Conversion Shares, except such as has been duly
and validly obtained or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. The Company has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company and believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted.
3.19 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is not
in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.3 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the Company nor
any agent on its behalf has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Shares to any
person or persons so as to bring the sale of such Shares by the Company within
the registration provisions of the Securities Act.
3.21 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the
Investors' Rights Agreement, the Co-Sale Agreement and all other documents
delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, do not contain any untrue statement of a material fact nor, to the
Company's knowledge, omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading.
3.22 QUALIFIED SMALL BUSINESS. The Company represents and warrants to
the Purchasers that it qualifies as a "Qualified Small Business" as defined in
Section 1202(d) of the
9.
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Internal Revenue Code of 1986, as amended (the "Code"). The Company covenants
that so long as it reasonably believes that the Shares (and/or Conversion
Shares) held by Purchaser or a transferee would qualify as Qualified Small
Business Stock as defined in Section 1202(c) of the Code it will timely file all
reports or filings with the Internal Revenue Service required of a Qualified
Small Business.
3.23 MINUTE BOOKS. The minute books of the Company provided to the
Purchasers contain a complete summary of all meetings of directors and
shareholders since the time of incorporation.
3.24 SECTION 83(b) ELECTIONS. To the Company's knowledge, all elections
and notices permitted by Section 83(b) of the Internal Revenue Code and any
analogous provisions of applicable state tax laws have been timely filed by all
employees who have purchased shares of the Company's common stock under
agreements that provide for the vesting of such shares.
3.25 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3.26 INSURANCE. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
3.27 SMALL BUSINESS CONCERN. The Company, together with its affiliates
(as that term is defined in 13 C.F.R. Section 121.103), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder (the "Small Business
Investment Act") and Part 121 of Title 13 of the United States Code of Federal
Regulations ("CFR"). The information provided by the Company to each Purchaser
that is a licensed Small Business Investment Company (an "SBIC Purchaser") on
SBA Forms 480, 652 and 1031 delivered in connection herewith is accurate and
complete.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Investors' Rights Agreement and to carry out their provisions.
All action on Purchaser's part required for the lawful execution and delivery of
this Agreement, the Investors' Rights Agreement and the Co-Sale Agreement have
been or will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement will be valid and binding obligations of Purchaser, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (ii) general principles of equity
that restrict the availability of equitable
10.
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remedies, and (iii) to the extent that the enforceability of the indemnification
provisions of Section 2.9 of the Investors' Rights Agreement may be limited by
applicable laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in the
Agreement, the Investors' Rights Agreement or the Co-Sale Agreement have been or
shall have been obtained prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(c) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(d) INVESTMENT. Purchaser is acquiring the Shares (or any of the
Common Stock into which the Shares are convertible) for investment for its own
account and not with a view to, or for resale in connection with, any
distribution thereof, and Purchaser has no present intention of selling or
distributing the Shares (or any of the Common Stock into which the Shares are
convertible). Purchaser understands that the Shares (and the Common Stock into
which the Shares are convertible) to be purchased by it have not been registered
under the Securities Act which depends upon, among other things, the bona fide
nature of the investment intent as expressed herein.
11.
<PAGE> 12
(e) COMPANY INFORMATION. Purchaser has received and read
the Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(f) RESTRICTED SECURITIES. Purchaser acknowledges and
agrees that the Shares and the Conversion Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Purchaser has been advised or is aware of
the provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the number of shares
being sold during any three-month period not exceeding specified limitations.
4.4 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees that
the Shares and the Conversion Shares are subject to restrictions on transfer as
set forth in the Investors' Rights Agreement.
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement (except for such as may be properly
obtained subsequent to the Closing).
(c) FILING OF RESTATED ARTICLES. The Restated Articles shall
have been filed with the Secretary of State of the State of California.
(d) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
12.
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(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(f) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President and the Chief
Financial Officer of the Company, dated the date of the Closing, to the effect
that the conditions specified in subsections (a) through (e) of this Section 5.1
have been satisfied.
(g) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the parties thereto.
(h) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in
the form attached hereto as Exhibit E shall have been executed and delivered by
Ellen Pack, Marleen McDaniel and the Company. The stock certificates
representing the shares subject to the Co-Sale Agreement shall have been
delivered to the Secretary of the Company and shall have had appropriate legends
placed upon them to reflect the restrictions on transfer set forth in the
Co-Sale Agreement.
(i) BOARD OF DIRECTORS. Upon the Closing, the authorized size of
the Board of Directors of the Company shall be seven members and the Board shall
consist of Ellen Pack, Marleen McDaniel, Shanda Bahles, Barry Weinman, Philip
Monego, Michael Edelhart and Tony Pantuso.
(j) LEGAL OPINION. The Purchasers shall have received from legal
counsel to the Company an opinion addressed to them, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit I.
(k) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(l) SBA DOCUMENTS. The Company shall have executed and delivered
to each Purchaser that is a licensed Small Business Investment Company a Size
Status Declaration on SBA Form 480 and an Assurance of Compliance on SBA Form
652, and shall have provided to each such Purchaser information necessary for
the preparation of a Portfolio Financing Report on SBA Form 1031.
(m) INVESTMENT AGREEMENT. The Company and US WEST Interactive
Services, Inc. shall have executed and delivered an Investment Agreement dated
as of the date hereof and attached hereto as Exhibit J.
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5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares at each Closing is subject to the satisfaction, on
or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchasers in Section 4 hereof shall be true and correct in
all material respects at the date of the Closing, with the same force and effect
as if they had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by Purchasers on or before the Closing.
(c) FILING OF RESTATED ARTICLES. The Restated Articles shall
have been filed with the Secretary of State of the State of California.
(d) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights Agreement
substantially in the form attached hereto as Exhibit D shall have been executed
and delivered by the Purchasers.
(e) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement (except for such as may be properly
obtained subsequent to the Closing).
SECTION 6. MISCELLANEOUS.
6.1 USE OF PROCEEDS. The Company hereby covenants and agrees that the
proceeds from the sale of the Shares shall be used to finance working capital
requirements.
6.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
6.3 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation and the closing of the transactions
contemplated hereby. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
6.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
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<PAGE> 15
6.5 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto
and the Investors' Rights Agreement and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any representations, warranties, covenants and
agreements except as specifically set forth herein and therein.
6.6 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.7 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
6.8 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Investors'
Rights Agreement, the Co-Sale Agreement or the Restated Articles, shall impair
any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Purchaser's part of any breach, default or noncompliance under this
Agreement or under the Restated Articles or any waiver on such party's part of
any provisions or conditions of the Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Restated Articles, Bylaws, or
otherwise afforded to any party, shall be cumulative and not alternative.
6.9 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex; (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at the
address as set forth on the signature page hereof and to Purchaser at the
address set forth on Exhibit A attached hereto or at such other address as the
Company or Purchaser may designate by ten (10) days advance written notice to
the other parties hereto.
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6.10 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement. The Company shall, at the Closing, reimburse the reasonable fees
of Cooley Godward LLP, special counsel for the Purchasers, not to exceed
$10,000, and shall reimburse such special counsel for reasonable expenses
incurred in connection with the negotiation, execution, delivery and performance
of this Agreement.
6.11 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.12 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
6.13 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
6.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.15 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein, except that the Company shall be obligated
to pay Volpe, Welty & Company, an amount equal to two hundred ninety-five
thousand one dollar and twenty cents ($295,001.20) and a warrant to purchase up
to forty-nine thousand one hundred sixty-seven (49,167) shares of Common Stock
of the Company upon the Closing. Each party hereto further agrees to indemnify
each other party for any claims, losses or expenses incurred by such other party
as a result of the representation in this Section 6.15 being untrue.
6.16 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, .THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
16.
<PAGE> 17
[THIS SPACE INTENTIONALLY LEFT BLANK]
17.
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this SERIES C
PREFERRED STOCK PURCHASE AGREEMENT as of the date first above written.
COMPANY: WIRE NETWORKS, INC.
By: /s/ Marleen McDaniel
---------------------------------
Marleen McDaniel, President
INVESTORS:
By:
---------------------------------
(Signature)
Title:
------------------------------
<PAGE> 19
<TABLE>
<S> <C>
INVESTOR(S): US WEST INTERACTIVE SERVICES, INC.
By: /s/ US West Interactive Services, Inc.
------------------------------------
(Signature)
Title:
------------------------------
EL DORADO VENTURES III, L.P.
By: /s/ El Dorado Ventures III, L.P.
---------------------------------
(Signature)
Title:
------------------------------
EL DORADO TECHNOLOGY IV, L.P.
By: /s/ El Dorado Ventures IV, L.P.
---------------------------------
(Signature)
Title:
------------------------------
AVI CAPITAL, L.P.
By: /s/ Barry Weinman
---------------------------------
(Signature)
Title: General Partner
------------------------------
ASSOCIATED VENTURE INVESTORS III, L.P.
By: /s/ Barry Weinman
---------------------------------
(Signature)
Title: General Partner
------------------------------
</TABLE>
SIGNATURE PAGE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 20
<TABLE>
<S> <C>
AVI SILICON VALLEY PARTNERS, L.P.
By: /s/ Barry Weinman
---------------------------------
(Signature)
Title: General Partner
------------------------------
TECHNOLOGY FUNDING PARTNERS III, L.P.
BY: TECHNOLOGY FUNDING INC.,
MANAGING GENERAL PARTNER
By: /s/ Technology Funding Inc.
---------------------------------
(Signature)
Title:
------------------------------
TECHNOLOGY FUNDING VENTURE PARTNERS IV, AN
AGGRESSIVE GROWTH FUND, L.P.
BY: TECHNOLOGY FUNDING INC.,
MANAGING GENERAL PARTNER
By: /s/ Technology Funding Inc.
---------------------------------
(Signature)
Title:
------------------------------
TECHNOLOGY FUNDING VENTURE PARTNERS V, AN
AGGRESSIVE GROWTH FUND, L.P.
BY: TECHNOLOGY FUNDING INC.,
MANAGING GENERAL PARTNER
By: /s/ Technology Funding Inc.
---------------------------------
(Signature)
Title:
------------------------------
</TABLE>
SIGNATURE PAGE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 21
<TABLE>
<S> <C>
KAREN & DAN LYNCH FAMILY TRUST
By: /s/ Karen & Dan Lynch
---------------------------------
Title: Co-Trustees
------------------------------
/s/ Charles Splaine
---------------------------------
CHARLES SPLAINE
/s/ Lore McGovern
---------------------------------
LORE MCGOVERN
</TABLE>
SIGNATURE PAGE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 22
<TABLE>
<S> <C>
HC CROWN CORP.
By: /s/ Dwight Arn
---------------------------------
Title: Vice President
------------------------------
</TABLE>
SIGNATURE PAGE
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 23
================================================================================
WIRE NETWORKS, INC.
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
JULY 9, 1997
================================================================================
<PAGE> 24
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. AGREEMENT TO SELL AND PURCHASE...............................................1
1.1 Authorization of Shares......................................................1
1.2 Sale and Purchase............................................................1
SECTION 2. CLOSING, DELIVERY AND PAYMENT................................................2
2.1 Closing Date.................................................................2
2.2 Delivery.....................................................................2
2.3 Subsequent Sales of Shares...................................................2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................2
3.1 Organization, Good Standing and Qualification................................2
3.2 Capitalization; Voting Rights................................................2
3.3 Authorization; Binding Obligations...........................................3
3.4 Financial Statements.........................................................3
3.5 Liabilities..................................................................4
3.6 Agreements: Action...........................................................4
3.7 Obligations to Related Parties...............................................5
3.8 Changes......................................................................5
3.9 Title to Properties and Assets; Liens. etc...................................6
3.10 Patents and Trademarks.......................................................6
3.11 Compliance with Other Instruments............................................7
3.12 Litigation...................................................................7
3.13 Tax Returns and Payments.....................................................8
3.14 Employees....................................................................8
3.15 Proprietary Information and Inventions Agreements............................8
3.16 Obligations of Management....................................................8
3.17 Registration Rights..........................................................8
3.18 Compliance with Laws; Permits................................................8
3.19 Environmental and Safety Laws................................................9
3.20 Offering Valid...............................................................9
3.21 Full Disclosure..............................................................9
3.22 Qualified Small Business.....................................................9
3.23 Minute Books.................................................................9
3.24 Section 83(b) Elections......................................................9
3.25 Real Property Holding Corporation...........................................10
3.26 Insurance...................................................................10
3.27 Small Business Concern......................................................10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............................10
4.1 Requisite Power and Authority...............................................10
4.2 Consents....................................................................10
</TABLE>
i.
<PAGE> 25
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
4.3 Investment Representations..................................................10
4.4 Transfer Restrictions.......................................................12
SECTION 5. CONDITIONS TO CLOSING.......................................................12
5.1 Conditions to Purchasers' Obligations at the Closing........................12
5.2 Conditions to Obligations of the Company....................................13
SECTION 6. MISCELLANEOUS...............................................................14
6.1 Use of Proceeds.............................................................14
6.2 Governing Law...............................................................14
6.3 Survival....................................................................14
6.4 Successors and Assigns......................................................14
6.5 Entire Agreement............................................................14
6.6 Separability................................................................14
6.7 Amendment and Waiver........................................................14
6.8 Delays or Omissions.........................................................15
6.9 Notices.....................................................................15
6.10 Expenses....................................................................15
6.11 Attorneys' Fees.............................................................15
6.12 Titles and Subtitles........................................................15
6.13 Pronouns....................................................................16
6.14 Counterparts................................................................16
6.15 Broker's Fees...............................................................16
6.16 California Corporate Securities Law.........................................16
</TABLE>
ii.
<PAGE> 26
LIST OF EXHIBITS
<TABLE>
<S> <C>
Schedule of Purchasers Exhibit A
Restated Articles Exhibit B
Schedule of Exceptions Exhibit C
Amended and Restated Investors' Rights Agreement Exhibit D
Amended and Restated Co-Sale and Voting Agreement Exhibit E
List of Shareholders Exhibit F
Financial Statements Exhibit G
Proprietary Information and Inventions Agreement Exhibit H
Form of Legal Opinion Exhibit I
Investment Agreement Exhibit J
</TABLE>
iii.
<PAGE> 27
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
NUMBER AGGREGATE
NAME OF PURCHASER OF SHARES PURCHASE PRICE
- ----------------------------------------------------------- ------------ -----------------
<S> <C> <C>
US WEST Interactive Services, Inc. 1,315,790 $4,000,001.60
9000 E. Nichols Avenue, Suite 100
Englewood, CO 80112
El Dorado Ventures III, L.P. 169,421 $515,039.84
El Dorado Technology IV, L.P. 3,639 $11,062.56
851 Fremont Avenue, Suite 112
Los Altos, CA 94024
AVI Capital, L.P. 534,407 $1,624,597.28
Associated Venture Investors III, L.P. 80,832 $245,729.28
AVI Silicon Valley Partners, L.P. 5,253 $15,969.12
One First Street, Suite 12
Los Altos, CA 94022
Technology Funding Partners III, L.P. 71,576 $217,591.04
Technology Funding Venture Partners IV, an Aggressive 35,295 $107,296.80
Growth Fund, L.P.
Technology Funding Venture Partners V, an Aggressive 2,740 $8,329.60
Growth Fund, L.P.
2000 Alameda de las Pulgas, Suite 250
San Mateo, CA 94403
Karen & Dan Lynch Family Trust 34,612 $105,220.48
25660 Lalanne Court
Los Altos Hills, CA 94022
Charles Splaine 41,119 $125,001.76
15951 Los Gatos Boulevard
Los Gatos, CA 95032
Lore McGovern 16,448 $50,001.92
811 Chiltern Road
Hillsborough, CA 94010
HC Crown Corp. 1,315,790 $4,000,001.60
2501 McGee
Kansas City, MO 64108
Attn: Dwight Arn
</TABLE>
<PAGE> 28
<TABLE>
<S> <C> <C>
TOTALS: 3,626,922 $11,025,842.88
</TABLE>
5.
<PAGE> 29
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
SEE TAB NO. 6
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 30
EXHIBIT C
SCHEDULE OF EXCEPTIONS
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 31
EXHIBIT D
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
SEE TAB NO. 10
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 32
EXHIBIT E
AMENDED AND RESTATED CO-SALE AND VOTING AGREEMENT
SEE TAB NO. 11
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 33
EXHIBIT F
LIST OF SHAREHOLDERS
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 34
EXHIBIT G
FINANCIAL STATEMENTS
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 35
EXHIBIT H
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 36
EXHIBIT I
FORM OF LEGAL OPINION
SEE TAB NO. 14
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 37
EXHIBIT J
INVESTMENT AGREEMENT
SEE TAB NO. 18
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.19
WOMEN.COM NETWORKS
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of June 5, 1998, by and among WOMEN.COM NETWORKS, a California
corporation (the "COMPANY"), and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as EXHIBIT A (which persons and entities are hereinafter
collectively referred to as "PURCHASERS" and each individually as a
"PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of 7,598,784 shares of its Series D Preferred Stock (the "SHARES");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein;
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
AGREEMENT
SECTION 1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (i) the sale and issuance to
Purchasers of the Shares and (ii) the issuance of the shares of Common Stock to
be issued on conversion of the Shares (the "CONVERSION SHARES"). The Shares and
the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Amended and Restated Articles of Incorporation of
the Company, in the form attached hereto as Exhibit B (the "RESTATED ARTICLES").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company hereby agrees to issue and sell
to each Purchaser and each Purchaser agrees to purchase from the Company, the
number of Shares set forth opposite such Purchaser's name on Exhibit A, at a
purchase price of $3.29 per Share.
1.
<PAGE> 2
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") shall take place on the date of this Agreement, at the
offices of the Company or at such other time and place upon which the Company
and a majority of the Purchasers shall agree.
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Closing by each Purchaser, against
payment of the purchase price therefor by check or wire transfer made payable to
the order of the Company, cancellation of indebtedness or any combination of the
foregoing.
2.3 SUBSEQUENT SALES OF SHARES. At any time on or before the 90th day
following the Closing, the Company may sell up to the balance of the authorized
shares of Series D Preferred Stock not sold at the Closing to such persons as
may be approved by the Board of Directors of the Company. All such sales shall
be made on the terms and conditions set forth in this Agreement, including,
without limitation, the representations and warranties by such Purchasers as set
forth in Section 4. Any Shares of Series D Preferred Stock sold pursuant to this
Section 2.3 shall be deemed to be "Shares" for all purposes under this Agreement
and any purchasers thereof shall be deemed to be "Purchasers" for all purposes
under this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on the Schedule of Exceptions attached hereto as
EXHIBIT C, the Company hereby represents and warrants to each Purchaser as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amended and Restated Investors' Rights Agreement in the form
attached hereto as Exhibit D (the "INVESTORS' RIGHTS AGREEMENT"), the Amended
and Restated Co-Sale and Voting Agreement in the form attached as Exhibit E (the
"CO-SALE AGREEMENT"), to issue and sell the Shares, to issue the Conversion
Shares, to carry out the provisions of this Agreement, the Investors' Rights
Agreement, the Co-Sale Agreement and the Restated Articles and to carry on its
business as presently conducted and as presently proposed to be conducted. The
Company is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or its business. The
Company owns no equity securities of any other corporation, limited partnership
or similar entity. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company, immediately prior to the Closing, will consist of: thirty million
(30,000,000) shares of Common Stock, one million four hundred fifty seven six
hundred thirty two (1,457,632) shares of which
2.
<PAGE> 3
are issued and outstanding and three million eighty thousand six hundred thirty
three (3,080,633) shares of which are reserved for future issuance to employees,
consultants and directors upon the exercise of options to purchase the Company's
Common Stock; and eighteen million two hundred eighty-six thousand eight hundred
ten (18,286,810) shares of Preferred Stock, of which two million seven hundred
seven thousand four hundred three (2,707,403) shares are designated Series A
Preferred Stock, of which two million six hundred eighty-five thousand one
hundred eighty-one (2,685,181) shares are issued and outstanding, of which five
hundred seventy-nine thousand four hundred seven (579,407) shares are designated
Series B Preferred Stock, of which five hundred seventy-nine thousand four
hundred seven (579,407) shares are issued and outstanding, of which seven
million (7,000,000) shares are designated Series C Preferred Stock, of which
three million six hundred twenty six thousand nine hundred twenty two
(3,626,922) shares are issued and outstanding and of which eight million
(8,000,0000) shares are designated Series D Preferred Stock, none of which are
issued and outstanding. All issued and outstanding shares of the Company's
Common Stock, Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock (i) have been duly authorized and validly issued to the persons
listed on Exhibit F hereto, (ii) are fully paid and nonassessable, and (iii)
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. The rights, preferences, privileges and restrictions
of the Shares are as stated in the Restated Articles. The Conversion Shares have
been duly and validly reserved for issuance. Other than as set forth on Exhibit
F, and except (i) as may be granted pursuant to the Investors' Rights Agreement
and the Co-Sale Agreement, (ii) a warrant for the purchase of an aggregate of
twenty-two thousand two hundred twenty-two (22,222) shares of Series A Preferred
Stock, (iii) warrants for the purchase of an aggregate of one hundred ten
thousand five hundred twenty four (110,524) shares of Common Stock, (iv)
warrants for the purchase of an aggregate of one million seven hundred
seventy-five thousand three hundred thirty (1,775,330) shares of Series C
Preferred Stock, (v) a warrant for the purchase of an aggregate of twenty four
thousand six hundred seventy one (24,671) shares of Series C Preferred Stock or
Series D Preferred Stock, (vi) warrant to be issued to BT Alex.Brown
Incorporated pursuant to this transaction to purchase Common Stock of the
Company, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
shareholder agreements, or agreements of any kind for the purchase or
acquisition from the Company of any of its securities. When issued in compliance
with the provisions of this Agreement and the Restated Articles, the Shares and
the Conversion Shares will be validly issued, fully paid and nonassessable, and
will be free of any liens or encumbrances; provided, however, that the Shares
and the Conversion Shares may be subject to restrictions on transfer under state
and/or federal securities laws as set forth herein or as otherwise required by
such laws at the time a transfer is proposed.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the Conversion Shares pursuant to the Restated
Articles, has been taken or will be taken prior to the Closing. The Agreement,
the Investors' Rights Agreement and the Co-Sale Agreement, when executed and
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except
3.
<PAGE> 4
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws of general application affecting enforcement of creditors' rights;
(ii) general principles of equity that restrict the availability of equitable
remedies; and (iii) to the extent that the enforceability of the indemnification
provisions in Section 2.9 of the Investors' Rights Agreement may be limited by
applicable laws. The sale of the Shares and the subsequent conversion of Shares
into Conversion Shares are not and will not be subject to any preemptive rights
or rights of first refusal other than the right of first refusal set forth in
the Investors' Rights Agreement, which has been waived in accordance with that
agreement.
3.4 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
(i) its audited balance sheet as at December 31, 1997 and audited statement of
income for the year ending December 31, 1997 and (ii) its unaudited balance
sheet as at March 31, 1998 and unaudited statement of income for the three month
period ending March 31, 1998 (collectively, the "FINANCIAL STATEMENTS"), copies
of which are attached hereto as Exhibit G. The Financial Statements, together
with the notes thereto, are complete and correct in all material respects, have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except as
disclosed therein, and present fairly the financial condition and position of
the Company as of December 31, 1997 and March 31, 1998, provided, however, that
the interim financial statements are subject to normal recurring year-end audit
adjustments (which are not expected to be material), and do not contain all
footnotes required under generally accepted accounting principles.
3.5 LIABILITIES. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to March 31, 1998, which in the aggregate do not
exceed $100,000.
3.6 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of the
Company's Common Stock, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates
or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $100,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company (other than licenses arising
from the purchase of "off the shelf" or other standard products), or (iii)
provisions restricting or affecting the development, manufacture or distribution
of the Company's products or services, or (iv) indemnification by the Company
with respect to infringements of proprietary rights (other than indemnification
obligations arising from purchase or sale agreements entered into in the
ordinary course of business).
4.
<PAGE> 5
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities (other than with respect to dividend obligations,
distributions, indebtedness and other obligations incurred in the ordinary
course of business or as disclosed in the Financial Statements) individually in
excess of $100,000 or, in the case of indebtedness and/or liabilities
individually less than $100,000, in excess of $200,000 in the aggregate, (iii)
made any loans or advances to any person, other than ordinary advances for
travel expenses or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company has not engaged in the past three months in any
discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company, or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company, (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company), (d) the Investors' Rights Agreement, and (e) the
Co-Sale Agreement.
3.8 CHANGES. Since March 31, 1998, there has not been to the Company's
knowledge:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition or operations of
the Company;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
5.
<PAGE> 6
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(l) Any change in any material agreement to which the Company is
a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company, including compensation agreements with the Company's employees; or
(m) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects of
the Company.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good and
marketable title to its tangible properties and assets, including the tangible
properties and assets reflected in the balance sheet as at March 31, 1998
(included in the Financial Statements), and good title to its leasehold estates,
to the Company's knowledge, in each case subject to no mortgage, pledge, lien,
lease, encumbrance or charge, other than (i) those resulting from taxes which
have not yet become delinquent, (ii) minor liens and encumbrances which do not
materially detract from the value of the property subject thereto or materially
impair the
6.
<PAGE> 7
operations of the Company, and (iii) those that have otherwise arisen in the
ordinary course of business.
3.10 PATENTS AND TRADEMARKS. The Company owns or possesses sufficient
legal rights to all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information and other proprietary rights and processes necessary
for its business as now conducted and as proposed to be conducted, without any
known infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of "off the shelf" or standard products. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with their duties to the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Restated Articles or Bylaws, or of any provision
of any mortgage, indenture, contract, agreement, instrument or contract to which
it is party or by which it is bound or of any judgment, decree, order, writ or,
to its knowledge, any statute, rule or regulation applicable to the Company
which would materially and adversely affect the business, assets, liabilities,
financial condition, operations or prospects of the Company. The execution,
delivery, and performance of and compliance with this Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement and the issuance and sale of the
Shares pursuant hereto and of the Conversion Shares pursuant to the Restated
Articles, will not result in any such material violation, or be in conflict with
or constitute a default under any such term, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
7.
<PAGE> 8
3.12 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company
that questions the validity of this Agreement, the Investors' Rights Agreement
or the Co-Sale Agreement or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware of any such material unasserted claim which,
if asserted, would likely be determined adversely to the Company. The foregoing
includes, without limitation, actions pending or threatened or unasserted claims
(as described in the preceding sentence) involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
3.13 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and to the Company's
knowledge all other taxes due and payable by the Company on or before the
Closing have been paid or will be paid prior to the time they become delinquent.
3.14 EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Company's knowledge, threatened with respect to the Company. No employee has
any agreement or contract, written or verbal, regarding his or her employment.
To the Company's knowledge, no employee of the Company, nor any consultant with
whom the Company has contracted, is in violation of any term of any employment
contract, patent disclosure agreement or any other agreement relating to the
right of any such individual to be employed by, or to contract with, the Company
because of the nature of the business to be conducted by the Company; and to the
Company's knowledge the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice alleging that any such violation has occurred. Each employee is
employed on an "at will" basis and has no right to any material compensation
following termination of employment with the Company. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any officer, key employee or group of
key employees.
3.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each key
employee, officer and director of the Company has executed a Proprietary
Information and Inventions Agreement substantially in the form of Exhibit H
attached hereto.
8.
<PAGE> 9
3.16 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is currently
devoting one hundred percent (100%) of his or her business time to the conduct
of the business of the Company. The Company is not aware of any officer or key
employee of the Company planning to work less than full time at the Company in
the future.
3.17 REGISTRATION RIGHTS. Except as required pursuant to the Investors'
Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to register (as defined in Section 1.1 of the Investors'
Rights Agreement) any of the Company's presently outstanding securities or any
of its securities that may hereafter be issued.
3.18 COMPLIANCE WITH LAWS; PERMITS. To its knowledge, the Company is not
in violation of any applicable statute, rule, regulation, order or restriction
of any domestic or foreign government or any instrumentality or agency thereof
in respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of the Shares or the Conversion Shares, except such as has been duly
and validly obtained or filed, or with respect to any filings that must be made
after the Closing, as will be filed in a timely manner. The Company has all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or financial
condition of the Company and believes it can obtain, without undue burden or
expense, any similar authority for the conduct of its business as planned to be
conducted.
3.19 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is not
in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.3 hereof, the offer, sale
and issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the Company nor
any agent on its behalf has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Shares to any
person or persons so as to bring the sale of such Shares by the Company within
the registration provisions of the Securities Act.
3.21 FULL DISCLOSURE. This Agreement, the Exhibits hereto, the
Investors' Rights Agreement, the Co-Sale Agreement and all other documents
delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, do not contain any untrue statement of a material
9.
<PAGE> 10
fact nor, to the Company's knowledge, omit to state a material fact necessary in
order to make the statements contained herein or therein not misleading.
3.22 QUALIFIED SMALL BUSINESS. The Company represents and warrants to
the Purchasers that it qualifies as a "Qualified Small Business" as defined in
Section 1202(d) of the Internal Revenue Code of 1986, as amended (the "CODE").
The Company covenants that so long as it reasonably believes that the Shares
(and/or Conversion Shares) held by Purchaser or a transferee would qualify as
Qualified Small Business Stock as defined in Section 1202(c) of the Code it will
timely file all reports or filings with the Internal Revenue Service required of
a Qualified Small Business.
3.23 MINUTE BOOKS. The minute books of the Company provided to the
Purchasers contain a complete summary of all meetings of directors and
shareholders since the time of incorporation.
3.24 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3.25 INSURANCE. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
3.26 SMALL BUSINESS CONCERN. The Company, together with its affiliates
(as that term is defined in 13 C.F.R. Section 121.103), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder (the "SMALL BUSINESS
INVESTMENT ACT") and Part 121 of Title 13 of the United States Code of Federal
Regulations ("CFR"). The information provided by the Company to each Purchaser
that is a licensed Small Business Investment Company (an "SBIC PURCHASER") on
SBA Forms 480, 652 and 1031 delivered in connection herewith is accurate and
complete.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Investors' Rights Agreement and to carry out their provisions.
All action on Purchaser's part required for the lawful execution and delivery of
this Agreement, the Investors' Rights Agreement and the Co-Sale Agreement have
been or will be effectively taken prior to the Closing. Upon their execution and
delivery, this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement will be valid and binding obligations of Purchaser, enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, (ii) general principles of equity
that restrict the availability of equitable
10.
<PAGE> 11
remedies, and (iii) to the extent that the enforceability of the indemnification
provisions of Section 2.9 of the Investors' Rights Agreement may be limited by
applicable laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in the
Agreement, the Investors' Rights Agreement or the Co-Sale Agreement have been or
shall have been obtained prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(c) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(d) INVESTMENT. Purchaser is acquiring the Shares (or any of the
Common Stock into which the Shares are convertible) for investment for its own
account and not with a view to, or for resale in connection with, any
distribution thereof, and Purchaser has no present intention of selling or
distributing the Shares (or any of the Common Stock into which the Shares are
convertible). Purchaser understands that the Shares (and the Common Stock into
which the Shares are convertible) to be purchased by it have not been registered
under the Securities Act which depends upon, among other things, the bona fide
nature of the investment intent as expressed herein.
11.
<PAGE> 12
(e) COMPANY INFORMATION. Purchaser has received and read the
Financial Statements and has had an opportunity to discuss the Company's
business, management and financial affairs with directors, officers and
management of the Company and has had the opportunity to review the Company's
operations and facilities. Purchaser has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
the terms and conditions of this investment.
(f) RESTRICTED SECURITIES. Purchaser acknowledges and agrees
that the Shares and the Conversion Shares must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934) and the number of shares
being sold during any three-month period not exceeding specified limitations.
4.4 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees that
the Shares and the Conversion Shares are subject to restrictions on transfer as
set forth in the Investors' Rights Agreement.
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct as of the Closing Date with the same force and
effect as if they had been made as of the Closing Date, and the Company shall
have performed all obligations and conditions herein required to be performed or
observed by it on or prior to the Closing.
(b) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement (except for such as may be properly
obtained subsequent to the Closing).
(c) FILING OF RESTATED ARTICLES. The Restated Articles shall
have been filed with the Secretary of State of the State of California.
(d) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
12.
<PAGE> 13
(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(f) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President and the Chief
Financial Officer of the Company, dated the date of the Closing, to the effect
that the conditions specified in subsections (a) through (e) of this Section 5.1
have been satisfied.
(g) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights Agreement
substantially in the form attached hereto as EXHIBIT D shall have been executed
and delivered by the parties thereto.
(h) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in
the form attached hereto as EXHIBIT E shall have been executed and delivered by
Ellen Pack, Marleen McDaniel and the Company.
(i) BOARD OF DIRECTORS. Upon the Closing, the authorized size of
the Board of Directors of the Company shall be nine members and the Board shall
consist of Ellen Pack, Marleen McDaniel, Shanda Bahles, Barry Weinman, Mary
McClure, Philip Monego, Michael Edelhart, Natalie Egleston and one
representative of the Series D Preferred Stock.
(j) LEGAL OPINION. The Purchasers shall have received from legal
counsel to the Company an opinion addressed to them, dated as of the Closing
Date, in substantially the form attached hereto as EXHIBIT I.
(k) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
special counsel, and the Purchasers and their special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as they may reasonably request.
(l) SBA DOCUMENTS. The Company shall have executed and delivered
to each Purchaser that is a licensed Small Business Investment Company a Size
Status Declaration on SBA Form 480 and an Assurance of Compliance on SBA Form
652, and shall have provided to each such Purchaser information necessary for
the preparation of a Portfolio Financing Report on SBA Form 1031.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares at each Closing is subject to the satisfaction, on
or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchasers in Section 4 hereof shall be true and correct in
all material
13.
<PAGE> 14
respects at the date of the Closing, with the same force and effect as if they
had been made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by Purchasers on or before the Closing.
(c) FILING OF RESTATED ARTICLES. The Restated Articles shall
have been filed with the Secretary of State of the State of California.
(d) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights Agreement
substantially in the form attached hereto as EXHIBIT D shall have been executed
and delivered by the Purchasers.
(e) ESCROW AGREEMENT. An Escrow Agreement substantially in the
form attached hereto as EXHIBIT J shall have been executed and delivered by the
Purchasers.
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement (except for such as may be properly
obtained subsequent to the Closing).
SECTION 6. MISCELLANEOUS.
6.1 USE OF PROCEEDS. The Company hereby covenants and agrees that the
proceeds from the sale of the Shares shall be used to finance working capital
requirements.
6.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
6.3 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation and the closing of the transactions
contemplated hereby. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
6.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.5 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Investors' Rights Agreement, the Co-Sale Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties
14.
<PAGE> 15
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
6.6 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.7 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(c) Any amendment or waiver effected in accordance with this
Section 6.7 shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities and the
Company.
6.8 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Investors'
Rights Agreement, the Co-Sale Agreement or the Restated Articles, shall impair
any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Purchaser's part of any breach, default or noncompliance under this
Agreement or under the Restated Articles or any waiver on such party's part of
any provisions or conditions of the Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Restated Articles, Bylaws, or
otherwise afforded to any party, shall be cumulative and not alternative.
6.9 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex; (iii) five days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) one day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address as set
forth on the signature page hereof and to Purchaser at the address set forth on
EXHIBIT A attached hereto or at such other
15.
<PAGE> 16
address as the Company or Purchaser may designate by ten days advance written
notice to the other parties hereto.
6.10 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.11 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
6.12 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
6.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.14 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein, except that the Company shall be obligated
to pay BT Alex. Brown Incorporated its fees pursuant to its engagement letter
with the Company related to this transaction and a warrant to purchase shares of
Common Stock of the Company upon the Closing. Each party hereto further agrees
to indemnify each other party for any claims, losses or expenses incurred by
such other party as a result of the representation in this Section 6.14 being
untrue.
6.15 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
[THIS SPACE INTENTIONALLY LEFT BLANK]
16.
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this SERIES D
PREFERRED STOCK PURCHASE AGREEMENT as of the date first above written.
COMPANY: WOMEN.COM NETWORKS
By:/s/ Marleen McDaniel
---------------------------------
Marleen McDaniel, President
INVESTORS:
By:
---------------------------------
(Signature)
Title:
------------------------------
SIGNATURE PAGE
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 18
================================================================================
WOMEN.COM NETWORKS
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
FIRST CLOSING ON JUNE 5TH, 1998 AND SECOND CLOSING ON JULY 24TH, 1998
================================================================================
<PAGE> 19
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
SECTION 1. AGREEMENT TO SELL AND PURCHASE................................................1
1.1 Authorization of Shares.......................................................1
1.2 Sale and Purchase.............................................................1
SECTION 2. CLOSING, DELIVERY AND PAYMENT.................................................2
2.1 Closing Date..................................................................2
2.2 Delivery......................................................................2
2.3 Subsequent Sales of Shares....................................................2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................2
3.1 Organization, Good Standing and Qualification.................................2
3.2 Capitalization; Voting Rights.................................................2
3.3 Authorization; Binding Obligations............................................3
3.4 Financial Statements..........................................................4
3.5 Liabilities...................................................................4
3.6 Agreements; Action............................................................4
3.7 Obligations to Related Parties................................................5
3.8 Changes.......................................................................5
3.9 Title to Properties and Assets; Liens, etc....................................6
3.10 Patents and Trademarks........................................................7
3.11 Compliance with Other Instruments.............................................7
3.12 Litigation....................................................................8
3.13 Tax Returns and Payments......................................................8
3.14 Employees.....................................................................8
3.15 Proprietary Information and Inventions Agreements.............................8
3.16 Obligations of Management.....................................................9
3.17 Registration Rights...........................................................9
3.18 Compliance with Laws; Permits.................................................9
3.19 Environmental and Safety Laws.................................................9
3.20 Offering Valid................................................................9
3.21 Full Disclosure...............................................................9
</TABLE>
i.
<PAGE> 20
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
3.22 Qualified Small Business.....................................................10
3.23 Minute Books.................................................................10
3.24 Real Property Holding Corporation............................................10
3.25 Insurance....................................................................10
3.26 Small Business Concern.......................................................10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.............................10
4.1 Requisite Power and Authority................................................10
4.2 Consents.....................................................................11
4.3 Investment Representations...................................................11
4.4 Transfer Restrictions........................................................12
SECTION 5. CONDITIONS TO CLOSING........................................................12
5.1 Conditions to Purchasers' Obligations at the Closing.........................12
5.2 Conditions to Obligations of the Company.....................................13
SECTION 6. MISCELLANEOUS................................................................14
6.1 Use of Proceeds..............................................................14
6.2 Governing Law................................................................14
6.3 Survival.....................................................................14
6.4 Successors and Assigns.......................................................14
6.5 Entire Agreement.............................................................14
6.6 Separability.................................................................15
6.7 Amendment and Waiver.........................................................15
6.8 Delays or Omissions..........................................................15
6.9 Notices......................................................................15
6.10 Attorneys' Fees..............................................................16
6.11 Titles and Subtitles.........................................................16
6.12 Pronouns.....................................................................16
6.13 Counterparts.................................................................16
6.14 Broker's Fees................................................................16
6.15 California Corporate Securities Law..........................................16
</TABLE>
ii.
<PAGE> 21
LIST OF EXHIBITS
<TABLE>
<S> <C>
Schedule of Purchasers Exhibit A
Restated Articles Exhibit B
Schedule of Exceptions Exhibit C
Amended and Restated Investors' Rights Agreement Exhibit D
Amended and Restated Co-Sale and Voting Agreement Exhibit E
List of Shareholders Exhibit F
Financial Statements Exhibit G
Proprietary Information and Inventions Agreement Exhibit H
Form of Legal Opinion Exhibit I
Escrow Agreement Exhibit J
</TABLE>
iii.
<PAGE> 22
EXHIBIT A
SCHEDULE OF PURCHASERS
SERIES D PREFERRED STOCK FINANCING
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
ABS EMPLOYEES' VENTURE FUND LIMITED PARTNERSHIP 152,196 $500,724.84
375 West Padonia Road
Timonium, MD 21093
Attn: Dan Gunter
ACHIEVER, INC. 30,395 $99,999.55
c/o International Trade & Investment
Box N-1201-Marlborough Hse
Cumberland St.
Nassau, Bahamas
Attn: Roy Bouchier
ALFRED J. ANZALONE LIMITED FAMILY PARTNERSHIP 30,000 $98,700.00
7893 West Mesa Vista Avenue
Las Vegas, NV 89113-1572
Attn: Alfred J. Anzalone
AVI CAPITAL L.P. 129,058 $424,600.82
One First Street, Suite 12
Los Altos, CA 94022
Attn: Barry Weinman
AVI SILICON VALLEY PARTNERS 1,474 $4,849.46
One First Street, Suite 12
Los Altos, CA 94022
Attn: Barry Weinman
ASSOCIATED VENTURE INVESTORS III 21,444 $70,550.76
One First Street, Suite 12
Los Altos, CA 94022
Attn: Barry Weinman
</TABLE>
EXHIBIT A
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 23
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
CHARLES C. BAUM 48,000 $157,920.00
c/o United Holdings, Inc.
2545 Wilkens Avenue
Baltimore, MD 21223-3333
BETTS FAMILY, L.C. 6,079 $19,999.91
1619 Wythe Road
Lynchburg, VA 24501
Attn: W. Earle Betts III
W. EARLE BETTS III 6,079 $19,999.91
1619 Wythe Road
Lynchburg, VA 24501
LAWRENCE OWEN BROWN, TRUSTEE LAWRENCE OWEN BROWN 15,200 $50,008.00
FAMILY TRUST U/D/T DTD. 10/30/87
19753 Farwell Avenue
Saratoga, CA 95070
SIDNEY BROWN 15,197 $49,998.13
24 Holly Oak Drive
Voorhees, NJ 08043-1533
TIMOTHY BRIGHT 15,197 $49,998.13
C/o Standard Mortgage Holding Company
300 Plaza, One Shell Square
New Orleans, LA 70139
JOHN D. CRAFT, JR. 30,395 $99,999.55
3640 Edinborough Drive
Rochester Hills, MI 48306-3632
J&T INVESTMENTS 30,395 $99,999.55
c/o John D. Crawford and Thomas Keefe
11817 Canon Boulevard, Suite 600
Newport News, VA 23606
JACK DANE 30,395 $99,999.55
1719 Green Street
San Francisco, CA 94123
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
DANIEL F. DENT 19,000 $62,510.00
2 East Read Street, 6th Floor
Baltimore, MD 21202
ORRIN DEVINSKY 45,595 $150,007.55
97 Westview Road
Short Hills, NJ 07078-1268
DEBRA DIAMOND & ASSOCIATES, INC. 9,118 $29,998.22
c/o Dauphin Capital Partners
1921 West Joppa Road
Baltimore, MD 21204-1848
3GT INVESTMENT PARTNERSHIP 60,790 $199,999.10
845 Larch Avenue
Elmhurst, IL 60126-1196
Attn: Craig J. Duchossois
EDWARD M. DUNN 30,395 $99,999.55
17518 Woodcamp Road
Mt. Airy, MD 21771-3226
THE HYMAN DUSHMAN FAMILY TRUST 30,395 $99,999.55
7608-B Lexington Club Boulevard
Del Ray Beach, FL 33446-3413
Attn: Hyman Dushman
D.W.B. ASSOCIATES 3,039 $9,998.31
1619 Wythe Road
Lynchburg, VA 24501
Attn: W. Earle Betts III
GEORGE ERDI AND MARIA ERDI 40,000 $131,600.00
2 Longspur
Portola Valley, CA 94028
ESSEX HIGH TECHNOLOGY FUND, L.P. 34,350 $113,011.50
C/o Essex Investment Management Company
125 High Street, 29th Floor
Boston, MA 02110-2702
Attn: Pam Cutrell
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
ESSEX HIGH TECHNOLOGY FUND (BERMUDA), L.P. 148,020 $486,985.80
C/o Essex Investment Management Company
125 High Street, 29th Floor
Boston, MA 02110-2702
Attn: Pam Cutrell
FANAROFF INVESTMENT PARTNERSHIP 30,395 $99,999.55
5809 Nicholson Lane, Apt. 1009
Rockville, MD 20852
STANFORD C. FINNEY, JR. 49,665 $163,397.85
8201 Preston Road, Suite 400
Dallas, TX 75225
DAVID A. FRIEDMAN, TRUSTEE, 1993 REVOCABLE TRUST 22,796 $74,998.84
2637 Larkin Street
San Francisco, CA 94109
JAY H. GERSHBERG 30,395 $99,999.55
c/o Bagel Bros.
6000 North Bailey Avenue, Suite 2D
Amherst, NY 14226-5102
ROBERT S. GERSHBERG 30,395 $99,999.55
c/o Bagel Bros.
6000 North Bailey Avenue, Suite 2D
Amherst, NY 14226-5102
HEATHER GILKER 3,040 $10,001.60
7303 Tokalm Drive
Dallas, TX 75214
MARESOL L.P. 30,395 $99,999.55
c/o Henry Gonsalves
7 Great Meadows Lane
Lincoln, RI 02865
GREENWOOD EQUITIES, LLC 48,632 $159,999.28
c/o Piper & Marbury
36 S. Charles Street
Baltimore, MD 21201
Attn: Stanard T. Klinefelter
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
CHARLES R. HART, JR. 20,000 $65,800.00
c/o Hart & Watters
12400 Wilshire Boulevard, Suite 500
Los Angeles, CA 90025
H & K PARTNERSHIP 30,395 $99,999.55
c/o Morris Helman
7100 Rutherford Road
Baltimore, MD 21244-2702
JPK PARTNERS 258,359 $850,001.11
c/o Argonaut Securities Co.
1155 Battery Street, LS7
San Francisco, CA 94111
Attn: Peter Haas, Jr.
JAMES W. JOHNSTON 30,395 $99,999.55
c/o Stonemaker Ent., Inc.
380 Knollwood Street, Suite 570
Winston-Salem, NC 27103
KLAUS KRETSCHMER 30,395 $99,999.55
46 Brook Way
Demarest, NJ 07627
ALBERT LAMAR 30,395 $99,999.55
5901 Garfield Street
New Orleans, LA 70115
LINCOLN TRUST COMPANY 30,000 $98,700.00
P.O. Box 5831
Denver, CO 80217
Attn: Tamara V. Armour
H. MARK LUNENBURG 30,000 $98,700.00
11 Whitehall Place
Farmington, CT 06032
DAN LYNCH 30,395 $99,999.55
25660 La Lanne Court
Los Altos Hills, CA 94022
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
MONTAGUE-BETTS COMPANY 24,316 $79,999.64
1619 Wythe Road
Lynchburg, VA 24501
Attn: W. Earle Betts III
PHILIP MONEGO, SR. 50,000 $164,500.00
811 Revere Way
Woodside, CA 94062
WILLIAM A. NEWSOM 15,197 $49,998.13
c/o Newsom Associates
3717 Buchanan Street, 2nd Floor
San Francisco, CA 94123
ALBERT AND PEARL NIPON 30,395 $99,999.55
15 W. Old Gulph Road
Gladwyne, PA 19035
NORTHPORT PRIVATE EQUITY, LLC 30,395 $99,999.55
122 S. Michigan Avenue, Suite 1700
Chicago, IL 60603
Attn: David T. Shelby
LOREN PACK 30,395 $99,999.55
215 East 68th Street, Apt. 29G
New York, NY 10021
DAVID H. PARKS 15,197 $49,998.13
1281 Windimer Drive
Los Altos, CA 94024
RUSSELL AND SHERRY PATERRA, AS COMMUNITY PROPERTY 15,197 $49,998.13
16 Craig Avenue
Piedmont, CA 94611
G. RICHARD PATTON 6,079 $19,999.91
2035 St. Andrews Drive
Nevillewood, PA 15142-1012
PHOENIX SMALL CAP FUND 455,930 $1,500,009.70
56 Prospect Street
Hartford, CT 06115
Attn: Tom Gilbert
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
DONALD L. POARCH 10,000 $32,900.00
1041 Conrad Saver
Houston, TX 77043
PRISM IV INVESTMENT PARTNERSHIP 33,435 $110,001.15
1300 York Road, Suite 180
Lutherville, MD 21093
Attn: Charles Freeland
RAINBOW TRADING PARTNERS, LTD. 49,665 $163,397.85
8201 Preston Road, Suite 400
Dallas, TX 75225
Attn: Stanford C. Finney, Jr.
RAINBOW TRADING VENTURE PARTNERS, L.P. 52,640 $173,185.60
8201 Preston Road, Suite 400
Dallas, TX 75225
Attn: Stanford C. Finney, Jr.
HOWARD E. RACHOFSKY 45,595 $150,007.55
c/o Regal Capital
8201 Preston Road, Suite 400
Dallas, TX 75225
KEVIN P. REILLY, SR. 15,197 $49,998.13
Post Office Box 66613
Baton Rouge, LA 70896
SEAN REILLY 15,197 $49,998.13
Post Office Box 66338
Baton Rouge, LA 70896
RODALE PRESS, INC. 911,855 $3,000,002.95
33 East Minor Street
Emmaus, PA 18098
Attn: Barbara Newton
RITA ROME 30,395 $99,999.55
1428 Colton Road
Gladwyne, PA 19035
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
ALOYSIUS D. ROSSI 30,395 $99,999.55
c/o Young Estates
Post Office Box 490
Drums, PA 18222
DAVID J. ROSSI 30,395 $99,999.55
141 Moseywood Road
Post Office Box 495
Lake Harmony, PA 18624
MICHAEL RUBIN 30,395 $99,999.55
1840 Aloha Lane
Gladwyne, PA 19035
RONALD D. SIPPEL 45,595 $150,007.55
1312 Church Street
Evanston, IL 60201-3508
BRYAN SPLAINE 10,000 $32,900.00
15951 Los Gatos Boulevard
Los Gatos, CA 95032
CHARLES E. SPLAINE 23,000 $75,670.00
15951 Los Gatos Boulevard
Los Gatos, CA 95032
THE SPRINGS COMPANY 80,000 $263,200.00
P. O. Drawer 460
104 East Springs Street
Lancaster, SC 29720
Attn: William G. Taylor
STANDARD MORTGAGE HOLDING CORPORATION 45,595 $150,007.55
300 Plaza, One Shell Square
New Orleans, LA 70139
Attn: Edgar Bright
PRESLEY AND ANTONIA TAYLOR III 30,395 $99,999.55
2408 Rutland Road
Davidsonville, MD 21035
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
TECHNOLOGY FUNDING PARTNERS III, L.P. 121,581 $400,001.49
2000 Alameda de las Pulgas
San Mateo, CA 94403
Attn: Greg George
TECHNOLOGY FUNDING VENTURE PARTNERS, IV, AN 91,185 $299,998.65
AGGRESSIVE GROWTH FUND, L.P.
2000 Alameda de las Pulgas
San Mateo, CA 94403
Attn: Greg George
TECHNOLOGY FUNDING VENTURE PARTNERS V, AN 15,199 $50,004.71
AGGRESSIVE GROWTH FUND, L.P.
2000 Alameda de las Pulgas
San Mateo, CA 94403
Attn: Greg George
TENNYSON PRIVATE PLACEMENT OPPORTUNITY FUND, LLP 30,400 $100,016.00
c/o Walpert Smullian & Blumenthal
29 West Susquehanna Avenue, 4th Floor
Baltimore, MD 21204
Attn: Alfred M. Walpert
DYAN TRIFFO 1,520 $5,000.80
C/o BT Alex. Brown Incorporated
1990 Beach Street, #304
San Francisco, CA 94123
TRIVENTURES 30,395 $99,999.55
410 - 17th Street, Suite 1705
Denver, CO 80202
Attn: Jim Lustig
TURTLE & COMPANY 30,396 $100,002.84
Jonathan Cohen and Eleanor Friedman-Cohen
c/o Nuland and Arshad, Inc.
176 Federal Street, 5th Floor
Boston, MA 02210-2209
Attn: James Nuland
MARY COLLEEN UNDERHILL 30,395 $99,999.55
1901 Stonegate Road
Anchorage, KY 40223
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
MEDIAONE INTERACTIVE SERVICES, INC. 607,903 $2,000,000.87
9000 E. Nichols Avenue, Suite 100
Englewood, CO 80112
Attn: Natalie Egleston
WAKEFIELD PARTNERS, L.P. 60,000 $197,400.00
10 Avon Meadow Lane
Avon, CT 06001-3737
Attn: Steven W. Ballentine
WARBURG PINCUS INSTITUTIONAL FUND, INC. - SMALL 455,927 $1,499,999.83
COMPANIES GROWTH PORTFOLIO
466 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Steve Lurito
WARBURG PINCUS POST-VENTURE CAPITAL 227,964 $750,001.56
FUND, INC.
466 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Steve Lurito
WARBURG PINCUS TRUST, INC. POST-VENTURE 75,988 $250,000.52
CAPITAL PORTFOLIO
466 Lexington Avenue, 10th Floor
New York, NY 10017
Attn: Steve Lurito
WILLOU & CO. 121,976 $401,301.04
P.O. Box 10856
Greenville, SC 29603
Attn: Richard L. King
WOMEN, LLC 551,672 $1,815,000.88
514 North Crain Highway
Glen Burnie, MD 21061
Attn: Joel D. Fedder
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
1ST CLOSING - JUNE 5, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------- ------ --------------
<S> <C> <C>
WOMEN'S GROWTH CAPITAL FUND I, LLP 182,370 $599,997.30
1029 - 31st Street, NW
Washington, DC 20007
Attn: Wendee Kanarek
TOTALS: 6,515,974 $21,437,554.46
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
2ND CLOSING - JULY 24, 1998 AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ------------- ------ ----------
<S> <C> <C>
JOHN PAPAZIAN 30,395 $99,999.55
118 Pea Place
Kula, HI 96790
- ------------------------------------------------------------------------------------------
2ND CLOSING TOTAL 30,395 $99,999.55
- ------------------------------------------------------------------------------------------
AGGREGATE TOTAL 6,546,369 $21,537,554.01
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.20
WOMEN.COM NETWORKS
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
entered into as of May 7, 1999, by and among WOMEN.COM NETWORKS, a California
corporation (the "COMPANY"), and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as EXHIBIT A (which persons and entities are hereinafter
collectively referred to as "PURCHASERS" and each individually as a
"PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of up to one
million (1,000,000) shares of its Series E Preferred Stock (the "SHARES");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein;
WHEREAS, the Company desires to issue and sell the Shares to Purchasers
on the terms and conditions set forth herein; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
AGREEMENT
SECTION 1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized (a) the sale and issuance to
Purchasers of the Shares and (b) the issuance of the shares of common stock to
be issued on conversion of the Shares (the "CONVERSION SHARES"). The Shares and
the Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Amended and Restated Articles of Incorporation of
the Company, in the form attached hereto as EXHIBIT B (the "RESTATED ARTICLES").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company hereby agrees to issue and sell
to each Purchaser and each Purchaser agrees to purchase from the Company, the
number of Shares set forth opposite such Purchaser's name on EXHIBIT A, at a
purchase price of $10.00 per Share.
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") shall take place on the date of this Agreement, at the
offices of Cooley Godward LLP.
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Closing by
1.
<PAGE> 2
each Purchaser, against payment of the purchase price therefor by check or wire
transfer made payable to the order of the Company, cancellation of indebtedness
or any combination of the foregoing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amended and Restated Investors' Rights Agreement in
substantially the form attached hereto as EXHIBIT D (the "INVESTORS' RIGHTS
AGREEMENT') and the Amended and Restated Co-Sale and Voting Agreement in
substantially the form attached hereto as EXHIBIT E (the "CO-SALE AGREEMENT"),
to issue and sell the Shares, to issue the Conversion Shares, to carry out the
provisions of this Agreement, the Investors' Rights Agreement, the Co-Sale
Agreement and the Restated Articles and to carry on its business as presently
conducted and as presently proposed to be conducted. The Company is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in all jurisdictions in which the nature of its activities and of
its properties (both owned and leased) makes such qualification necessary,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business.
3.2 CAPITALIZATION. As of April 20, 1999, the authorized capital stock
of the Company consisted of (a) 30,000,000 shares of common stock, (i) 1,826,799
shares of which are issued and outstanding and (ii) 8,822,500 shares of which
are reserved for future issuance to employees, consultants and directors upon
the exercise of options to purchase the Company's common stock pursuant to the
Amended and Restated 1994 Stock Option Plan and the Amended and Restated 1998
Equity Incentive Plan and (b) 18,286,810 shares of preferred stock, (i)
2,707,403 shares of which are designated Series A Preferred Stock, of which
2,685,181 shares are issued and outstanding, (ii) 579,407 shares of which are
designated Series B Preferred Stock, of which 579,407 shares are issued and
outstanding, (iii) 7,000,000 shares of which are designated Series C Preferred
Stock, of which 3,626,922 shares are issued and outstanding and (iv) 8,000,000
shares of which are designated Series D Preferred Stock, of which 6,546,369 are
issued and outstanding. All issued and outstanding shares of the Company's
common stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (A) have been duly authorized and
validly issued and (B) are fully paid and nonassessable. The rights,
preferences, privileges and restrictions of the Shares are as stated in the
Restated Articles. The Conversion Shares have been duly and validly reserved for
issuance. When issued in compliance with the provisions of this Agreement and
the Restated Articles, the Shares and the Conversion Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Shares may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or as otherwise required by such laws at the time a
transfer is proposed.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement, the Investors' Rights Agreement and the Co-Sale
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Shares pursuant hereto and the Conversion Shares pursuant to the Restated
Articles, has been taken or will be taken prior to the Closing. The Agreement,
the Investors' Rights Agreement and the Co-Sale Agreement, when executed and
delivered, will be valid and binding obligations of the Company
2.
<PAGE> 3
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors' rights, (b) general principles
of equity that restrict the availability of equitable remedies, and (c) to the
extent that the enforceability of the indemnification provisions in Section 3.9
of the Investors' Rights Agreement may be limited by applicable laws. The sale
of the Shares and the subsequent conversion of Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first refusal
other than the right of first refusal set forth in the Investors' Rights
Agreement, which has been waived in accordance with that agreement.
3.4 SMALL BUSINESS CONCERN. The Company, together with its affiliates
(as that term is defined in 13 C.F.R. Section121.103), is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations promulgated thereunder (the "SMALL BUSINESS
INVESTMENT ACT") and Part 121 of Title 13 of the United States Code of Federal
Regulations ("CFR"). The information provided by the Company to each Purchaser
that is a licensed Small Business Investment Company (an "SBIC PURCHASER") on
SBA Forms 480, 652 and 1031 delivered in connection herewith is accurate and
complete.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows
(such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement, the Investors' Rights Agreement and the Co-Sale Agreement and to
carry out their provisions. All action on Purchaser's part required for the
lawful execution and delivery of this Agreement, the Investors' Rights Agreement
and the Co-Sale Agreement has been or will be effectively taken prior to the
Closing. Upon their execution and delivery, this Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement will be valid and binding obligations
of Purchaser, enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights, (b) general
principles of equity that restrict the availability of equitable remedies, and
(c) to the extent that the enforceability of the indemnification provisions of
Section 3.9 of the Investors' Rights Agreement may be limited by applicable
laws.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in the
Agreement, the Investors' Rights Agreement or the Co-Sale Agreement have been or
shall have been obtained prior to and be effective as of the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Purchaser also understands that the Shares are being offered and sold pursuant
to an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the
3.
<PAGE> 4
Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Purchaser must bear the economic risk of this investment indefinitely unless the
Shares (or the Conversion Shares) are registered pursuant to the Securities Act
or an exemption from registration is available. Purchaser understands that the
Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its common stock. Purchaser also understands that there
is no assurance that any exemption from registration under the Securities Act
will be available and that, even if available, such exemption may not allow
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times Purchaser might propose.
(b) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that
by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement, the Investors' Rights Agreement and
the Co-Sale Agreement. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the Agreement.
(c) ACCREDITED INVESTOR. Purchaser represents that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act as such term is defined under Rule 501 of Regulation D as indicated on
EXHIBIT C hereto.
(d) INVESTMENT. Purchaser is acquiring the Shares (or any of the
common stock into which the Shares are convertible) for investment for its own
account and not with a view to, or for resale in connection with, any
distribution thereof, and Purchaser has no present intention of selling or
distributing the Shares (or any of the common stock into which the Shares are
convertible). Purchaser understands that the Shares (and the common stock into
which the Shares are convertible) to be purchased by it have not been registered
under the Securities Act which depends upon, among other things, the bona fide
nature of the investment intent as expressed herein.
(e) COMPANY INFORMATION. Purchaser has received and read the
financial statements of the Company and of Hearst HomeArts, Inc. and has had an
opportunity to discuss the Company's business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company's operations and facilities. Purchaser has
also had the opportunity to ask questions of and receive answers from the
Company and its management regarding the terms and conditions of this
investment.
(f) RESTRICTED SECURITIES. Purchaser acknowledges and agrees that
the Shares and the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended) and the number of
shares being sold during any three-month period not exceeding specified
limitations.
4.4 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees that
the Shares and the Conversion Shares are subject to restrictions on transfer as
set forth in the Investors' Rights Agreement.
4.
<PAGE> 5
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all material respects as of the Closing Date
with the same force and effect as if they had been made as of the Closing Date,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.
(b) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement (except for such as may be properly
obtained subsequent to the Closing).
(c) FILING OF RESTATED ARTICLES. The Restated Articles shall have
been filed with the Secretary of State of the State of California.
(d) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company as
Purchasers shall reasonably request.
(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(f) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights Agreement
substantially in the form attached hereto as EXHIBIT D shall have been executed
and delivered by the parties thereto.
(g) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the
form attached hereto as EXHIBIT E shall have been executed and delivered by the
parties thereto.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares at each Closing is subject to the satisfaction, on
or prior to the Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchasers in Section 4 hereof shall be true and correct at
the date of the Closing, with the same force and effect as if they had been made
on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchasers shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by Purchasers on or before the Closing.
(c) FILING OF RESTATED ARTICLES. The Restated Articles shall have
been filed with the Secretary of State of the State of California.
5.
<PAGE> 6
(d) INVESTORS' RIGHTS AGREEMENT. An Investors' Rights Agreement
substantially in the form attached hereto as EXHIBIT D shall have been executed
and delivered by the parties thereto.
(e) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the
form attached hereto as EXHIBIT E shall have been executed and delivered by the
parties thereto.
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Agreement, the Investors'
Rights Agreement and the Co-Sale Agreement (except for such as may be properly
obtained subsequent to the Closing).
SECTION 6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in the State of
California.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation and the closing of the transactions
contemplated hereby. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the Company hereunder solely as
of the date of such certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the Investors'
Rights Agreement, the Co-Sale Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
6.5 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
6.
<PAGE> 7
(c) Any amendment or waiver effected in accordance with this
Section 6.6 shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities and the
Company.
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Investors'
Rights Agreement, the Co-Sale Agreement or the Restated Articles, shall impair
any such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
any Purchaser's part of any breach, default or noncompliance under this
Agreement or under the Restated Articles or any waiver on such party's part of
any provisions or conditions of the Agreement must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, the Restated Articles, Bylaws, or
otherwise afforded to any party, shall be cumulative and not alternative.
6.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex; (c) five days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) one day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Company at the address as set
forth on the signature page hereof and to Purchaser at the address set forth on
EXHIBIT A attached hereto or at such other address as the Company or Purchaser
may designate by ten days advance written notice to the other parties hereto.
6.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
6.10 WAIVER OF CONFLICTS. Each party to this Agreement acknowledges that
legal counsel for the Company, Cooley Godward LLP ("COOLEY GODWARD"), has in the
past and may continue in the future to perform legal services for one or more of
the Purchasers or their affiliates in matters unrelated to the transactions
contemplated by this Agreement, including, but not limited to, the
representation of the Purchasers in matters of a similar nature to the
transactions contemplated herein. Each party to this Agreement hereby (a)
acknowledges that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation, (b)
acknowledges that with respect to the transactions contemplated herein, Cooley
Godward has represented the Company and not any individual Purchaser or any
individual shareholder, director or employee of the Company and (c) gives its
informed consent to Cooley Godward's representation of the Company in the
transactions contemplated by this Agreement and Cooley Godward's representation
of one or more of the Purchasers or their affiliates in matters unrelated to
such transactions.
6.11 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.
7.
<PAGE> 8
6.12 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
6.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.14 EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement, the Investors' Rights Agreement and the Co-Sale Agreement.
6.15 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein, except that the Company shall be obligated
to pay BT Alex. Brown Incorporated its fees pursuant to its agreement with the
Company related to this transaction. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 6.15 being untrue.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
8.
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this SERIES E
PREFERRED STOCK PURCHASE AGREEMENT as of the date first above written.
COMPANY: WOMEN.COM NETWORKS
1820 Gateway Drive, Suite 100
San Mateo, CA 94404
By: /s/ MARLEEN MCDANIEL
--------------------------------
Marleen McDaniel, President
PURCHASERS:
(Name of Entity, if applicable)
By:
--------------------------------
(Signature)
Title:
--------------------------------
SIGNATURE PAGE
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 10
===============================================================================
WOMEN.COM NETWORKS
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
DATED: MAY 7, 1999
===============================================================================
<PAGE> 11
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Agreement to Sell and Purchase................................................1
1.1 Authorization of Shares.......................................................1
1.2 Sale and Purchase.............................................................1
SECTION 2. Closing, Delivery and Payment.................................................1
2.1 Closing Date..................................................................1
2.2 Delivery......................................................................1
3.1 Organization, Good Standing and Qualification.................................2
3.2 Capitalization................................................................2
3.3 Authorization; Binding Obligations............................................2
3.4 Small Business Concern........................................................3
SECTION 4. Representations and Warranties of the Purchasers..............................3
4.1 Requisite Power and Authority.................................................3
4.2 Consents......................................................................3
4.3 Investment Representations....................................................3
4.4 Transfer Restrictions.........................................................4
SECTION 5. Conditions to Closing.........................................................5
5.1 Conditions to Purchasers' Obligations at the Closing..........................5
5.2 Conditions to Obligations of the Company......................................5
SECTION 6. Miscellaneous.................................................................6
6.1 Governing Law.................................................................6
6.2 Survival......................................................................6
6.3 Successors and Assigns........................................................6
6.4 Entire Agreement..............................................................6
6.5 Separability..................................................................6
6.6 Amendment and Waiver..........................................................6
6.7 Delays or Omissions...........................................................7
6.8 Notices.......................................................................7
6.9 Attorneys' Fees...............................................................7
6.10 Waiver of Conflicts...........................................................7
6.11 Titles and Subtitles..........................................................7
6.12 Pronouns......................................................................8
</TABLE>
i.
<PAGE> 12
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.13 Counterparts..................................................................8
6.14 Expenses......................................................................8
6.15 Broker's Fees.................................................................8
</TABLE>
ii.
<PAGE> 13
LIST OF EXHIBITS
<TABLE>
<S> <C>
Schedule of Purchasers Exhibit A
Amended and Restated Articles of Incorporation Exhibit B
Definition of an "Accredited Investor" Exhibit C
Amended and Restated Investors' Rights Agreement Exhibit D
Amended and Restated Co-Sale and Voting Agreement Exhibit E
</TABLE>
iii.
<PAGE> 14
EXHIBIT A
SCHEDULE OF PURCHASERS
SERIES E PREFERRED STOCK FINANCING
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
AGGREGATE
NAME AND ADDRESS SHARES PURCHASE PRICE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
$
TOTALS:
</TABLE>
EXHIBIT A
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 15
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
EXHIBIT B
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 16
EXHIBIT C
DEFINITION OF AN "ACCREDITED INVESTOR"
EXHIBIT C
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 17
EXHIBIT D
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
EXHIBIT D
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 18
EXHIBIT E
AMENDED AND RESTATED CO-SALE AND VOTING AGREEMENT
EXHIBIT E
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.21
October 22, 1998
Women.com Networks
1820 Gateway Drive, Suite 100
San Mateo, CA 94404-2471
Attention: Marleen McDaniel, CEO
Dear Marleen:
This will confirm the basis upon which Women.com Networks (the "Company") has
engaged BT Alex. Brown Incorporated ("BT Alex. Brown") on an exclusive basis, to
provide advisory and investment banking services with respect to the exploration
of strategic alternatives that may lead to a possible transaction (a
"Transaction"), through (i) a minority investment in the Company (a "Minority
Investment") or (ii) a sale, merger, joint venture or otherwise (a "Sale"),
whether effected in a single transaction or a series of related transactions, in
which 50% or more of the voting power of the Company or all or a substantial
portion of its business or assets are combined with or transferred to another
company (excluding reincorporations or similar reorganizations).
Section 1. Services to be Rendered. BT Alex. Brown agrees to perform such of the
following financial advisory and investment banking services as the Company
reasonably and specifically requests:
(a) BT Alex. Brown will familiarize itself to the extent it deems
appropriate and feasible with the business, operations,
properties, financial condition and prospects of the Company;
(b) Assist the Company in identifying and evaluating candidates for a
potential Transaction with the Company;
(c) Assist the Company in the preparation and implementation of a
marketing plan and in the preparation of a memorandum (together
with exhibits, the "Memorandum") describing the Company and its
business operations for distribution to potential parties to a
Transaction;
(d) Contact potential candidates which BT Alex. Brown and the Company
believe to be appropriate for a potential Transaction. In
rendering such services, BT Alex. Brown may meet with
representatives of such candidates, as are approved in advance by
the Company, and provide such representatives with such
information about the Company as may be appropriate, subject to
customary business confidentiality;
(e) BT Alex. Brown will advise and assist the Company in considering
the desirability of effecting a Transaction, and, if the Company
believes such a Transaction to be desirable, in developing a
general negotiating strategy for accomplishing a Transaction;
(f) BT Alex. Brown will advise and assist management of the
Company in making presentations to the Board of Directors of the
Company concerning any proposed Transaction; and
<PAGE> 2
Women.com Networks
October 22, 1998
Page 2
(g) BT Alex. Brown will advise and assist the Company in the course
of its negotiation of a Transaction and will participate in such
negotiations.
The Company will furnish BT Alex. Brown such information as BT Alex. Brown
reasonably requests in connection with the performance of its services hereunder
(all such information so furnished is referred to herein as the "Information").
The Company understands and agrees that BT Alex. Brown, in performing its
services hereunder, will use and rely upon the Information as well as publicly
available information regarding the Company and any potential partners and that
BT Alex. Brown does not assume responsibility for independent verification of
any information, whether publicly available or otherwise furnished to it,
concerning the Company or any potential partner, including, without limitation,
any financial information, forecasts or projections, considered by BT Alex.
Brown in connection with the rendering of its services. Accordingly, BT Alex.
Brown shall be entitled to assume and rely upon the accuracy and completeness of
all such information and is not required to conduct a physical inspection of any
of the properties or assets, or to prepare or obtain any independent evaluation
or appraisal of any of the assets or liabilities, of the Company or any
potential partner. With respect to any financial forecasts and projections made
available to BT Alex. Brown by the Company or any potential partners and used by
BT Alex. Brown in its analysis, BT Alex. Brown shall be entitled to assume that
such forecasts and projections have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the management of the
Company or any potential partner, as the case may be, as to the matters covered
thereby.
In connection with the services described in this Section 1, the Company
authorizes BT Alex. Brown, as the Company's representative, to transmit the
Memorandum to potential parties to a Transaction and execute on behalf of the
Company a confidentiality agreement, in form approved by the Company, to be
entered into by such parties. The Company hereby acknowledges that all
information contained in the Memorandum will be provided by or based upon
information provided by the Company or third parties, and that the Company will
be solely responsible for the contents thereof. BT Alex. Brown agrees to obtain
the consent of the Company prior to contacting any potential party to a
Transaction.
Section 2. Transaction Fees. The Company shall pay BT Alex. Brown for its
services hereunder a cash fee equal to:
(a) in the event of a Minority Investment, a cash fee at closing
equal to five percent (5%) of the Aggregate Consideration (as
hereinafter defined) payable to the Company or its
securityholders in such Transaction, but in no event less than
$1,000,000. In addition, the Company agrees that BT Alex. Brown
shall have the right to reinvest an amount equal to half of the
fee earned hereunder pursuant to five year noncancelable
warrants to purchase common stock exercisable at 120% of the
common equivalent price per share of the securities sold in the
Transaction. The warrants shall include (without limitation) a
"net issuance" exercise feature; and
(b) in the event of a Sale, payable at closing of such Transaction a
cash fee of $1,000,000.
For purposes of this Agreement, the term "Aggregate
Consideration" shall mean the total amount of cash and the fair
market value (on the date of closing of such Transaction) of all
other property paid or payable (including promotional
commitments) directly or indirectly to the Company or any of its
securityholders in connection with a Transaction (including (i)
amounts paid to holders of any warrants or convertible
securities of the Company and to holders of any options or stock
appreciation rights issued by the
<PAGE> 3
Women.com Networks
October 22, 1998
Page 3
Company, whether or not vested; and, (ii) the total amount of
indebtedness for borrowed money or similar non-trade liabilities
or obligations (including pension liabilities, guarantees,
capitalized leases and the like) of the Company repaid, retired,
extinguished or assumed in connection with, or, in the case of
an acquisition of the Company, which otherwise remains
outstanding as of the closing of, a Transaction.
For purposes of calculating Aggregate Consideration, the value
of any securities issuable in connection with a Transaction
(whether debt or equity) that are freely tradable in an
established public market will be determined on the basis of the
average closing price in such market during the ten business
days prior to the consummation of the Transaction (the
"Valuation Period"), and the value of securities that are not
freely tradable (or have no established public market) or other
property will be the fair market value of such securities or
other property on during the Valuation Period as determined in
good faith and upon mutual agreement of the Company and BT Alex.
Brown or if the Company and BT Alex. Brown are unable to reach
such an agreement within the thirty (30) days after the
consummation of the Transaction, as determined by an investment
banker or other person experienced in valuing such stock, equity
securities or non-cash consideration mutually acceptable to BT
Alex. Brown and the Company. Such determination of such
investment banker or other person shall be binding upon BT Alex.
Brown and the Company, and BT Alex. Brown and the Company shall
be responsible for paying one-half of the fees of such
investment banker or other person. In the event an agreement for
a Transaction provides for escrowed or contingent payments or
other payments over time ("Deferred Payments"), BT Alex. Brown
and the Company shall determine the value of such payments at
the time the exact amount is received by the Company. BT Alex
Brown's fees with respect to such Deferred Payments shall be
calculated based upon such exact amount when received by the
Company and such fees shall be paid within a reasonable time
after such Deferred Payments are received by the Company.
Section 3. Expenses. In addition to any fees that may be payable to BT Alex.
Brown hereunder and regardless of whether any Transaction is proposed or
consummated, the Company hereby agrees, from time to time upon request, to
reimburse BT Alex. Brown for all reasonable fees and disbursements of BT Alex.
Brown's counsel, if any, and all of BT Alex. Brown's reasonable travel and other
out-of-pocket expenses incurred in connection with any actual or proposed
Transaction arising out of BT Alex. Brown's engagement hereunder. Any fees
and/or disbursements individually or in the aggregate in excess of $25,000.00
must be approved in advance by the written consent of the Company.
Section 4. Scope of Responsibility. Neither BT Alex. Brown nor any of its
affiliates (nor any of their respective control persons, directors, officers,
employees or agents) shall be liable to the Company or to any other person
claiming through the Company for any claim, loss, damage, liability, cost or
expense suffered by the Company or any such other person arising out of or
related to BT Alex. Brown's engagement hereunder except for a claim, loss or
expense that arises primarily out of or is based primarily upon any action or
failure to act by BT Alex. Brown, other than an action or failure to act
undertaken at the request or with the consent of the Company, that is found in a
final judicial determination (or a settlement tantamount thereto) to constitute
bad faith, willful misconduct or gross negligence on the part of BT Alex. Brown.
Section 5. Indemnity and Contribution. The Company agrees to indemnify and hold
harmless BT Alex. Brown and its affiliates (and their respective control
persons, directors, officers, employees and agents) to the full extent lawful
against any and all claims, losses, damages, liabilities, costs and expenses as
<PAGE> 4
Women.com Networks
October 22, 1998
Page 4
incurred (including all reasonable fees and disbursements of counsel and all
reasonable travel and other out-of-pocket expenses incurred in connection with
investigation of, preparation for and defense of any pending or threatened claim
and any litigation or other proceeding arising therefrom, whether or not in
connection with pending or threatened litigation in which BT Alex. Brown or any
other indemnified person is a party) arising out of or related to any actual or
proposed Transaction or BT Alex. Brown's engagement hereunder; provided,
however, there shall be excluded from such indemnification any such claims,
losses, damages, liabilities, costs or expenses that arise primarily out of or
are based primarily upon any action or failure to act by BT Alex. Brown, other
than an action or failure to act undertaken at the request or with the consent
of the Company, that is found in a final judicial determination (or a settlement
tantamount thereto) to constitute bad faith, willful misconduct or gross
negligence on the part of BT Alex. Brown. In the event that the foregoing
indemnity is unavailable or insufficient to hold BT Alex. Brown and other
indemnified parties harmless, then the Company shall contribute to amounts paid
or payable by BT Alex. Brown and other indemnified parties in respect of such
claims, losses, damages, liabilities, costs and expenses in such proportion as
appropriately reflects the relative benefits received by, and, if applicable law
does not permit allocation solely on the basis of benefits, fault of, the
Company and BT Alex. Brown in connection with the matters as to which such
claims, losses, damages, liabilities, costs and expenses relate and other
equitable considerations, subject to the limitation that in any event BT Alex.
Brown's aggregate contributions in respect of such claims, losses, damages,
liabilities, costs and expenses will not exceed the amount of fees and expenses
actually received by BT Alex. Brown pursuant to this Agreement. For purposes
hereof, relative benefits to the Company and BT Alex. Brown of the Transaction
shall be deemed to be in the same proportion that the total value received or
contemplated to be received by the Company and/or its security holders in
connection with the Transaction bears to the fees paid to BT Alex. Brown
pursuant to its engagement in respect of such Transaction.
The Company will not, without the prior written consent of BT Alex. Brown,
settle any litigation relating to BT Alex. Brown's engagement hereunder unless
such settlement includes an express, complete and unconditional release of BT
Alex. Brown and its affiliates (and their respective control persons, directors,
officers, employees and agents) with respect to all claims asserted in such
litigation or relating to BT Alex. Brown's engagement hereunder; such release to
be set forth in an instrument signed by all parties to such settlement.
Section 6. Termination of Engagement. BT Alex. Brown's engagement hereunder may
be terminated by either the Company or BT Alex. Brown at any time, with or
without cause, upon written notice to that effect to the other party; provided,
however, that
(a) BT Alex. Brown will be entitled to its full fee under Section 2
hereof in the event that (i) at any time prior to the expiration
of 18 months after such termination by the Company, a
Transaction is consummated with a party which contacted the
Company or was contacted by the Company or BT Alex. Brown on
behalf of the Company (provided such party is not an existing
shareholder of the Company) during the course of this engagement
pursuant to the terms of this Agreement; or (ii) the Company
enters into an agreement during the term of this Agreement which
contemplates a Transaction and such Transaction is consummated
within 24 months after termination with a party which contacted
the Company or was contacted by the Company or BT Alex. Brown on
behalf of the Company during the course of this engagement
pursuant to the terms of this Agreement; and
(b) the provisions of this Section 6 and of Sections 3, 4 and 5
hereof shall survive such termination.
<PAGE> 5
Women.com Networks
October 22, 1998
Page 5
Section 7. Governing Law: Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to the conflicts of law provisions thereof. Any right to trial by jury with
respect to any claim, action, suit or proceeding arising out of this Agreement
or any of the matters contemplated hereby is waived.
Section 8. Reliance on Others. The Company confirms that it will rely on its own
counsel, accountants and other similar expert advisors for legal, accounting,
tax and other similar advice.
Section 9. Affiliate Services. In connection with the services contemplated by
this Agreement, BT Alex. Brown may employ, on an "as needed" basis, the services
of personnel who are employees of Bankers Trust Company or its affiliates.
Section 10. Publicity. In the event of consummation of any publicly-disclosed
Transaction, BT Alex. Brown shall have the right to disclose its participation
in such Transaction, including, without limitation, the placement of "tombstone"
advertisements in financial and other newspapers and journals.
Section 11. No Rights in Shareholders, etc. The Company recognizes that BT Alex.
Brown has been engaged only by the Company, and that the Company's engagement of
BT Alex. Brown is not deemed to be on behalf of and is not intended to confer
rights upon any shareholder, partner or other owner of the Company or any other
person not a party hereto as against BT Alex. Brown or any of its affiliates or
any of their respective directors, officers, agents, employees or
representatives. Unless otherwise expressly agreed, no one other than the
Company is authorized to rely upon the Company's engagement of BT Alex. Brown or
any statements, advice, opinions or conduct by BT Alex. Brown. Without limiting
the foregoing, any opinions or advice rendered to the Company's Board of
Directors or management in the course of the Company's engagement of BT Alex.
Brown are for the purpose of assisting the Board or management, as the case may
be, in evaluating the Transaction and do not constitute a recommendation to any
shareholder of the Company concerning action that such shareholder might or
should take in connection with the Transaction. BT Alex. Brown's role herein is
that of an independent contractor; nothing herein is intended to create or shall
be construed as creating a fiduciary relationship between the Company and BT
Alex. Brown.
Section 12. Miscellaneous. In order to better coordinate the activities of BT
Alex. Brown contemplated by this letter, both the Company (including management
or other officers and directors of the Company) and BT Alex. Brown will promptly
inform the other of inquiries of third parties which it receives concerning a
Transaction. Nothing in this Agreement is intended to obligate or commit BT
Alex. Brown or any of its affiliates to provide any services other than as set
out above. This Agreement may be executed in two or more counterparts, all of
which together shall be considered a single instrument. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings (both written and oral) of the parties hereto with respect to the
subject matter hereof, and cannot be amended or otherwise modified except in
writing executed by the parties hereto. The provisions hereof shall inure to the
benefit of and be binding upon the successors and assigns of the Company. BT
Alex. Brown may not assign its obligations or rights pursuant to this Agreement
without the prior written consent of the Company.
<PAGE> 6
Women.com Networks
October 22, 1998
Page 6
If you are in agreement with the foregoing, please sign and return the attached
copy of this Agreement, whereupon this Agreement shall become effective as of
the date hereof.
Sincerely,
BT ALEX. BROWN INCORPORATED
By: /s/ BT Alex. Brown Incorporated
-----------------------------------
AGREED TO:
Women.com Networks
By: /s/ Women.com Networks
-------------------------------
<PAGE> 1
EXHIBIT 10.22
EXECUTION COPY
AGREEMENT OF MERGER AND PURCHASE
This Agreement of Merger and Purchase (the "Agreement") is made and
entered into as of December 23, 1998, by and among Hearst Communications, Inc.,
a Delaware corporation ("HCI"), Astronet, Inc., a Connecticut corporation (the
"Company"), Diserio Merger Corp., a Delaware corporation ("Newco"), Hearst New
Media, L.L.C., a Delaware limited liability company ("Hearst LLC" and
collectively with HCI, "Buyer"), Eugenie A. Diserio, an individual residing at
68 Running Brook Lane, New Canaan, Connecticut 06840 ("Diserio"), James Turner,
an individual residing at 270 Orchard Hill Lane, Fairfield, Connecticut
("Turner"), David Cunningham, an individual residing at 11 Rockford Drive, West
Nyack, New York 10994 ("Cunningham"), Richard L. Barstow, an individual residing
at 259 Pauline Street, Stratford, Connecticut 06497 ("Barstow"), Timothy
Sheridan, an individual residing at 102 Rowayton Woods Drive, Norwalk,
Connecticut 06854 ("Sheridan"), Christine Rising, an individual residing at 114
Perry Avenue, Norwalk, Connecticut 06850 ("Rising"), and America Online, Inc., a
Delaware corporation ("AOL") (each of Turner, Cunningham, Sheridan and Rising is
sometimes individually referred to as an "Option Holder" and collectively as the
"Option Holders", each of Diserio, Barstow and the Option Holders is sometimes
individually referred to as a "Holder" and collectively as the "Holders" and
each of the Holders and AOL is sometimes individually referred to as a
"Shareholder" and collectively as the "Shareholders").
WHEREAS, HCI is the sole and managing member of Hearst LLC; and
WHEREAS, Diserio owns 1,000 shares (the "Diserio Shares") and Barstow
owns 7.8 shares (the "Barstow Shares") of common stock, no par value (the
"Common Stock"), of the Company, constituting all issued and outstanding shares
of capital stock of the Company (the Diserio Shares and the Barstow Shares are
sometimes collectively referred to as the "Shares"); and
WHEREAS, the Company owns -1 share of common stock, no par value (the
"Newco Stock"), of Newco, constituting all issued and outstanding shares of
capital stock of Newco; and
WHEREAS, at the Closing hereunder, Diserio and Barstow will cause the
Company to be merged with and into Newco (the "CT Merger"), such that, following
consummation of such merger, Diserio will own 1,000 shares of Newco Stock and
Barstow will own 7.8 shares of Newco Stock; and
WHEREAS, Diserio, Barstow and HCI have determined that it is in their
respective best interests to merge Newco with and into Hearst LLC (the "DE
Merger"), at the Closing and immediately after the CT Merger;
<PAGE> 2
WHEREAS, the Option Holders collectively own options (the "Options")
to purchase 271 shares of Common Stock (the "Option Shares"); and
WHEREAS, AOL owns certain warrants (the "AOL Warrants") to purchase
such number of shares of preferred stock of the Company which represent, on a
fully diluted basis, 33.2% of the issued and outstanding capital stock of the
Company; and
WHEREAS, AOL owns (i) that certain Convertible Promissory Note of the
Company to AOL, dated November 15, 1997, in the maximum principal amount of
$400,000; (ii) that certain Promissory Note of the Company to AOL, dated July
28, 1995, in the principal amount of $150,000; and (iii) that certain Promissory
Note of the Company to AOL, dated November 15, 1996, as amended, in the original
principal amount of $610,000 (collectively, the "AOL Notes"), and
WHEREAS, the Option Holders and AOL desire to sell, and HCI desires
to purchase, the Options, the AOL Warrants and the AOL Notes on the terms and
subject to the conditions set forth in this Agreement; and
WHEREAS, capitalized terms used herein shall sometimes have the
respective meanings ascribed to such terms in Section 9.9.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
ARTICLE 1
MERGER AND PURCHASE
1.1 Merger of the Company with and into Newco.
(a) The CT Merger. Upon the terms and conditions of this
Agreement, and in accordance with the Delaware General Corporation Law (the
"DGCL") and the Connecticut Business Corporations Act (the "CBCA"), at the First
Effective Time (as defined herein), the Company shall be merged with and into
Newco. As a result of the CT Merger, the separate existence of the Company shall
cease and Newco shall continue as the surviving entity of the merger.
(b) First Effective Time. At the Closing (as defined herein),
Diserio, Barstow and the Company shall cause (i) a certificate of merger in the
form of Exhibit A hereto (the "DE Certificate of Merger") to be filed with the
Secretary of State of the State of Delaware (the "DE Secretary"), (ii) a
certificate of merger in the form of Exhibit B hereto (the "CT Certificate of
Merger") to be filed with the Secretary of State of the State of Connecticut
(the "CT Secretary"), and (iii) a plan of merger substantially in the form of
Exhibit C hereto (the "CT Plan of Merger") to be filed with the CT
2.
<PAGE> 3
Secretary, in each case in such form as required by, and executed in accordance
with the provisions of, the DGCL and the CBCA, and shall take such actions and
execute and deliver such other documents as necessary to consummate the CT
Merger pursuant to the provisions of the DGCL and the CBCA. The CT Merger shall
become effective at such time as the CT Certificate of Merger and the CT Plan of
Merger are duly filed with the CT Secretary and the DE Certificate of Merger is
filed with the DE Secretary, or at such later time as may be agreed in writing
by each of the parties hereto and specified in the CT Plan of Merger (the date
and time that the First Merger becomes effective being the "First Effective
Time").
(c) Effect of the CT Merger. At and after the First
Effective time, the CT Merger shall have the effects set
forth in the DGCL and the CBCA. Without limiting the generality of the
foregoing, and subject thereto, at the First Effective Time all the property,
rights, privileges, powers and franchises of the Company and Newco shall vest in
Newco as the surviving entity, and all debts, liabilities (including without
limitation, the AOL Notes) and duties of the Company and Newco shall become the
debts, liabilities and duties of Newco as the surviving entity.
(d) Certificate of Incorporation and By-laws. The
Certificate of Incorporation and Bylaws of Newco, as in
effect immediately prior to the First Effective Time, shall be the Certificate
of Incorporation and By-laws of Newco, as the surviving entity, until thereafter
amended as provided by law and such Certificate of Incorporation and By-laws.
(e) Officers of Surviving Entity. The officers of Newco
immediately prior to the First Effective Time shall be
the initial officers of Newco, as the surviving entity, each to hold office in
accordance with the By-laws of Newco until the earlier of their resignation or
removal or until their respective successors are duly elected or appointed and
qualified, as the case may be.
(f) Merger Consideration. At the First Effective Time, by
virtue of the CT Merger and without any further action on the part of Diserio,
Barstow, the Company, Newco or HCI, (i) each share of Common Stock shall be
converted into one share of Newco Stock, (ii) the Options shall be converted on
a one-for-one basis into options to purchase a total of 271 shares of Newco
Stock, (iii) the AOL Warrants shall be converted into warrants to purchase such
number of shares of preferred stock of Newco which represent, on a fully diluted
basis, 33.2% of the issued and outstanding capital stock of Newco and (iv) each
issued share of Newco Stock existing immediately prior to the First Effective
Time shall be cancelled and extinguished.
1.2 Merger of Newco with and into Hearst LLC.
(a) The DE Merger. Upon the terms and conditions of this
Agreement, and in accordance with the DGCL and the Delaware Limited Liability
Company Act (the "DLLCA"), at the Effective Time (as defined herein), Newco
shall be merged with and into Hearst LLC. As a result of the DE Merger, the
separate existence of Newco shall cease and Hearst LLC shall continue as the
surviving entity of the merger. Hearst LLC, as the surviving entity after the DE
Merger, is hereinafter sometimes referred to as the "Surviving Entity".
(b) Effective Time. At the Closing, but after the First Effective
Time, Diserio, Barstow, Hearst LLC and HCI shall cause a certificate of merger
(the "Certificate of Merger") to be filed with the DE Secretary, in such form as
required by, and executed in accordance with the provisions of, the DGCL and the
DLLCA, and shall take such other actions as are necessary to cause the DE Merger
to be consummated in accordance with the provisions of the DGCL and the DLLCA.
The DE Merger shall become effective at such time as the Certificate of Merger
is duly
3.
<PAGE> 4
filed with the DE Secretary or at such later time as may be agreed in writing by
each of the parties hereto and specified in the Certificate of Merger (the date
and time that the DE Merger becomes effective being the "Effective Time").
(c) Effect of the Merger. At and after the Effective Time, the DE
Merger shall have the effects set forth in the DGCL and the DLLCA. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of Newco and
Hearst LLC shall vest in the Surviving Entity, and all debts, liabilities and
duties of Newco and Hearst LLC shall become the debts, liabilities and duties of
the Surviving Entity.
(d) Limited Liability Company Agreement. The Limited Liability
Company Agreement of Hearst LLC, as in effect immediately prior to the Effective
Time, shall be the Limited Liability Company Agreement of the Surviving Entity
until thereafter amended as provided by law and such Limited Liability Company
Agreement.
(e) Officers of Surviving Entity. The officers of Hearst LLC
immediately prior to the Effective Time shall be the initial officers of the
Surviving Entity, each to hold office in accordance with the Limited Liability
Company Agreement of the Surviving Entity until the earlier of their resignation
or removal or until their respective successors are duly elected or appointed
and qualified, as the case may be.
(f) Merger Consideration. At the Effective Time, by virtue of the
DE Merger and without any further action on the part of Diserio, Barstow, Newco,
HCI or Hearst LLC, all of the shares of Newco Stock held by each of Diserio and
Barstow shall be cancelled and extinguished, and the HCI shall (i) pay to (A)
Diserio the aggregate amount of three hundred thirty-seven thousand eight
hundred sixteen dollars and seventy cents ($337,816.70), and to (B) Barstow the
aggregate amount of two thousand six hundred thirty-four dollars and
ninety-seven cents ($2,634.97) (collectively, the "Shares Payment"); and (ii)
issue to (A) Diserio a subordinated promissory note of HCI, substantially in the
form of Exhibit D-1 hereto (a "Holders Subordinated Note"), in the aggregate
initial principal amount of two million eighty-three thousand two hundred and
three dollars ($2,083,203.00), and to (B) Barstow a Holders Subordinated Note in
the aggregate initial principal amount of sixteen thousand two hundred
forty-eight dollars and ninety-eight cents ($16,248.98).
1.3 Purchase of AOL Warrants and Notes.
(a) Purchase. At the Closing, AOL agrees to sell to HCI, and HCI
agrees to purchase from AOL, all of AOL's right, title and interest in and to
the AOL Warrants and the AOL Notes, on the terms and subject to the provisions
of this Agreement.
(b) Consideration. As consideration in full for the acquisition
of the AOL Warrants and the AOL Notes from AOL, at the Closing HCI shall (i) pay
to AOL the aggregate amount of five hundred sixty-eight thousand dollars
($568,000.00) (the "AOL Payment") and (ii) issue to AOL a subordinated
promissory note of HCI substantially in the form of Exhibit D-2 hereto (an "AOL
Subordinated Note"), in the aggregate initial principal amount of one million
thirty-six thousand dollars ($1,036,000.00) (the Holders Subordinated Notes and
the AOL
4.
<PAGE> 5
Subordinated Note are sometimes individually referred to as a "Subordinated
Note" and collectively as the "Subordinated Notes").
1.4 Purchase of Options.
(a) Purchase. At the Second Closing (as hereinafter defined),
each of the Option Holders agrees to sell to HCI and HCI agrees to purchase from
each of the Option Holders, all of such Option Holder's right, title and
interest in and to the Options, on the terms and subject to the provisions of
this Agreement.
(b) Consideration. As consideration in full for the acquisition
of the Options from the Option Holders, at the Second Closing HCI shall (i) pay
to the Option Holders the aggregate amount of ninety-one thousand five hundred
forty-eight dollars and thirty-three cents ($91,548.33), payable to each Option
Holder in the amount set forth opposite such Option Holder's name on Schedule
1.4 hereto (the "Option Payment" and collectively with the Shares Payment and
the AOL Payment, the "Cash Payment"); and (ii) issue to the Option Holders,
Holders Subordinated Notes in the aggregate initial principal amount of five
hundred sixty-four thousand five hundred forty-eight dollars and one cent
($564,548.01), to be issued to each Option Holder in the initial principal
amount set forth opposite such Option Holder's name on Schedule 1.4 hereto (the
consideration referred to in Sections 1.2(f), 1.3(b) and 1.4(b) hereto,
collectively, the "Purchase Price").
1.5 Closing.
(a) Closing. The closing of the transactions contemplated by
Sections 1.1, 1.2, 1.3 and 1.4 of this Agreement (the "Closing") will take place
at 10:00 a.m. local time at the offices of Rogers & Wei Is LLP, 200 Park Avenue,
New York, New York 10 166 (or such other place as the parties may agree) as soon
as practicable (but not later than five Business Days) after the satisfaction or
waiver of the conditions set forth in Article VI (the "Closing Date"). At the
Closing:
(i) Diserio, Barstow and the Company shall cause the DE
Certificate of Merger to be filed with the DE Secretary and
the CT Certificate of Merger and the CT Plan of Merger to
be filed with the CT Secretary in accordance with the
provisions of the DGCL and the CBCA, and shall take such
actions and execute and deliver such other documents as
necessary to consummate the CT Merger pursuant to the
provisions of the DGCL and the CBCA;
(ii) after the First Effective Time, Diserio, Barstow,
Hearst LLC and HCI shall cause the Certificate of Merger to
be filed with the DE Secretary, in such form as required
by, and executed in accordance with the provisions of, the
DGCL and the DLLCA, and shall take such other actions as
are necessary to cause the DE Merger to be consummated in
accordance with the provisions of the DGCL and the DLLCA;
and
(iii) at the Effective Time, (A) HCI shall pay to Diserio
and Barstow the Shares Payment as set forth in Section
1.2(f) and deliver to each of
5.
<PAGE> 6
Diserio and Barstow a Holders Subordinated Note in the
respective initial principal amount set forth in Section
1.2(f) and (B) AOL shall deliver to HCI against payment of
the AOL Payment and delivery to AOL of the AOL Subordinated
Note in the initial principal amount set forth in Section
1.3(b), (1) the AOL Warrants, in genuine and unaltered
form, accompanied by such instruments of transfer or
cancellation as may reasonably be requested by HCI and (II)
the AOL Notes, in genuine and unaltered form, accompanied
by such instruments of transfer or cancellation as may
reasonably be requested by HCI
(b) Second Closing. The closing of the transactions contemplated
by Section 1.4 of this Agreement (the "Second Closing") ") will take place at
the offices of Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166 (or
such other place as the parties may agree) as soon as practicable (but not later
than one Business Day) after the Effective Time (the "Second Closing Date"). At
the Second Closing, the Option Holders shall deliver to HCI against payment of
the Option Payment as set forth in Section 1.4 and delivery to such Option
Holders of Subordinated Notes in the respective initial principal amounts set
forth set forth in Section 1.4(b), the Options, in genuine and unaltered form,
accompanied by such instruments of transfer or cancellation as may reasonably be
requested by HCI
(c) The portion of the Cash Payment payable to each of Diserio,
Barstow and AOL will be paid to such party by 14CI at the Closing, and the
portion of the Cash Payment payable to each of the Option Holders will be paid
to such Option Holder by HCI at the Second Closing, each by wire transfer of
immediately available funds (to an account specified in writing by such
Shareholder to HCI at least two Business Days prior to the Closing Date).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE HOLDERS
Each Holder, jointly and severally, hereby represents and warrants to
Buyer as follows:
2.1 Organization of the Company and Newco.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Connecticut and has all
requisite corporate power to own its properties and to conduct its business as
presently conducted. The Company is duly authorized, qualified or licensed to do
business and is in good standing in each state or other jurisdiction in which
its assets are located or in which its business or operations as presently
conducted make such qualification necessary, except for such failures to be so
authorized, qualified, licensed or in good standing as could not reasonably be
expected to have a material adverse effect on the assets, properties, business,
prospects, the results of operations or condition (financial or otherwise) of
the Company or Newco or on the ability of any Shareholder to perform its
respective obligations hereunder (a "Material Adverse Effect").
(b) Newco 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 to own its
6.
<PAGE> 7
properties and to conduct its business as presently conducted. Newco is duly
authorized, qualified or licensed to do business and is in good standing in each
state or other jurisdiction in which its assets are located or in which its
business or operations as presently conducted make such qualification necessary,
except for such failures to be so authorized, qualified, licensed or in good
standing as could not reasonably be expected to have a Material Adverse Effect.
2.2 Authority.
(a) Each Holder has full legal right, capacity, power and
authority to execute, deliver and perform its obligations under this Agreement
and the other agreements, certificates and instruments to be executed by such
Holder in connection with or pursuant to this Agreement, including without
limitation, the DE Certificate of Merger, the CT Certificate of Merger, the CT
Plan of Merger and the Certificate of Merger (collectively, the "Shareholder
Documents"). This Agreement has been, and at the Closing or the Second Closing,
as the case may be, the other Shareholder Documents will be, duly executed and
delivered by each Holder. This Agreement is, and, upon execution and delivery by
each Holder to the extent it is a party thereto, at the Closing or the Second
Closing, as the case may be, each of the other Shareholder Documents will be, a
legal, valid and binding agreement of each Holder, enforceable against each
Holder in accordance with their respective terms.
(b) The Company has full legal right, capacity, power and
authority to execute, deliver and perform its obligations under this Agreement
and the Shareholder Documents to be executed by the Company. This Agreement has
been, and at the Closing or the Second Closing, as the case may be, to the
extent it is a party thereto, the other Shareholder Documents will be, duly
executed and delivered by the Company. This Agreement is, and, upon execution
and delivery by the Company to the extent it is a party thereto, at the Closing
or the Second Closing, as the case may be, each of the other Shareholder
Documents will be, a legal, valid `and binding agreement of the Company,
enforceable against the Company in accordance with their respective terms.
(c) Newco has full legal right, capacity, power and authority to
execute, deliver and perform its obligations under this Agreement and the
Shareholder Documents to be executed by Newco. This Agreement has been, and at
the Closing or the Second Closing, as the case may be, to the extent it is a
party thereto, the other Shareholder Documents will be, duly executed and
delivered by Newco. This Agreement is, and, upon execution and delivery by Newco
to the extent it is a party thereto, at the Closing or the Second Closing, as
the case may be, each of the other Shareholder Documents will be, a legal, valid
and binding agreement of Newco, enforceable against Newco in accordance with
their respective terms.
2.3 Capitalization.
(a) The authorized capital stock of the Company consists solely
of 20,000 shares of Common Stock, of which: (i) as of the date hereof, only the
Diserio Shares and the Barstow Shares have been issued and are outstanding; and
(ii) immediately prior to the First Effective Time, only the Shares will have
been issued and be outstanding and will be owned by Diserio and Barstow. The
authorized capital stock of Newco consists solely of 20,000 shares of Common
Stock, of which: (i) as of the date hereof, only I share of Newco Stock have
been
7.
<PAGE> 8
issued and are outstanding; and (ii) immediately after the First Effective Time,
only 1,007.8 shares of Newco Stock will have been issued and be outstanding and
will be owned by Diserio and Barstow (the "Newco Shares").
(b) The Diserio Shares and the Barstow Shares are duly
authorized, validly issued, outstanding, fully paid and nonassessable. Diserio
and Barstow have good and marketable title to the Shares free and clear of all
Liens (as hereinafter defined). After the First Effective Time, Diserio and
Barstow will have, and upon the delivery to Buyer at the Closing of certificates
representing the Newco Shares in the manner set forth in Section 1.2, Diserio
and Barstow will convey to Buyer, good and marketable title to the Newco Shares,
in each case free and clear of all Liens.
(c) Each Option Holder owns the number of Options set forth
opposite such Option Holder's name on Schedule 2.3 hereto. AOL owns the AOL
Warrants, which represent the right to purchase such number of shares of
preferred stock of the Company which represent, on a fully diluted basis, 33.2%
of the issued and outstanding capital stock of the Company.
(i) Except for the Options and the AOL Warrants, there are
no securities, rights, subscriptions, warrants, options or
other contracts that give the right to purchase or
otherwise receive or be issued any shares of capital stock
of the Company or any security of any kind convertible into
or exchangeable or exercisable for any shares of capital
stock of the Company. There are no voting trusts or other
agreements or understandings with respect to the voting of
the capital stock or other equity interests of the Company
nor any restrictions on the transferability or sale of such
shares or other equity interests except under the
Securities Act and state "blue sky" or securities laws. The
Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire, redeem or
retire any shares of capital stock or other equity
interests of the Company or any securities convertible into
or exchangeable for any such capital stock or other equity
interests.
(ii) Immediately after the First Effective Time, except for
the Options and the AOL Warrants, there will be no
securities, rights, subscriptions, warrants, options or
other contracts that give the right to purchase or
otherwise receive or be issued any shares of capital stock
of Newco or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock
of Newco. There are no voting trusts or other agreements or
understandings with respect to the voting of the capital
stock or other equity interests of Newco nor any
restrictions on the transferability or sale of such shares
or other equity interests except under the Securities Act
and state "blue sky" or securities laws. Newco is not
subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire, redeem or retire any
shares of capital stock or other equity interests of Newco
or any securities convertible into or exchangeable for any
such capital stock or other equity interests.
8.
<PAGE> 9
2.4 Formation Documents, Books and Records.
(a) Copies of the certificate of incorporation and by-laws (or
similar governing documents) of the Company, and all amendments thereto, have
heretofore been delivered to Buyer, and are true, correct and complete. The
minute book of the Company as made available to Buyer prior to the execution of
this Agreement contains true and complete records of all meetings and consents
in lieu of meetings of the shareholders and Board of Directors (and any
committees thereof) or similar governing bodies of the Company since the time of
the Company's organization. The stock transfer ledgers and other similar records
of the Company as made available to Buyer prior to the execution of this
Agreement accurately reflect all record transfers prior to the execution of this
Agreement in the capital stock of the Company.
(b) Copies of the certificate of incorporation and by-laws (or
similar governing documents) of Newco, and all amendments thereto, have
heretofore been delivered to Buyer, and are true, correct and complete. The
minute book of Newco as made available to Buyer prior to the execution of this
Agreement contains true and complete records of all meetings and consents in
lieu of meetings of the shareholders and Board of Directors (and any committees
thereof) or similar governing bodies of Newco since the time of Newco's
organization. The stock transfer ledgers and other similar records of Newco as
made available to Buyer prior to the execution of this Agreement accurately
reflect all record transfers prior to the execution of this Agreement in the
capital stock of Newco.
2.5 Title to Assets.
(a) Set forth in Schedule 2.5(a) is a complete list (including
the street address, where applicable) of: (i) all real property leased by the
Company (the "Leased Real Property") or which the Company has an option to
lease; (ii) each vehicle owned or leased by the Company as of the date of this
Agreement; and (iii) each other material item of tangible personal property
owned or leased by the Company (in the form maintained by the Company) as of the
date indicated. All assets used by the Company pursuant to leases or licenses
are referred to as the "Leased Assets." Except for those leasehold interests set
forth on Schedule 2.5(a), the Company does not own, or hold any option or
contractual obligation to purchase or acquire any interest in, any real
property.
(b) The Company has good and marketable title to all of its
assets (other than the Leased Assets, as to which the Company has valid licenses
or leasehold interests) and owns all of such assets (including such licenses or
leasehold interests) free and clear of any liens, security interests,
encumbrances or other restrictions or limitations (collectively, "Liens"), other
than (i) statutory Liens securing taxes and other obligations that are not yet
due and payable or which are being contested in good faith and in respect of
which adequate reserves have been established by the Company; (ii) minor
imperfections of title and encumbrances that do not materially detract from or
interfere with the present use or value of such properties; and (iii) Liens
described in Schedule 2.5(b).
(c) The Company has a valid and subsisting leasehold estate in
and the right to quiet enjoyment of the Leased Real Property where the Company
is lessee or sublessee for the full term thereof. The Company does not owe
brokerage or commissions or tenant improvement
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<PAGE> 10
costs with respect to any such leased space. There are no pending, or to the
knowledge of each Holder, threatened condemnation or appropriation proceedings
or any action, suit, proceeding or arbitration by any Person or any
investigation or audit by any Governmental Body alleging any violation of any
applicable law, statute, rule, regulation, or ordinance with respect to the
Leased Real Property.
2.6 Sufficiency of Assets. The tangible personal property owned by
the Company and the Leased Assets: (i) constitute all assets used by the Company
in the conduct of its business; and (ii) are in good condition and repair,
ordinary wear and tear excepted, for property of comparable type, age and usage.
2.7 No Violation. Except as described in Schedule 2.7, the execution
and delivery of this Agreement and the other Shareholder Documents, the
performance of the Holders' obligations hereunder and thereunder and the
consummation of the transactions contemplated hereby and thereby, including,
without limitation, the CT Merger and the DE Merger, will not conflict with or
result in the breach of any term or provision of, or violate or constitute a
default under, or result in the creation of any Lien on the Company, Newco, any
Holders or any of their respective assets pursuant to, or require any Holder,
the Company or Newco to obtain any consent, approval or action of, make any
filing with, or give any notice to any Person as a result or under the terms of,
or relieve any third party of any obligation to the Company or Newco under or
give any third party the right to terminate or accelerate any obligation under,
(i) the certificate of incorporation or by-laws of the Company or Newco, (ii)
any Material Agreement (as hereinafter defined) or Permit (as hereinafter
defined) by which the Company, Newco or any Holder is bound, or (iii) any law,
statute, rule, regulation, ordinance or other pronouncement, or any writ,
judgment, decree, injunction or similar order, of any Governmental Body (as
hereinafter defined) by which the Company, Newco or any Holder or any of their
respective assets are in any way bound or obligated.
2.8 Government Consents. Except as set forth in Schedule 2.8, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental agency, authority,
commission, board or other body (collectively, a "Governmental Body") is
required on the part of any Holder, the Company or Newco in connection with any
of the transactions contemplated by this Agreement.
2.9 Financial Statements.
(a) Attached as Schedule 2.9(a) are true and complete copies of
the unaudited balance sheet of the Company (the "Latest Balance Sheet") as of
June 30, 1998 (the "Latest Balance Sheet Date"), the unaudited balance sheets of
the Company as of December 31, 1997 and 1996 and the related unaudited
statements of operations and cash flow for the years (with respect to the
periods ended December 3 1, 1997 and 1996) and the six months (with respect to
the period ended on the Latest Balance Sheet Date) then ended (collectively, the
"Financial Statements"). The Financial Statements present fairly in all material
respects the financial condition of the Company at the dates specified and the
results of its operations for the periods specified and, except for the
treatment of deferred income taxes, have been prepared in accordance with
generally accepted accounting principles, consistently applied, subject in the
case of the Latest Balance Sheet and the related statements of operations and
cash flow for the
10.
<PAGE> 11
six month period then ended, to the absence of footnote disclosure and to
changes resulting from normal period-end adjustments, which will not be material
in the aggregate. The Financial Statements have been prepared from the books and
records of the Company, which accurately and fairly reflect in all material
respects the transactions of, acquisitions and dispositions of assets by, and
incurrence of liabilities by the Company.
(b) The Company has no Liabilities of a type required by
generally accepted accounting principles to be set forth on a balance sheet
except for (i) Liabilities reflected on the Latest Balance Sheet, and (ii)
current liabilities incurred in the ordinary course of business and consistent
with past practice after the Latest Balance Sheet Date, none of which is
material to the assets, properties, business, prospects, results of operations
or condition (financial or otherwise) of the Company.
(c) All accounts receivable reflected in the Latest Balance Sheet
arose from bona fide sales in the ordinary course of business, represent valid
and binding obligations due to the Company and have been collected or are
collectible in the aggregate recorded amounts thereof without valid set-off.
2.10 Subsidiaries and Investments. The Company does not own any
direct or indirect equity or debt interest in any other Person, including,
without limitation, any interest in a corporation, partnership or joint venture,
and is not obligated or committed to acquire any such interest.
2.11 Absence of Material Adverse Changes; Operations.
(a) Since the Latest Balance Sheet Date, the Company has
conducted its business in the ordinary course consistent with past practice and
there has not been, nor to the knowledge of each Holder, is there threatened:
(i) any material adverse change in the assets, properties, business, prospects,
results of operations or condition (financial or otherwise) or Liabilities of
the Company; or (ii) any theft, condemnation, or eminent domain proceeding, or
any material damage, destruction or casualty loss affecting any of the Company's
assets, whether or not covered by insurance.
(b) Except as disclosed on Schedule 2.11 or expressly authorized
by this Agreement, since the Latest Balance Sheet Date, the Company has not, and
from the date hereof through the Closing Date, the Company shall not have,
without the prior written consent of HCI:
(i) amended its certificate of incorporation or by-laws or
comparable instruments or merged with or into or
consolidated with any other Person, or changed or agreed to
rearrange in any manner the character of its business;
(ii) issued, sold or purchased options or rights to
subscribe to, or entered into any contracts or commitments
to issue, sell or purchase, any shares of its capital stock
or other equity interests;
(iii) entered into, amended or terminated any (i)
employment agreement or collective bargaining agreement,
(ii) adopted, entered into or
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<PAGE> 12
amended any arrangement which is, or would be, an Employee
Plan (as hereinafter defined) or (iii) made any change in
any actuarial methods or assumptions used in funding any
Employee Plan or in the assumptions or factors used in
determining benefit equivalences thereunder;
(iv) issued any note, bond or other debt security, created,
incurred or assumed any indebtedness for borrowed money, or
guaranteed any indebtedness for borrowed money or any
capitalized lease obligation;
(v) declared, set aside or paid any dividends or declared
or made any other distributions of any kind to its
shareholders or holders of its equity interests, or made
any direct or indirect redemption, retirement, purchase or
other acquisition of any shares of its capital stock or
other equity interests;
(vi) knowingly waived any right of material value to its
business, operations or assets;
(vii) made any change in its accounting methods or
practices or made any changes in depreciation or
amortization policies or rates adopted by it or made any
material write-down of inventory or material write-off as
uncollectible of accounts receivable;
(viii) made any wage or salary increase or other
compensation payable or to become payable or bonus, or
increase in any other direct or indirect compensation, for
or to any of its officers, directors, employees,
independent contractors, consultants, agents or other
representatives, or any accrual for or commitment or
agreement to make or pay the same, other than increases
made in the ordinary course consistent with past practice;
(ix) entered into any transactions with any of its
shareholders, officers, directors or employees, or their
immediate family members, (other than employment
arrangements made in the ordinary course of business
consistent with past practice), or any Affiliate of any of
the foregoing;
(x) made any payment or commitment to pay any severance or
termination pay to any Person or any of its officers,
directors, employees, independent contractors, consultants,
agents or other representatives, other than payments or
commitments to pay such Persons or its officers, directors,
employees in the ordinary course of business;
(xi) (i) entered into any lease (as lessor or lessee); (ii)
sold, abandoned or made any other disposition of any of its
assets or properties other than in the ordinary course of
business consistent with past practice; (iii) granted or
suffered any Lien on any of its assets or properties other
than sales of inventory in the ordinary course of business;
or (iv) entered into or amended any contract or other
agreement to which it is a party, or
12.
<PAGE> 13
by or to which it or its assets or properties are bound or
subject, or pursuant to which it agrees to indemnify any
Person or to refrain from competing with any Person, in
each case of a type required to be disclosed pursuant to
Section 2.19 hereof;
(xii) except in the ordinary course of business, incurred
or assumed any debt, obligation or liability (whether
absolute or contingent and whether or not currently due and
payable);
(xiii) except for inventory or equipment acquired in the
ordinary course of business, made any acquisition of all or
any part of the assets, properties, capital stock or
business of any other Person;
(xiv) paid, directly or indirectly, any of its Liabilities
before the same became due in accordance with its terms or
otherwise than in the ordinary course of business;
(xv) made any capital expenditures or commitments for
capital expenditures in an aggregate amount exceeding $
10,000; or
(xvi) except in the ordinary course of business,
terminated, failed to renew, amended or entered into any
contract or other agreement of a type required to be
disclosed pursuant to Section 2.19.
2.12 Taxes. The Company has filed all Tax Returns required to be
filed by applicable law. All Tax Returns were in all respects (and, as to Tax
Returns not filed as of the date hereof, will be) true, complete and correct and
filed on a timely basis. No claim has ever been made by an authority of a
jurisdiction where the Company does not file Tax Returns that such Company is or
may be subject to taxation by that jurisdiction. The Company has, within the
time and in the manner prescribed by law, paid (and until the Closing Date will
pay within the time and in the manner prescribed by law) all Taxes that are due
and payable. There are no Tax liens upon the assets of the Company except liens
for Taxes not yet due. No audits or other administrative proceedings or court
proceedings are presently pending with regard to any Taxes or Tax Returns of the
Company, and no Tax authority has notified the Company that it intends to
investigate its Tax affairs. The Company has not received a tax ruling or
entered into a closing agreement with any Tax authority that would have a
continuing adverse effect after the Closing Date. The Company has complied (and
until the Closing Date will comply) in all respects with the provisions of the
Code relating to the payment and withholding of Taxes, including, without
limitation, the withholding and reporting requirements under Code Sections 3401
through 3606, and 6041 and 6049, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law, withheld
and paid over to the proper governmental authorities all amounts required in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party. The Company has properly classified
for all purposes (including, without limitation, for all Tax purposes and for
all purposes under ERISA (as hereinafter defined)) all employees, consultants
and independent contractors, and has made all filings and has withheld and paid
all Taxes required to have been filed, withheld or paid in connection with
services provided by such persons to the Company. The Company has
13.
<PAGE> 14
validly elected to be an "S corporation" (within the meaning of Code
1361(a)(1)), for federal income tax purposes as of July 1, 1995, and has
maintained its status as an "S corporation" at all times thereafter. The Company
has validly elected to be an "S corporation" in all state and local
jurisdictions where it would, absent such an election, be subject to corporate
income or franchise tax, and has maintained its status as an "S corporation" in
such jurisdictions at all times thereafter. Except for the consummation of the
transactions contemplated hereby, no state of facts exists or has existed, which
presents or presented a material risk that the Company's status as an "S
corporation" is or was subject to termination or revocation.
2.13 Litigation.
(a) Except as described in Schedule 2.13(a), there are currently
no pending or, to the knowledge of each Holder, threatened lawsuits,
administrative proceedings, or formal or informal complaints or investigations
by any Person against or relating to the Company or, to the knowledge of each
Holder, any of the Company's former shareholders, or any current or former
employees or agents (in their capacity as such), or to which any of the
Company's assets are subject. The Company is not subject to or bound by any
currently existing judgment, order, writ, injunction or decree.
(b) Except as described in Schedule 2.13(b), there are currently
no pending or, to the knowledge of each Holder, threatened lawsuits,
administrative proceedings, or formal or informal complaints or investigations
by any Person against or relating to a Holder, or to which any of a Holder's
assets are subject which could reasonably be expected to directly have a
Material Adverse Effect. No Holder is subject to or bound by any currently
existing judgment, order, writ, injunction or decree which could reasonably be
expected to directly have a Material Adverse Effect.
2.14 Compliance with Laws. Except as described in Schedule 2.14, the
Company is currently complying in all material respects with and has at all
times complied in all material respects with, and has not received any claim or
notice that it is not in compliance in any material respect with, each statute,
law, ordinance, decree, order, rule or regulation of any Governmental Body
applicable to it, including, without limitation, all federal, state and local
laws relating to zoning and land use, occupational health and safety, product
quality and safety and employment and labor matters.
2.15 Permits. The Company owns or possesses from each appropriate
Governmental Body all right, title and interest in and to all permits, licenses,
authorizations, approvals, franchises or rights issued by any Governmental Body
(collectively, "Permits") necessary to conduct its business. Each of such
Permits is described in Schedule 2.15. No loss or expiration of any Pen-nit is
pending or, to the knowledge of each Holder, threatened, other than expiration
in accordance with the terms thereof of Permits that may be renewed in the
ordinary course of business without lapsing.
2.16 Environmental Matters. Except as described in Schedule 2.16: (i)
the Company has conducted its business in compliance in all material respects
with, and without giving rise to any material Liability under, all applicable
Environmental Laws, including, without limitation, by having all material
Permits required under any Environmental Laws for the operation of its
14.
<PAGE> 15
business; (ii) to the knowledge of each Holder, none of the Leased Real Property
contains any Hazardous Substance in amounts exceeding in any material respect
the levels permitted by applicable Environmental Laws; (iii) the Company has not
received any written notices, demand letters or requests for information from
any Governmental Body or other Person indicating that the Company may be in
violation of, or liable under, any Environmental Law; (iv) no written reports
have been filed, or are required to be filed, by the Company concerning the
release of any Hazardous Substance or the threatened or actual violation of any
Environmental Law; (v) to the knowledge of each Holder, no Hazardous Substance
has been disposed of, released or transported in violation in any material
respect of any applicable Environmental Law to or from the Leased Real Property,
or as a result of any activity of the Company, that would give rise to material
liability under any Environmental Law; (vi) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses regarding
compliance or noncompliance with any Environmental Law conducted by or on behalf
of the Company, or which are in the possession of the Company, relating to the
activities of the Company or any of the Leased Real Property that have not been
delivered to HCI prior to the date hereof, (vii) to the knowledge of each
Holder, there are no underground storage tanks on, in or under any of the Leased
Real Property, and no underground storage tanks have been closed or removed from
any of the Leased Real Property in a manner that would give rise to material
liability under any Environmental Law; (viii) to the knowledge of each Holder,
there is no asbestos present in any of the Leased Real Property the condition or
existence of which currently requires remediation under applicable Environmental
Law, and no asbestos has been removed from any of the Leased Real Property; and
(ix) neither the Company nor any of the Company's assets are subject to any
material Liabilities or expenditures relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law.
2.17 Employee Matters. Set forth on Schedule 2.17 is a complete list
of all current employees of the Company as of the date of this Agreement,
including date of employment, current title and compensation, and date and
amount of last increase in compensation and indicating any employees on
disability or other permitted leaves of absence. The Company does not have and
has never had any collective bargaining, union or labor agreements, contracts or
other arrangements with any group of employees, labor union or employee
representative. No Holder knows of any organization effort currently being made
or threatened by or on behalf of any labor union with respect to employees of
the Company. The Company has not experienced, and the Company does not know of
any basis for any strike or material work stoppage or slow down.
2.18 Employee Benefit Plans.
(a) Set forth in Schedule 2.18 is a complete list of all
"employee benefit plans," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), all plans or policies
providing for fringe benefits (including, without limitation, vacation, paid
holidays, personal leave, employee discounts, educational benefits or similar
programs), and all other bonus, incentive, compensation, profit-sharing, equity,
severance, retirement, health, life, disability, group insurance, employment,
fringe benefit and other similar plans, agreements, policies or understandings
(whether or not subject to ERISA, whether written or oral, qualified or
nonqualified, currently effective or terminated), and any
15.
<PAGE> 16
trust, escrow or other agreement related thereto, which (i) is maintained or
contributed to by the Company or any ERISA Affiliate, or with respect to which
the Company or any ERISA Affiliate has or may have any liability, or (ii)
provides benefits, or describes policies or procedures applicable, to any
current or former officer, employee or independent contractor or dependents
thereof, regardless of whether funded (the "Employee Plans"). The Holders have
made available, or have caused the Company to make available, to HCI accurate
and complete copies of the documents, records and other materials related
thereto reasonably requested by HCI in writing. Except as described in Schedule
2.18, no Employee Plan provides, and no written or oral representations have
been made to any current or former employee, officer or independent contractor
of the Company promising or guaranteeing any employer payment or funding for the
continuation of medical, dental, life or disability coverage for any period of
time beyond the employee's date of termination (except to the extent of coverage
required under Code Section 4980B). Except as described in Schedule 2.18, the
consummation of the transactions contemplated by this Agreement will not
accelerate the time of payment or vesting, or increase the amount of
compensation due to any employee, officer, former officer or former employee of
the Company and neither the Company nor any ERISA Affiliate is a party to any
plan, program or agreement which could result in a payment that is an "excess
parachute" under Section 280G of the Code. "ERISA Affiliate" means the Company
and each Person that is or has been treated as a single employer or controlled
group member with the Company pursuant to Section 414 of the Code or Section
4001 of ERISA.
(b) With respect to each Employee Plan that is maintained or
contributed to, currently or in the past, by the Company or any ERISA Affiliate:
(i) there is no Employee Plan that is or has ever been a
"defined benefit plan" (as defined in Section 3(35) of
ERISA) or is subject to Section 412 of the Code or Title IV
of ERISA;
(ii) each Employee Plan has been operated in compliance
with ERISA, applicable tax qualification requirements and
all other applicable laws;
(iii) each Employee Plan which is intended to be
tax-qualified under Section 401(a) of the Code has been
determined by the IRS to be so qualified and no events have
occurred that would adversely affect the tax-qualified
status of any such Employee Plan; and
(iv) each Employee Plan which provides medical, dental,
health or long-term disability benefits are fully insured
and claims with respect to any participant or covered
dependent under such Employee Plan could not result in any
uninsured liability to the Company, HCI or any Affiliate
thereof.
(c) No Employee Plan contributed to by the Company or any ERISA
Affiliate is a "multiemployer plan" or a "multiple employer plan" (as such terms
are defined in Sections 3(37)(A) and 3(40)(A) of ERISA (multiemployer plans and
multiple employer plans are hereinafter referred to as "Multiemployer Plans")),
nor has the Company or any ERISA Affiliate ever contributed or been required to
contribute to any Multiemployer Plan.
16.
<PAGE> 17
(d) Neither the Company, any ERISA Affiliate or any plan
fiduciary of any Employee Plan has engaged in any transaction in violation of
Section 406(a) or (b) of ERISA or any "prohibited transaction" (as defined in
Code Section 4975(c)(1)) that would subject the Company, the Buyer, or any
Affiliate thereof to any taxes, penalties or other Liabilities resulting from
such transaction.
(e) To the knowledge of each Holder, none of the Employee Plans
is being audited or investigated by any Governmental Body.
(f) Without limiting any other provision of this Section 2.18,
no event has occurred and no condition exists, with respect to any Employee Plan
or any other employee benefit plan that has subjected or could subject the
Company, or any Employee Plan or any successor thereto, to any tax, fine,
penalty or other Liability (other than, in the case of the Company and the
Employee Plans, a Liability arising in the normal course to make contributions
or payments, as applicable, when ordinarily due under an Employee Plan with
respect to employees of the Company). No employee benefit plan, agreement or
arrangement other than an Employee Plan is or will be directly or indirectly
binding on Buyer or any of its Affiliates, including on and after the Closing
and the Second Closing, by virtue of the transactions contemplated hereby. Buyer
and its Affiliates (including on and after the Closing, the Company), shall have
no liability for, under, with respect to or otherwise in connection with any
employee benefit plan, which liability arises under ERISA or the Code, by virtue
of the Company being aggregated in a controlled group or affiliated service
group with any ERISA Affiliate for purposes of ERISA or the Code at any relevant
time prior to the Closing or the Second Closing. Each Employee Plan may be
amended and terminated in accordance with its terms, and, each such plan
provides for the unrestricted right of the Company to amend or terminate such
plan.
2.19 Material Agreements.
(a) Schedule 2.19 lists each agreement (whether written or oral
and including all amendments thereto) to which the Company is a party or a
beneficiary or by which the Company or any of the Company's assets is bound that
is material to the Company (collectively, the "Material Agreements"), including,
without limitation, the following: (i) agreements pursuant to which the Company
sells or distributes any products (other than Purchase Orders and Short Term
Agreements, as defined below); (ii) real estate leases; (iii) agreements
evidencing, securing or otherwise relating to any indebtedness for borrowed
money for which the Company is liable; (iv) capital or operating leases or
conditional sales agreements relating to vehicles, equipment or other assets
(other than Short Term Agreements); (v) agreements pursuant to which the Company
is entitled or obligated to acquire any assets from a third party (other than
Purchase Orders and Short Tenn Agreements); (vi) insurance policies; (vii)
employment, consulting, noncompetition, separation, collective bargaining,
independent contractor, staff writer, affiliate, information provider, online
content, union or labor agreements; (viii) agreements with or for the benefit of
any present or former shareholder, officer, director or employee of the Company
or any Affiliate or immediate family member thereof; (ix) agreements under which
the Company is obligated to indemnify, or entitled to indemnification from, any
third party, excluding any agreement that requires indemnification solely for a
breach of such agreement; and (x) any other agreement (other than a Purchase
Order) pursuant to which the Company is required to make or
17.
<PAGE> 18
entitled to receive aggregate payments or other value in excess of $10,000.
Schedule 2.19 identifies any Material Agreements that will be terminated at or
prior to the Closing or the Second Closing. For purposes of this Agreement, (A)
"Purchase Order" means a purchase order issued and accepted in the ordinary
course of business that sets forth terms applicable to a specified purchase or
sale of goods or services and does not impose obligations on either party that
relate to any transaction other than such purchase or sale, and (B) "Short Term
Agreement" means an agreement entered into in the ordinary course of business
that is terminable by the Company on thirty (30) days or less notice and
involves aggregate consideration of less than $10,000.
(b) The Holders have delivered to HCI a copy of each written
Material Agreement and a written summary of each oral Material Agreement. Except
as described in Schedule 2.19, (i) each Material Agreement is in full force and
effect and is valid, binding and enforceable in accordance with its terms as to
the Company and, to the knowledge of each Holder, as to each other party
thereto; (ii) there exists no material breach or material default (or event that
with notice or lapse of time would constitute a material breach or material
default) on the part of the Company or, to the knowledge of each Holder, on the
part of any other party under any Material Agreement; (iii) the Company has
received no written notice of termination or default under any Material
Agreement; and (iv) as of the date of this Agreement, no party to an agreement
under which the Company acquired a substantial portion of its assets has
asserted any claim for indemnification under such agreement.
2.20 Customers. Schedule 2.20 sets forth a list of the ten largest
customers of the Company on the basis of revenues for services provided or goods
sold (the "Major Customers") and the ten largest suppliers in terms of goods or
services purchased (the "Major Suppliers"), from January 1, 1998 until June 30,
1998. Since January 1, 1998, none of the Major Customers or Major Suppliers has
threatened to, or notified the Company of any intention to, terminate or
materially alter its relationship with the Company, and there has been no
material dispute with any Major Customer or Major Supplier. Except as set forth
on Schedule 2.20, to the knowledge of each Holder, no Major Customer or Major
Supplier is threatened with bankruptcy or insolvency.
2.21 Intellectual Property Rights. Schedule 2.21 sets forth a list of
all Intellectual Property owned by the Company or with respect to which the
Company has any rights (other than trade secrets, know-how and goodwill
attendant to the Intellectual Property and other intellectual property rights
not reducible to schedule form), true and complete copies of which have been
delivered or made available to HCI. The Company has the right to use all
Intellectual Property used by the Company or necessary in connection with the
operation of the Company's business, without infringing on or otherwise acting
adversely to the rights or claimed rights of any Person. Except as set forth on
Schedule 2.21, the Company is not obligated to pay any royalty or other
consideration to any Person in connection with the use of any such Intellectual
Property. To the knowledge of each Holder, no other Person is infringing the
rights of the Company in any of its Intellectual Property.
2.22 Transactions with Affiliates. Except as set forth on Schedule
2.22, no shareholder, officer, director or employee of the Company or Affiliate
or immediate family member thereof has since January 1, 1998: (a) borrowed money
from or loaned money to the
18.
<PAGE> 19
Company which remains outstanding; (b) obtained any contractual or other claim,
express or implied, of any kind whatsoever against the Company; (c) any interest
in any property or assets used by the Company in its business; (d) engaged in
any other transaction with the Company or (e) owned, directly or indirectly, any
interest in (except not more than two percent (2%) stockholdings for investment
purposes in securities of publicly held and traded companies), or served as an
officer, director, employee or consultant of or otherwise received remuneration
from, any Person which is, or has engaged in business as, a competitor, lessor,
lessee, customer or supplier of the Company.
2.23 Brokers. All negotiations relative to. this Agreement and the
transactions contemplated hereby have been carried out by each Holder directly
with Buyer without the intervention of any Person on behalf of any Holder in
such manner as to give rise to any valid claim by any Person against Buyer for a
finder's fee, brokerage commission or similar payment.
2.24 Investment Intent. Each Holder is acquiring the Subordinated
Notes for its own account for the purpose of investment and not with a view to
resale or any distribution thereof Each Holder understands that (a) the
Subordinated Notes have not been registered under the Securities Act of 1933, as
amended, by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof, (b) the Subordinated Notes must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
of 1933, as amended, or is exempt from such registration, and (c) HCI will make
a notation on its transfer books to such effect. Each Holder acknowledges that
it has had a full opportunity to request from HCI and to review and has received
all information which it deems relevant, in making a decision to acquire the
Subordinated Notes and will comply with the restrictions on transferability of
the Subordinated Notes contained therein.
2.25 No Misrepresentations. The representations, warranties and
statements made by the Holders in or pursuant to this Agreement are true,
complete and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make any such representation, warranty or statement, under the circumstances in
which it is made, not misleading.
2.26 No Prior Activity. Newco was formed for the purpose of merging
with the Company and has not engaged in any activity before the date hereof
except in connection with the transactions contemplated by this Agreement. The
Holders have not caused Newco to, and to the knowledge of the Holders Newco has
not, incurred any liabilities as of the date hereof, except in connection with
the transactions contemplated by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AOL
AOL hereby represents and warrants to Buyer as follows:
3.1 Organization of AOL. AOL 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 to
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own its properties and to conduct its business as presently conducted. AOL is
duly authorized, qualified or licensed to do business and is in good standing in
each state or other jurisdiction in which its assets are located or in which its
business or operations as presently conducted make such qualification necessary,
except for such failures to be so authorized, qualified, licensed or in good
standing as could not reasonably be expected to have a material adverse effect
on AOL's ability to complete its obligations under this Agreement.
3.2 Authority. AOL has full legal right, capacity, power and
authority to execute, deliver and perform its obligations under this Agreement
and the Shareholder Documents to be executed by AOL in connection with or
pursuant to this Agreement. The execution, delivery and performance by AOL of
each Shareholder Document to which it is a party have been duly authorized by
all necessary corporate action. This Agreement has been, and, to the extent AOL
has executed and delivered such documents, the other Shareholder Documents have
been, duly executed and delivered by AOL. This Agreement is, and, upon execution
and delivery at the Closing by each Shareholder, to the extent AOL has executed
and delivered such document, each of the other Shareholder Documents executed by
AOL in connection with or pursuant to this Agreement is, a legal, valid and
binding agreement of AOL, enforceable against AOL in accordance with their
respective terms.
3.3 Capitalization.
(a) Upon the delivery to HCI at the Closing of the AOL Warrants
and the AOL Notes in the manner set forth in Section 6.1(i), AOL will convey to
HCI. good and marketable title to the AOL Warrants and the AOL Notes, free and
clear of all Liens.
(b) AOL owns the AOL Warrants and the AOL Notes, free and clear
of all Liens. Except for the AOL Warrants and the AOL Notes, AOL has no
securities, rights, subscriptions, warrants, options or other contracts that
give the right to purchase or otherwise receive or be issued any shares of
capital stock of the Company or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of the Company. AOL
has not entered into any voting trusts or other agreements or understandings
with respect to the voting of the capital stock or other equity interests of the
Company. Other than as set forth in this Agreement, AOL does not have any right
(contingent or otherwise) to repurchase or otherwise acquire, redeem or retire
any shares of capital stock or other equity interests of the Company or any
securities convertible into or exchangeable for any such capital stock or other
equity interests of the Company.
3.4 No Violation. Except as described in Schedule 3.4, the execution
and delivery of this Agreement and the other Shareholder Documents by AOL, the
performance of AOL's obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby, including, without
limitation, the sale of the AOL Warrants and AOL Notes to HCI, will not conflict
with or result in the breach of any term or provision of, or violate or
constitute a default under, or result in the creation of any Lien on AOL or any
of its assets, or to the knowledge of AOL, the Company or any of its assets,
pursuant to, or require AOL, or to the knowledge of AOL, the Company to obtain
any consent, approval or action of, make any filing with, or give any notice to
any Person as a result or under the terms of, (i) the certificate of
incorporation or by-laws of AOL, (ii) any material agreement or Permit by which
AOL is bound,
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or (iii) any law, statute, rule, regulation, ordinance or other pronouncement,
or any writ, judgment, decree, injunction or similar order, of any Governmental
Body by which AOL or any of its respective assets are in any way bound or
obligated.
3.5 Government Consents. Except as set forth in Schedule 3.5, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Body is required on
the part of AOL in connection with any of the transactions contemplated by this
Agreement to which AOL is a party.
3.6 Litigation. Except as described in Schedule 3.6, there are
currently no pending or, to the knowledge of AOL, threatened lawsuits,
administrative proceedings, or formal or informal complaints or investigations
by any Person against AOL, or to which any of AOL's assets are subject which, to
AOL's knowledge, could reasonably be expected to have a direct material adverse
effect on the business of the Company as currently constituted or on AOL's
ability to perform its obligations hereunder. AOL is not subject to or bound by
any currently existing judgment, order, writ, injunction or decree which could
reasonably be expected to have a direct material adverse effect on the business
of the Company as currently constituted or on AOL's ability to perform its
obligations hereunder.
3.7 Transactions with Affiliates. Except as set forth on Schedule
3.7, neither AOL nor any of AOL's Affiliates has since January 1, 1998: (a)
borrowed money from or loaned money to the Company which remains outstanding;
(b) obtained any contractual or other claim, express or implied, of any kind
whatsoever against the Company; (c) any interest in any property or assets used
by the Company in its business; or (d) engaged in any other transaction with the
Company.
3.8 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by AOL directly with
Buyer without the intervention of any Person on behalf of AOL in such manner as
to give rise to any valid claim by any Person against Buyer for a finder's fee,
brokerage commission or similar payment.
3.9 Investment Intent. AOL is acquiring the Subordinated Notes for
its own account for the purpose of investment and not with a view to resale or
any distribution thereof. AOL understands that (a) the Subordinated Notes have
not been registered under the Securities Act of 1933, as amended, by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act of 1933, as amended, pursuant to Section 4(2) thereof, (b) the
Subordinated Notes must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act of 1933, as amended, or is exempt
from such registration, and (c) HCI will make a notation on its transfer books
to such effect. AOL acknowledges that it has had a full opportunity to request
from HCI and to review and has received all information which it deems relevant,
in making a decision to acquire the Subordinated Notes and will comply with the
restrictions on transferability of the Subordinated Notes contained therein.
3.10 No Misrepresentations. The representations, warranties and
statements made by AOL in or pursuant to this Agreement are true, complete and
correct in all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make any such
representation, warranty or statement, under the circumstances in which it is
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made, not misleading. This Section 3.10 shall not be interpreted in any way to
expand or alter the specific scope or coverage of the representations and
warranties otherwise being made by AOL in this Article 111.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholders as follows:
4.1 Organization. Buyer is a corporation duly formed, validly
existing and in good standing under the laws of the State of Delaware.
4.2 Authority. Buyer has all requisite corporate power and authority
to execute, deliver and perform under this Agreement and the other agreements,
certificates and instruments to be executed by Buyer in connection with or
pursuant to this Agreement (collectively, the "Buyer Documents"). The execution,
delivery and performance by Buyer of each Buyer Document have been duly
authorized by all necessary corporate action. This Agreement has been, and at
the Closing and the Second Closing, as the case may be, the other Buyer
Documents will be, duly executed and delivered by Buyer. This Agreement is, and,
upon execution and delivery by Buyer at the Closing or the Second Closing, as
the case may be, each of the other Buyer Documents will be, a legal, valid and
binding agreement of Buyer, enforceable against Buyer in accordance with their
respective terms.
4.3 No Violation. The execution and delivery of this Agreement and
the other Buyer Documents, the performance of the Buyer's obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the purchase of the Shares from the
Shareholders, will not conflict with or result in the breach of any term or
provision of, or violate or constitute a default under, or result in the
creation of any Lien on Buyer or any of its assets pursuant to, or require Buyer
to obtain any consent, approval or action of, make any filing with, or give any
notice to any Person as a result or under the terms of, or relieve any third
party of any obligation to the Company under or give any third party the right
to terminate or accelerate any obligation under, (i) Buyer's certificate of
incorporation or by-laws, (ii) any material agreement or Permit by which Buyer
is bound, or (iii) any law, statute, rule, regulation, ordinance or other
pronouncement, or any writ, judgment, decree, injunction or similar order, of
any Governmental Body by which Buyer or any of their respective assets are in
any way bound or obligated.
4.4 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Body is required on the part of Buyer in
connection with the transactions contemplated by this Agreement.
4.5 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Buyer directly with
the Shareholders without the intervention of any Person on behalf of Buyer in
such manner as to give rise to any valid claim
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by any Person against the Company or the Shareholders for a finder's fee,
brokerage commission or similar payment.
4.6 HomeArts Business. The HomeArts Business (as defined in the AOL
Subordinated Note) constitutes all of the material tangible and intangible
property used by Buyer (whether owned, leased or held under license by Buyer, by
any of Buyer's Affiliates, or by others) in connection with the conduct of the
HomeArts Site (as defined in the AOL Subordinated Note) as is currently being
conducted by Buyer.
4.7 Financial Condition. Buyer has sufficient assets and cash flow to
meet its anticipated expenses as its business is currently being conducted,
including, without limitation the HomeArts Business, and to fully perform its
obligations hereunder.
4.8 No Misrepresentations. The representations, warranties and
statements made by Buyer in or pursuant to this Agreement are true, complete and
correct in all material respects. None of such representations, warranties or
statements contains any untrue statement of a material fact or omits to state
any material fact necessary to make any such representation, warranty or
statement, under the circumstances in which it is made, not misleading.
ARTICLE 5
COVENANTS AND AGREEMENTS
5.1 Conduct of Business. Prior to the Closing, unless HCI otherwise
consents in writing, the Holders will cause the Company to operate in the
ordinary course of business and consistent with past practices and use
commercially reasonable efforts to preserve the goodwill of the Company and
(except as, described in Schedule 2.11) of its employees, customers, suppliers,
Governmental Bodies and others having business dealings with the Company.
5.2 Exercise of Options. Prior to the Closing, no Option Holder shall
exercise any of the Options owned by such Option Holder.
5.3 Exercise or Transfer of AOL Warrants. Prior to the Closing, AOL
shall not, and, to the extent legally permitted, the Holders shall cause the
Company to refrain from permitting AOL to (i) exercise or transfer the AOL
Warrants, (ii) transfer or convert the AOL Notes or (iii) amend the terms or
provisions of the AOL Warrants or the AOL Notes.
5.4 Intellectual Property. Diserio will use her best efforts to
preserve and maintain intact, and will transfer, assign and set over to the
Company or Buyer, at HCI's election, at no cost to the Company or Buyer, as the
case may be, all of Diserio's rights, title and interest in any Intellectual
Property used or useful in the operation of the business of the Company, whether
registered or unregistered, wherever located, including without limitation any
rights of Diserio in (i) the pending applications for registration of the
trademarks "Astronet" and "Astromates" set forth on Schedule 5.4, and (ii) any
other pending applications with any Governmental Body or similar trademark
registration authority relating to the trademarks "Astronet" and "Astromates";
provided, however, that, except as set forth in the License Agreement (as
hereinafter defined), Diserio may retain all right, title and interest currently
held by Diserio in the trademark "Genie Easy."
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5.5 Access and Information. The Holders will cause the Company to
permit Buyer, its lenders and their respective representatives to have
reasonable access to the Company's employees, agents, assets and properties and
all relevant books, records and documents of or relating to the business and
assets of the Company during normal business hours and will furnish to Buyer and
its lenders such information, financial records and other documents relating to
the Company and its operations and business as Buyer and its lenders may
reasonably request. The Holders will cause the Company to permit Buyer, its
lenders and their respective representatives reasonable access to the Company's
accountants, auditors and suppliers for reasonable consultation or verification
of any information obtained by Buyer and its lenders and will use commercially
reasonable efforts to cause such Persons to cooperate with Buyer, its lenders
and their respective representatives in such consultations and in verifying such
information.
5.6 Information for Filings. The Shareholders and Buyer will furnish
each other with all information that is required for inclusion in any
application or filing made by such party or its Affiliates to any Governmental
Body in connection with the transactions contemplated by this Agreement.
5.7 Fulfillment of Conditions by the Shareholders.
(a) Each Holder will not knowingly take any action that would
cause the conditions on the obligations of the parties to effect the
transactions contemplated hereby not to be fulfilled, including, without
limitation, by taking or causing to be taken any action that would cause the
representations and warranties made by such Holder herein not to be true and
correct as of the Closing and the Second Closing. Each Holder will take all
commercially reasonable steps within its power to cause to be fulfilled the
conditions precedent to Buyer's obligations to consummate the transactions
contemplated hereby.
(b) AOL will not knowingly take any action that would directly
cause the conditions on the obligations of the parties to effect the
transactions contemplated hereby not to be fulfilled, including, without
limitation, by taking or causing to be taken any action that would cause the
representations and warranties made by AOL herein not to be true and correct as
of the Closing. AOL will take all commercially reasonable steps within its power
to cause to be fulfilled the conditions precedent to Buyer's obligations to
consummate the transactions contemplated hereby.
5.8 Fulfillment of Conditions by Buyer. Buyer will not knowingly take
any action that would cause the conditions on the obligations of the parties to
effect the transactions contemplated hereby not to be fulfilled, including,
without limitation, by taking or causing to be taken any action that would cause
the representations and warranties made by Buyer herein not to be true and
correct as of the Closing and the Second Closing. Buyer will take all
commercially reasonable steps within its power to cause to be fulfilled the
conditions precedent to the obligations of the Company to consummate the
transactions.
5.9 Publicity.
(a) Buyer and the Holders will cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the transactions
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contemplated by this Agreement. Neither Buyer nor the Holders will issue or
make, or allow to have issued or made, any press release or public announcement
concerning the transactions contemplated by this Agreement without the consent
of Buyer and AOL, with respect to the Holders, and the Holders' Representative,
with respect to the Buyer (subject also to the conditions of Section 5.9(b)),
except as required by law, but in any event only after giving the other party a
reasonable opportunity to comment on such release or announcement in advance,
consistent with such applicable legal requirements.
(b) Buyer and AOL will cooperate with each other in the
development and distribution of all news releases and other public disclosures
relating to the transactions contemplated by this Agreement. Neither Buyer nor
AOL will issue or make, or allow to have issued or made, any press release or
public announcement concerning the transactions contemplated by this Agreement
without the consent of the other party, except as required by law, but in any
event only after giving the other party a reasonable opportunity to comment on
such release or announcement in advance, consistent with such applicable legal
requirements.
5.10 Transaction Costs. Buyer will pay all transaction costs and
expenses (including legal, accounting and other professional fees) that it
incurs in connection with the negotiation, execution and performance of this
Agreement and the transactions contemplated hereby. The Holders will pay all
transaction costs and expenses (including legal, accounting and other
professional fees) that they incur in connection with the negotiation, execution
and performance of this Agreement and the transactions contemplated hereby;
provided that, subject to the conditions set forth in the Holders Subordinated
Note, the Company may pay up to $25,000 of such costs and expenses. AOL will pay
all transaction costs and expenses (including legal, accounting and other
professional fees) that it incurs in connection with the negotiation, execution
and performance of this Agreement and the transactions contemplated hereby.
5.11 Nondisclosure. Each Shareholder and Buyer acknowledge and agree
that all customer, prospect and marketing lists, sales data, intellectual
property, proprietary information, trade secrets and other confidential
information of the Company (collectively, "Confidential Information") are
valuable assets of the Company. Each Shareholder agrees to, and agrees to use
reasonable efforts to cause its or his representatives to, treat the
Confidential Information, together with any other confidential information
furnished to it by Buyer, as confidential and not to make use of such
information for its or his own purposes or for the benefit of any other Person
(other than the Company). In the event the Closing does not occur, Buyer agrees
to, and agrees to use reasonable efforts to cause its representatives to, treat
the Confidential Information, together with any other confidential information
furnished to it by the Company, as confidential and not to make use of such
information for its or his own purposes or for the benefit of any other Person
(other than the Company). The foregoing confidentiality obligations will not
apply to information that (a) is at the time of receipt or thereafter becomes
publicly known through no wrongful act of any Shareholder, or Buyer, as the case
may be, (b) is received from a third party not under an obligation to keep such
information confidential and without breach of this Agreement (c) is received by
AOL pursuant to the relationship of the Company with AOL as a tenant on the AOL
proprietary network, in the case of AOL's obligations, (d) is required to be
disclosed pursuant to applicable law or an order or decree of a Governmental
Body, or (e) is independently developed without violation of this Section 5.11
by a Shareholder or Buyer, as the case may be. Further, the parties acknowledge
that AOL is involved in a broad range of
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activities in the online industry and agree that, without more, any activities
of AOL which may resemble any Confidential Information will not be presumed to
violate this Section 5.11.
5.12 Exclusivity. Until the earlier to occur of the Second Closing or
the termination of this Agreement, each Shareholder (including their agents and
representatives) shall, and the Holders shall cause the Company and each
officer, director, agent and representative of each Holder and the Company to,
hot, directly or indirectly, (a) submit, solicit, initiate, encourage or discuss
any proposal or offer from any person relating to any (i) reorganization,
dissolution or recapitalization involving the Company, (ii) merger or
consolidation involving the Company, (iii) sale of any assets of the Company
outside the ordinary course of business or sale of capital stock or other equity
interests in the Company, or (iv) similar transaction or business combination
involving the Company or its respective assets, capital stock or equity
interests; or (b) furnish any information with respect to, assist or participate
in or facilitate in any other manner any effort or attempt by any person to do
or seek the foregoing. Each Shareholder will, and the Holders will cause the
Company to, terminate all discussions with any third party regarding the
foregoing and will notify Buyer immediately if any person makes any proposal or
offer with respect to the foregoing.
5.13 Relocation of the Company. Provided that Diserio remains an
employee of the Company, until the date that is one year after the Closing Date,
Buyer will not, without the prior written consent of Diserio, relocate the
Company's principal office from the Town of New Canaan, Connecticut.
5.14 Consent and Waiver. By executing this Agreement, AOL hereby
consents to and waives any rights it has or might have pursuant to the AOL
Documents with respect to (i) the execution and delivery of this Agreement by
the Company, Newco and the Holders and (ii) provided that this Agreement is not
terminated pursuant to Section 9. 1, the transactions contemplated hereby.
ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions to Obligations of Buyer. The obligations of Buyer
under this Agreement are subject to the satisfaction at or prior to the Closing
or the Second Closing, as the case may be, of the following conditions, but
compliance with any such conditions may be waived by Buyer in writing:
(a) All representations and warranties of the Holders and of AOL
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing and the Second Closing, with the same effect as though
such representations and warranties were made at and as of the Closing or the
Second Closing, as the case may be (other than any representation or warranty
that is expressly made as of a specified date, which shall be true and correct
in all material respects as of such specified date only).
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(b) Each Shareholder shall have performed and complied with all
the covenants and agreements required by this Agreement to be performed or
complied with by it at or prior to the Closing or the Second Closing, as the
case may be.
(c) The contractual and governmental consents, approvals,
orders, authorizations and notices described in Schedule 6.1(c) shall have been
obtained or given, as applicable.
(d) Each of Diserio, Turner and Cunningham shall have executed
and delivered to the Company an employment agreement, substantially in the form
of Exhibits F-1, F-2, and F-3, respectively.
(e) Diserio shall have executed a license agreement,
substantially in the form of Exhibit G hereto (the "License Agreement"),
granting to the Company or Buyer, at Buyer's election, at no cost, an exclusive
license to use the trademark "Genie Easy" during the term of her employment with
the Company or with any successor to the business of the Company and shall have
transferred, assigned and set over to the Company or Buyer, at HCI's election.
all of Diserio's rights, title and interest in the Intellectual Property set
forth in Section 5.4 by such instruments of transfer as HCI may reasonably
request.
(f) AOL shall have executed and delivered to the Company UCC
Termination statements with respect to all security interests held by AOL in the
assets of the Company and Newco.
(g) The Company shall have delivered to Buyer (i) copies of its
certificate or articles of incorporation (or other comparable organizational
documents), including all amendments thereto, certified by the Secretary of
State or other appropriate official of its jurisdiction of incorporation or
organization, (ii) certificates from the Secretary of State or other appropriate
official of the respective jurisdiction of incorporation or organization to the
effect that it is in good standing or subsisting in such jurisdiction, listing
all charter documents on file and attesting to its payment of all franchise or
similar Taxes, and (iii) a certificate from the Secretary of State or other
appropriate official in each jurisdiction in which it is qualified or admitted
to do business to the effect that it is duly qualified or admitted and in good
standing in such jurisdiction.
(h) Buyer shall have received executed copies of
(i) (A) the DE Certificate of Merger, (B) the CT
Certificate of Merger, (C) the CT Plan of Merger and (D)
such other documents as necessary to consummate the CT
Merger pursuant to the provisions of the DGCL and the CBCA
(ii) (A) the Certificate of Merger and (B) such other
documents as are necessary to cause the DE Merger to be
consummated in accordance with the provisions of the DGCL
and the DLLCA.
(i) Buyer shall have received (i) the AOL Warrants, in genuine
and unaltered form, accompanied by such instruments of transfer or cancellation
as may reasonably be
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requested by Buyer and (ii) the AOL Notes, in genuine and unaltered form,
accompanied by such instruments of transfer or cancellation as may reasonably be
requested by Buyer.
(j) Buyer shall have received the Options, in genuine and
unaltered form, accompanied by such instruments of transfer or cancellation as
may reasonably be requested by Buyer.
(k) Buyer shall have received the minute book of the Company.
(l) Buyer shall have received from each Shareholder a general
release dated as of the Closing Date in form and substance reasonably
satisfactory to Buyer, releasing the Company and Newco from all liabilities
arising on or prior to the Closing.
(m) There shall not have been instituted or threatened any legal
proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of the transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto.
(n) Each Holder shall have delivered to Buyer a closing
certificate, substantially in the form of Exhibit H-1 hereto.
(o) AOL shall have delivered to Buyer a closing certificate,
substantially in the form of Exhibit H-2 hereto.
(p) The Holders shall have delivered to Buyer a legal opinion of
the Holders' counsel, substantially in the form of Exhibit I hereto.
(q) The Company's Confidential Information Provider Agreement
with AOL will have been modified and extended on terms and conditions acceptable
to Buyer; provided, however, that Buyer's execution and delivery of a new
Confidential Information Provider Agreement with AOL with respect to the Company
shall be deemed to be a waiver of this Section 6. 1 (q).
6.2 Conditions to Obligations of the Shareholders. The obligations of
the Shareholders under this Agreement are subject to the satisfaction at or
prior to the Closing or the Second Closing, as the case may be, of the following
conditions, but compliance with any such conditions may be waived by the
Shareholders in writing:
(a) All representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing and the Second Closing, with the same effect as though such
representations and warranties were made at and as of the Closing or the Second
Closing, as the case may be (other than any representation or warranty that is
expressly made as of a specified date, which shall be true and correct in all
material respects as of such specified date only).
(b) Buyer shall have performed and complied with the covenants
and agreements required by this Agreement to be performed or complied with by it
at or prior to the Closing or the Second Closing, as the case may be.
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(c) Buyer shall have delivered to the Shareholders a closing
certificate, substantially in the form of Exhibit J hereto.
(d) Buyer shall have delivered to the Shareholders a certificate
of the Secretary of Buyer, substantially in the form of Exhibit K hereto.
(e) Buyer shall have delivered to the Shareholders a legal
opinion of Rogers & Wells LLP, counsel to Buyer, substantially in the form of
Exhibit L hereto.
(f) There shall not have been instituted or threatened any legal
proceeding relating to, or seeking to prohibit or otherwise challenge the
consummation of the transactions contemplated by this Agreement, or to obtain
substantial damages with respect thereto.
(g) AOL shall have received from each Holder and the Company a
general release dated as of the Closing Date in form and substance reasonably
satisfactory to AOL, releasing AOL from all liabilities to such Holders and the
Company arising on or prior to the Closing, other than those obligations arising
out of this Agreement or the Shareholder Documents.
(h) Each Holder shall have received from AOL a general release
dated as of the Closing Date in form and substance reasonably satisfactory to
the Holders' Representative, releasing the Holders from all liabilities to AOL
arising on or prior to the Closing, other than those obligations arising out of
this Agreement or the Shareholder Documents.
(i) The Shareholders shall have received a certificate of a
financial officer of The Hearst Corporation substantially in the form of Exhibit
M hereto.
(j) At the Closing, Diserio and Barstow shall have received the
Shares Payment as set forth in Section 1.2 and Holders Subordinated Notes in the
initial principal amount set forth in Section 1.2.
(k) At the Closing, AOL shall have received the AOL Payment and
the AOL Subordinated Note in the initial principal amount set forth in Section
1.3.
(l) At the Second Closing, the Option Holders shall have received
the Option Payment as set forth in Section 1.4 hereto and Holders Subordinated
Notes in the initial principal amounts set forth set forth in Section 1.4
hereto.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification of Buyer.
(a) The Holders, jointly and severally, will indemnify and hold
Buyer, its Affiliates and their respective directors, officers, employees and
agents (collectively, the "Buyer Parties") harmless from any and all
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all court costs and reasonable attorneys' fees (collectively,
"Losses"),
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that any Buyer Party, may suffer or incur as a result of or relating to the
inaccuracy in or breach of any representation, warranty, covenant or agreement
of the Holders contained in this Agreement or in any document or other papers
delivered pursuant to this Agreement; provided, however, that the Holders shall
not be liable to Buyer pursuant to this Section 7.1(a) in respect of that
portion of any Loss for which the principal amount of the Holders Subordinated
Notes is reduced pursuant to Section 3.2 thereof; provided, further, that
Diserio, Cunningham and Turner shall be severally and not jointly liable for
breaches of Article 8 hereof. No amounts of indemnity shall be payable pursuant
to this Section 7.1(a), other than with respect to (i) a breach of Article 8
hereof or (ii) the infringement by the Company of the rights of any person with
respect to the trademark "Astromates" or any derivation thereof unless and until
the Buyer Parties hereunder have suffered, incurred, sustained or become subject
to Losses in excess of forty thousand dollars ($40,000) in the aggregate, in
which event the Buyer Parties shall be entitled to seek indemnification from the
Holders for the full amount of such Losses. No amounts of indemnity shall be
payable pursuant to this Section 7. 1 (a) by any Holder in excess of such
Holder's pro rata share of such Losses hereunder according to such Holder's
proportionate interest in the Shares and the Option Shares (assuming issuance
thereof) as of the date hereof (which for purposes hereof equals 1278.8 shares
of Common Stock).
(b) AOL will indemnify and hold the Buyer Parties harmless from
any and all Losses that any Buyer Party, may suffer or incur as a result of or
relating to the inaccuracy in or breach of any representation, warranty,
covenant or agreement of AOL contained in this Agreement or in any document or
other papers executed and delivered by AOL pursuant to this Agreement.
7.2 Indemnification of the Shareholders. Buyer will indemnify and
hold the Shareholders harmless from any and all Losses that any Shareholder may
suffer or incur as a result of or relating to the inaccuracy In or breach of any
representation, warranty, covenant or agreement of the Buyer contained in this
Agreement or in any document or other papers delivered pursuant to this
Agreement. No amounts of indemnity shall be payable to the Holders as a result
of a claim arising under this Section 7.2 unless and until the Holders have
suffered, incurred, sustained or become subject to Losses referred to in this
Section 7.2 in excess of forty thousand dollars ($40,000) in the aggregate, in
which event, the Holders shall be entitled to seek indemnification from Buyer
for the full amount of such Losses; provided that the foregoing limitation shall
not apply to Buyer's obligation to comply with the provisions of the Holders
Subordinated Notes.
7.3 Survival. The representations, warranties, covenants and
agreements of each Holder, AOL and Buyer contained in this Agreement, will
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (i) with respect to representations and
warranties, and any covenant or agreement to be performed prior to the Closing,
until two years after the Closing Date; provided that the representations and
warranties set forth in Sections 2.2, 2.3, 2.12, 2.14, 2.16, 2.18, 2.23, 3.2,
3.3 and 3.8 will survive until the expiration of all applicable statutes of
limitation with respect to the matters covered thereby; and (ii) with respect to
covenants and agreements, until 90 days following the last date on which such
covenant or agreement is to be performed, or if no such date is specified,
indefinitely; provided, however, that any representation, warranty, covenant or
agreement that would otherwise terminate in accordance with clause (i) or (ii)
above will continue to survive, if a Claim Notice
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shall have been given under this Article VII on or prior to such termination
date, until the related claim for indemnification has been satisfied or
otherwise resolved as provided in this Article VII.
7.4 Notice. Any party entitled to receive indemnification under this
Article VII (the "Indemnified Party") agrees to give prompt written notice (a
"Claim Notice") to the party or parties required to provide such indemnification
(the "Indemnifying Parties") upon the occurrence of any indemnifiable Loss or
the assertion of any claim or the commencement of any action or proceeding in
respect of which such a Loss may reasonably be expected to occur (such a claim,
action or proceeding being referred to as a "Claim"), but the Indemnified
Party's failure to give such notice will not affect the obligations of the
Indemnifying Party under this Article VII except to the extent that the
Indemnifying Party is prejudiced thereby.
7.5 Defense of Claims. The Indemnifying Party may elect to assume and
control the defense of any Claim, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of expenses related
thereto, if (a) the Indemnifying Party acknowledges its obligation to indemnify
the Indemnified Party for any Losses resulting from such Claim and provides
reasonable evidence to the Indemnified Party of its financial ability to satisfy
such obligation, and (b) the Claim does not seek to impose any material
liability or obligation on the Indemnified Party other than for money damages.
If such conditions are satisfied and the Indemnifying Party elects to assume and
control the defense of a Claim, then (i) the Indemnifying Party will not be
liable for any settlement of such Claim effected without its consent, which
consent will not be unreasonably withheld; (ii) the Indemnifying Party may not
settle such Claim without the consent of the Indemnified Party (not to be
unreasonably withheld) unless such settlement includes a full and unconditional
release of the Indemnified Party; and (iii) the Indemnified Party may employ
separate counsel and participate in the defense thereof, but the Indemnified
Party will be responsible for the fees and expenses of such counsel unless (A)
the Indemnifying Party has failed to assume the defense of such Claim or to
employ counsel with respect thereto or (B) a conflict of interest exists between
the interests of the Indemnified Party and the Indemnifying Party that requires
representation by separate counsel, in which case the fees and expenses of such
separate counsel will be paid by the Indemnifying Party. If such conditions are
not satisfied, the Indemnified Party may assume and control the defense of the
Claim at the expense of the Indemnifying Party; provided that the Indemnified
Party may not settle any such Claim without the consent of the Indemnifying
Party (not to be unreasonably withheld) unless such settlement includes a full
and unconditional release of the Indemnifying Party; and further provided that
the Indemnifying Party is given a reasonable opportunity to participate in such
defense (at the Indemnifying Party's expense).
7.6 Remedies of Buyer. In the event that the Holders are liable to
Buyer pursuant to Section 7. 1 (a) with respect to any Loss in respect of which
the principal amount of the Holders Subordinated Notes is not reduced pursuant
to Section 3.2 thereof, then the Holders agree that Buyer may set-off against
the payments due under any of the Holders Subordinated Notes the amounts so owed
to Buyer.
31.
<PAGE> 32
ARTICLE 8
NONCOMPETITION AGREEMENT
8.1 Noncompetition. For a period commencing on the Closing Date and
terminating (i) in the case of paragraphs (a) and (b) below, one year after such
party ceases to be employed by the Company or any successor to the business of
the Company, and (ii) in the case of paragraph (c) below, two years after such
party ceases to be employed by the Company or any successor to the business of
the Company (the "Restricted Period"), Diserio, Cunningham and Turner will not,
without the prior written consent of HCI, directly or indirectly, on their own
behalf or as an agent of, or as a stockholder, partner or other investor in, any
Person (other than the Company or any successor to the business of the Company):
(a) engage in the following activity (the "Restricted Activity")
") in the United States of America (the "Restricted Area"): (i) in the case of
Diserio, any activity related to astrology, tarot, psychic readings, predictions
and advice and other similar variations of fortune telling, predictions and
advice (A) under the name "Genie Easy", "Genie", "Eugenie" or any other similar
name or derivation thereof, (B) on any online interactive media, now known or
hereinafter developed, including but not limited to the international network of
interconnected computers commonly referred to as the "Internet" and proprietary
networks like the America Online proprietary network, or (C) by publication,
broadcast or transmission in national mass media (it being expressly agreed and
understood that the preceding clause will not preclude Diserio from performing
such services in local mass media under an assumed name); and (ii) in the case
of Cunningham and Turner, any activity that is directly competitive with the
services or businesses of the Company or any successor to the business of the
Company [for which such Shareholder has responsibility as an employee of the
Company] or any successor to the business of the Company;
(b) render any services to, or become interested (as a partner,
shareholder, principal, agent, trustee, consultant or in any other similar
relationship or capacity) in, any Person (other than the Company or any
successor to the business of the Company) engaged in the Restricted Activity in
the Restricted Area; provided that the restrictions in this Section 8. 1 (b)
will not prohibit a party hereto from investing in a class of publicly traded
securities constituting less than 2% of the outstanding securities in such
class; or
(c) in the Restricted Area, knowingly solicit, induce, aid or
suggest, directly or indirectly to any Person who is an employee, author,
independent contractor or other service provider, customer, agency or advertiser
of the Company or any successor to the business of the Company at such time or
who was an employee, author, independent contractor or other service provider,
customer, agency or advertiser of the Company or any successor to the business
of the Company during the year prior to such time, to leave such employ, to
terminate such relationship, to cease doing business with or to become an
employee of any Person other than the Company or such successor to the business
of the Company, as the case may be.
32.
<PAGE> 33
8.2 Enforcement.
(a) Each of Diserio, Cunningham and Turner acknowledges and
agrees that its obligations under this Article VIII are a material inducement
and condition to Buyer's entering into this Agreement and performing its
obligations hereunder and that the restrictions and remedies contained in this
Article VIII are reasonable as to time, geographic area and scope of activity
and do not impose a greater restraint than is necessary to protect the goodwill
and other legitimate business interests of Buyer.
(b) If the provisions of this Article VIII are found by a court
of competent jurisdiction to contain unreasonable or unnecessary limitations as
to time, geographic area or scope of activity, then such court is hereby
directed to reform such provisions to the minimum extent necessary to cause the
limitations contained therein as to time, geographical area and scope of
activity to be reasonable and enforceable.
(c) Each of Diserio, Cunningham and Turner acknowledges and
agrees that Buyer would be irreparably harmed by any violation of its
obligations under this Article VIII and that, in addition to all other rights or
remedies available at law or in equity, Buyer will be entitled to (i) injunctive
and other equitable relief to prevent or enjoin any such violation, and (ii)
require the breaching Shareholder to pay over to Buyer all compensation, profits
or other benefits derived or received as a result of any transactions
constituting a breach of this Article VIII.
ARTICLE 9
MISCELLANEOUS
9.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the Closing by
mutual written consent of Buyer, AOL and the Holders' Representative (as defined
below); or (b) by Buyer, AOL or the Holders' Representative if the Closing has
not occurred on or prior to December 31, 1998 (unless the Closing has not
occurred as a result of a breach of this Agreement by the party seeking such
termination or, in the case of termination by the Holders' Representative, a
breach by any Shareholder). If this Agreement is terminated pursuant to this
Section 9. 1, this Agreement shall become null and void and no party shall have
any further liability hereunder except that (A) the provisions of Sections 5. 10
and 5.11 shall remain in full force and effect and (B) each party hereto shall
remain liable to each other party hereto for any breach of this Agreement by
such party prior to such termination.
9.2 Notices. All notices that are required or may be given pursuant
to this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
Party may provide to the other parties by notice in accordance with this Section
9.2):
33.
<PAGE> 34
<TABLE>
<S> <C>
if to Buyer: with copies to:
c/o Hearst New Media & Technology Rogers & Wells LLP
959 Eighth Avenue 200 Park Avenue
New York, New York 10019 New York, New York 10166
Attention: Kenneth A. Bronfin Attention: Steven A. Hobbs, Esq.
if to the Holders: with copies to:
c/o Eugenie A. Diserio Diserio Martin O'Connor & Castiglioni LLP
68 Running Brook Lane One Atlantic Street
New Canaan, Connecticut 06840 Stamford, Connecticut 06901
Attention: Brian O'Connor
if to AOL: with copies to:
America Online America Online
22000 AOL Way 22000 AOL Way
Dulles, Virginia 20166 Dulles, Virginia 20166
Attn: Len Leader Attn: General Counsel
</TABLE>
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
9.3 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party will be entitled
to recover reasonable attorneys' fees and costs incurred in connection therewith
from the responsible party. To the extent more than one party is responsible,
such parties will be jointly and severally liable for their pro rata share of
such fees and other costs in proportion to their responsibility and then, if
equally responsible, or relative responsibility cannot be determined, in
relation to their proportionate share of the Purchase Price.
9.4 Further Assurances. Each party agrees to execute any and all
documents and to perform such other acts as may be reasonably necessary or
expedient to fulfill its obligations under this Agreement.
9.5 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
9.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned or delegated by any
Shareholder or Buyer without the prior written consent of the other parties and
any purported assignment or delegation in violation hereof shall be null and
void, except that Buyer may assign all or any part of its rights, interests and
obligations hereunder to any Affiliate of Buyer; provided, that no such
assignment by Buyer
34.
<PAGE> 35
shall relieve Buyer of its obligations hereunder. This Agreement is not intended
to confer any rights or benefits on any Person other than the parties hereto
and, to the extent provided in Article VII, the Buyer Parties.
9.7 Entire Agreement. This Agreement and the related documents
contained as Exhibits and Schedules hereto or expressly contemplated hereby
contain the entire understanding of the parties relating to the subject matter
hereof and supersede all prior written or oral and all contemporaneous oral
agreements and understandings relating to the subject matter hereof. This
Agreement may not be modified or amended except in writing signed by the party
against whom enforcement is sought. The Exhibits and Schedules to this Agreement
are hereby incorporated by reference into and made a part of this Agreement for
all purposes.
9.8 Governing Law.
(a) This Agreement will be governed by and construed and
interpreted in accordance with the substantive laws of the State of New York,
without giving effect to any conflicts of law rule or principle that might
require the application of the laws of another jurisdiction.
9.9 Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Affiliate" means any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning twenty percent (20%) or more of the voting securities of a second
Person shall be deemed to control that second Person.
(b) "AOL Documents" means: (i) the Confidential Information
Provider Agreement, dated as of July 28, 1995, by and between the Company and
AOL, as amended; (ii) the Note and Warrant Purchase Agreement, dated as of July
28, 1995, by and among the Company Diserio and AOL; (iii) the AOL Notes; (iv)
the Stock Purchase Warrant, executed July 28, 1995, issued to AOL by the
Company; (v) the Security Agreement, dated as of July 28, 1995, by and between
the Company and AOL, as amended; (vi) the Employee Agreement, dated July 27,
1995, by and among the Company, Diserio and AOL; (viii) the Second Round Note
and Warrant Purchase Agreement, dated as of November 15, 1996, by and among the
Company, Diserio and AOL, as amended; and (viii) the Second Round Stock Purchase
Warrant, dated November 15, 1996, issued by the Company to AOL.
(c) "Business Day" means any weekday (Monday through Friday) on
which banks in New York, New York are open for business.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Environmental Law" means any existing federal, state or
local law, statute, ordinance, rule, regulation, Permit, order, judgment or
decree relating to (i) the protection
35.
<PAGE> 36
of the environment or (ii) the use, storage, generation, transportation,
processing, production, release or disposal of Hazardous Substances.
(f) "Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic or radioactive under any
Environmental Law. Hazardous Substance includes any substance to which exposure
is regulated by any Governmental Body or any Environmental Law, including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste or petroleum or any
product or by-product thereof, radon, radioactive material, asbestos or asbestos
containing material, urea formaldehyde, lead or polychlorinated biphenyls.
(g) "Intellectual Property" means all computer software and
software licenses, intellectual property, proprietary information, trade
secrets, material and manufacturing specifications, drawings and designs,
patents, trademarks, service marks, trade names and copyrights, and applications
for and licenses (to or from the Company) with respect to any of the foregoing.
(h) "Liabilities" means any direct or indirect debts, obligations
or liabilities of any nature, whether absolute, accrued, contingent, liquidated
or otherwise, and whether due or to become due, asserted or unasserted, known or
unknown.
(i) "Person" means any individual, corporation, partnership,
Governmental Body or other entity.
(j) "Taxes" means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including all income, sales
and use, ad valorem, transfer, gains, profits, excise, franchise, property,
severance or withholding taxes or charges imposed by any governmental entity,
and includes any interest and penalties (civil or criminal) on or additions to
any such taxes and any expenses incurred in connection with the determination,
settlement or litigation of any Tax liability.
(k) "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes.
9.10 Holders' Representative.
(a) Each Holder hereby irrevocably constitutes and appoints
Diserio (in such capacity, the "Holders' Representative") as such Holder's
attorney-in-fact and agent in connection with the performance of this Agreement.
This power is irrevocable and coupled with an interest, and shall not be
affected by the death, incapacity, illness, dissolution or other inability to
act of any Holder.
(b) Each Holder hereby irrevocably grants the Holders'
Representative full power and authority: (i) to execute and deliver, on behalf
of such Holder, and to accept delivery of, on behalf of such Holder, such
documents as may be deemed by the Holders; Representative, in her sole
discretion, to be appropriate to consummate this Agreement; (ii) to transmit
each Holder's share of the Purchase Price to the appropriate Holders; (iii) to
(A) dispute or refrain from disputing, on behalf of such Holder, any claim made
by Buyer under this Agreement;
36.
<PAGE> 37
(B) negotiate and compromise, on behalf of such Holder, any dispute that may
arise under, and to exercise or refrain from exercising any remedies available
under, this Agreement, and (C) execute, on behalf of such Holder, any settlement
agreement, release or other document with respect to such dispute or remedy;
(iv) to give or agree to, on behalf of such Holder, any and all consents,
waivers, amendments or modifications, deemed by the Holders' Representative, in
her sole discretion, to be necessary or appropriate under this Agreement, and,
in each case, to execute and deliver any documents that may be necessary or
appropriate in connection therewith; (v) to enforce, on behalf of such Holder,
any claim against Buyer arising under this Agreement; (vi) to engage attorneys,
accountants and agents at the expense of the Holders; (vii) to amend this
Agreement (other than this Section 9.10) or any of the instruments to be
delivered to Buyer by such Holder pursuant to this Agreement; and (viii) to give
such instructions and to take such action or refrain from taking such action, on
behalf of such Holder, as the Holders' Representative deems, in her sole
discretion, necessary or appropriate to carry out the provisions of this
Agreement.
(c) Each Holder hereby agrees that: (i) in all matters in which
action by the Holders' Representative is required or permitted, the Holders'
Representative is authorized to act on behalf of such Holder, notwithstanding
any dispute or disagreement among Holders or between any Holder and the Holders'
Representative, and Buyer shall be entitled to rely on any and all action taken
by the Holders' Representative under this Agreement without any liability to, or
obligation to inquire of, any of the other Holders, notwithstanding any
knowledge on the part of Buyer of any such dispute or disagreement; (ii) notice
to the Holders' Representative, delivered in the manner provided in Section 9.2,
shall be deemed to be notice to all Holders for the purposes of this Agreement;
(iii) the power and authority of the Holders' Representative, as described in
this Agreement, shall continue in force until all rights and obligations of the
Holders and this Agreement shall have terminated, expired or been fully
performed; (iv) a majority in interest of the Holders other than Diserio (as
determined by reference to Schedule 1.4) shall have the right, exercisable from
time to time upon written notice delivered to the Holders' Representative and
Buyer, to remove the Holders' Representative, with or without cause, and to
appoint any other Holder as a Holders' Representative following the death,
resignation or removal of the Holders' Representative; and (v) if the Holders'
Representative resigns or is removed or otherwise ceases to function in her
capacity as such for any reason whatsoever, and no successor is appointed
pursuant to paragraph (iv) within 30 days, then Buyer shall have the right to
appoint a Holder to act as the Holders' Representative, to serve as described in
this Agreement.
(d) Each Holder agrees that, notwithstanding the foregoing, at
the request of Buyer, such Holder shall take all actions necessary or
appropriate to consummate the transactions contemplated hereby (including,
without limitation, delivery of the Shares and acceptance of their share of the
Purchase Price therefor) individually on such Holder's own behalf, and shall
deliver any other documents required of Holders pursuant to the terms hereof.
(e) Holders, jointly and severally, shall indemnify Buyer
against, and agree to holder the Buyer Parties harmless from, any and all Losses
incurred or suffered by any of such persons arising out of, with respect to or
incident to the operation of, or any breach of any covenant or agreement
pursuant to, this Section 9. 10. or the designation, appointment and actions of
the Holders' Representative pursuant to the provisions hereof, including without
37.
<PAGE> 38
limitation, with respect to (i) actions taken by the Holders' Representative,
and (ii) reliance by Buyer on, and actions taken by Buyer in response to or in
reliance on, the instructions of, notice given by or any other action taken by
the Holders' Representative.
(f) Each Holder shall severally indemnify the Holders'
Representative against any Losses (except such as result from such Holder
Representative's gross negligence or willful misconduct) that such Holder may
suffer or incur in connection with any action or omission of such person as the
Holders' Representative. No Holders' Representative shall be liable to any
Holder with respect to any action or omission taken or omitted to be taken by
the Holders' Representative pursuant to this Section 9. 10, except for the
Holders' Representative's gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
HEARST COMMUNICATIONS, INC.
By: /s/ Kenneth A. Bronfin
-----------------------------------------
Name: Kenneth A. Bronfin
Title: Senior Vice President -
Hearst New Media & Technology Division
HEARST NEW MEDIA, L.L.C.
By: /s/ Kenneth A. Bronfin
-----------------------------------------
Name: Kenneth A. Bronfin
Title: President
ASTRONET, INC.
By: /s/ Eugenie A. Diserio
-----------------------------------------
Name: Eugenie A. Diserio
Title: President
38.
<PAGE> 39
DISERIO MERGER CORP.
By: /s/ Eugenie A. Diserio
-----------------------------------------
Name: Eugenie A. Diserio
Title: President
/s/ Eugenie Diserio
---------------------------------------------
Eugenie A. Diserio
/s/ David Cunningham
---------------------------------------------
David Cunningham
/s/ James Turner
---------------------------------------------
James Turner
/s/ Richard L. Barstow
---------------------------------------------
Richard L. Barstow
/s/ Timothy J. Sheridan
---------------------------------------------
Timothy J. Sheridan
/s/ Christine A. Rising
---------------------------------------------
Christine A. Rising
AMERICA ONLINE, INC.
By: /s/ David M. Colburn
-----------------------------------------
Name: David Colburn
Title: Senior Vice President
39.
<PAGE> 1
EXHIBIT 10.23
CONFIDENTIAL
April 22, 1999
Ms. Marleen McDaniel
Chief Executive Officer and President
Women.com Networks
1820 Gateway Drive, Suite 150
San Mateo, CA 94404-2471
Dear Marleen:
This letter outlines the terms upon which BT Alex. Brown ("BT Alex.
Brown" or the "Agent") is to be engaged by [Women.com Networks LLC and Women.com
Networks] (collectively the "Company") to act as exclusive agent in connection
with the private placement (the "Offering") of one or more equity-related or
equity-linked securities (the "Securities") to be issued by the Company. It is
currently contemplated that the Offering will raise approximately $20.0 million.
Services
1. The Company, with the Agent's assistance, will prepare a Confidential
Offering Memorandum (the "Memorandum"), which will contain (a) a description of
the Company and its business, assets, prospects and management; (b) the terms
and conditions of the Offering and of the Securities; and (c) audited financial
statements and certain Company projections. If necessary, the Company will
update the Memorandum prior to completion of the Offering. The Agent shall be
entitled to rely on the accuracy and completeness of all information provided by
the Company, including information incorporated by reference in the Memorandum.
Additionally, representatives of the Company shall be available to answer
questions of, and to provide additional information to, any potential investors.
The Company represents that the Memorandum will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
2. The Agent agrees to use its reasonable best efforts to complete the private
placement of the Securities. The terms of the Offering shall be subject to
mutual agreement of the Company and each investor in the Offering. The Agent
will contact potential investors, assist in the negotiation and the structuring
of the investment in the Company, and provide related services that the Agent
deems advisable and reasonable that may facilitate the successful completion of
the Offering. The Agent will conduct all sales and solicitation efforts in a
manner consistent with your intent that the Offering be an exempt transaction
pursuant to the Securities Act of 1933, as amended (the "Act"). The Agent may
decline to participate in the Offering if it determines that the completion of
the Offering is impractical, undesirable or not advisable.
3. The Offering will be sold pursuant to a purchase agreement which shall (i)
contain customary representations and covenants on behalf of the Company, (ii)
provide for the delivery by the Company's counsel of customary opinions
addressed to the investors, may (iii) contain such other terms and conditions as
shall be agreed to by the Company and the investors, and (iv)
<PAGE> 2
Women.com Networks
Page 2 of 5
April 22, 1999
contain customary representations and warranties of the purchasers of such
securities. The Company agrees that with regard to any escrow arrangements
utilized in connection with this offering, all bank accounts which contain
investor funds will be maintained at a "bank" within the meaning of Section 3(a)
(6) of the Securities Exchange Act of 1934.
In order to coordinate our efforts during the term of our engagement
hereunder, the Company hereby agrees not to initiate any discussions looking
toward any investment in the Company without first notifying BT Alex. Brown. In
the event that the Company, its directors, management or controlling
shareholders receive any inquiry or are otherwise aware of the interest of any
third party concerning such investment during the term of the engagement, they
will promptly inform BT Alex. Brown of the prospective investor and its
interest. Consistent with the parties' intention that the Offering will be an
exempt transaction, we currently anticipate offering the Securities to both U.S.
and non-U.S. persons and institutions. The Company confirms that accredited
investors across this range are acceptable, and acknowledge that upon completion
of the Offering there may be as many as 75 new investors in the Company.
You shall advise us of those states in which the Securities have been
qualified or exempted under the appropriate securities laws. The Company agrees
not to solicit any offerees or take any action which might jeopardize the
availability of the exemption under the Act.
Fees
4. As compensation for its services under this Agreement, the Agent will receive
a cash fee at closing equal to five (5%) of the gross proceeds raised by
Women.com Networks and two and one-half percent (2.5%) of the gross proceeds
raised by Women.com LLC. Payment of such Placement Fee shall be a condition of
closing the Offering. If more than one closing is required to complete the
Offering, then only that portion of the Placement Fee applicable to each closing
shall be payable at such closing.
In addition, whether or not the Offering is completed, the Company
agrees to reimburse the Agent, at closing or upon termination of this
engagement, for its reasonable out-of-pocket expenses, including fees and
expenses of Agent's counsel, if any, in connection with the Offering not to
exceed $10,000 without the prior consent of the Company, which shall not be
unreasonably withheld or delayed.
Indemnification
5. The Company agrees to indemnify and hold harmless the Agent, any of its
directors, officers, agents, and employees, and each person, if any, who
controls the Agent within the meaning of the Securities Act of 1933, as amended,
against any lawsuits, claims, damages or liabilities (or actions or proceedings
in respect thereof) to which the Agent or such person may become subject related
to or arising out of our engagement hereunder including, without limitation, the
use and content of the Memorandum, and will reimburse the Agent and each such
person for all legal and other expenses incurred in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding whether or not in connection with
<PAGE> 3
Women.com Networks
Page 3 of 5
April 22, 1999
pending or threatened litigation in which the Agent or any such person is a
party; provided, however, that the Company will not be liable in any such case
for losses, claims, damages, liabilities or expenses that a court of competent
jurisdiction shall have found in a final judgment to have arisen primarily, in
bad faith, from the gross negligence or willful misconduct of the Agent or the
party claiming a right to indemnification. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
In case any proceeding shall be instituted involving any person in
respect to whom indemnity may be sought, such person (the "indemnified party")
shall promptly notify the Company, and the Company, upon the request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the Company
may designate in such proceedings and shall pay as incurred the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
indemnified party shall have the right to retain its own counsel at its own
expense, except that the Company shall pay as incurred the fees and expenses of
counsel retained by the indemnified party in the event that (i) the Company and
the indemnified party shall have mutually agreed to the retention of such
counsel or, (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Company and the indemnified party and
representation of both parties by the same counsel would constitute a real or
perceived conflict of interest in the reasonable opinion of the indemnified
party, due to actual or potential differing interests between them. The Company
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Company agrees to indemnify the indemnified
party to the extent set forth in this letter. In no event shall the Company be
liable to Alex. Brown for consequential damages or lost profits accruing to
Alex. Brown.
In the event a claim for indemnification as described herein is
determined to be unenforceable by a final judgment of a court of competent
jurisdiction, then the Company shall contribute to the aggregate losses, claims,
damages or liabilities to which the Agent or its officers, directors, agents,
employees or controlling persons may be subject in such amount as is appropriate
to reflect the relative benefits received by each of the Company and the party
seeking contribution on the one hand and the relative faults of the Company and
the party seeking contribution on the other, as well as any relevant equitable
contributions.
The provisions of this agreement relating to indemnification and
contribution shall survive termination or modification of our engagement and
shall be binding upon any successors or assigns of the Company.
Other
6. The Company represents and warrants that no person or organization other than
BT Alex. Brown is, as a result of any action by the Company, entitled to
compensation for services as a finder, broker, placement agent or investment
banker in connection with the Offering.
<PAGE> 4
Women.com Networks
Page 4 of 5
April 22, 1999
7. The initial term of this engagement shall be four months and it shall
automatically renew on a month-to-month basis until terminated in writing by
either party. However, upon completion of the Offering, or upon mutual written
consent of both parties, the engagement shall terminate immediately. In any such
event the Company shall be responsible for the reimbursement of expenses as
provided in Section 4 incurred by Alex. Brown through the date of termination.
8. For a period of three (3) years from closing of the Offering, the Company
shall provide BT Alex. Brown, in a timely manner, with all written information
provided to the investors in this Offering.
9. The Company agrees that BT Alex. Brown shall have the right, at its own cost,
to advertise its participation in the Offering in "tombstone" or other
appropriate financial advertisements in newspapers, magazines, trade periodicals
or other publications. BT Alex. Brown agrees that such tombstone or other
advertisements shall not be published without the Company's prior approval,
provided that such approval is not unreasonably withheld or delayed.
10. The Agent agrees to keep confidential information that the Company
designates as confidential and proprietary (the "Information") and that is not
otherwise publicly available for a period of one year from the date of this
letter. The Agent agrees to exercise the same standard of care to prevent the
unauthorized use of disclosure of the Information as it exercises to prevent the
unauthorized disclosure or unauthorized use of its own proprietary information
(the "Standard of Care"). The Agent shall not be liable to the Company for any
unauthorized use or unauthorized disclosure of the Information to the extent
that the Standard of Care is exercised with respect thereto.
11. The invalidity or unenforceability of any provision of this Agreement shall
in no way offset the validity or enforceability of any other provision. This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the state of Maryland. The terms and provisions of this letter are
solely for the benefit of the Company and the Agent and the other indemnified
parties and their respective successors, assigns, heirs and personal
representatives, and no other person shall acquire or have any right by virtue
of this letter.
<PAGE> 5
Women.com Networks
Page 5 of 5
April 22, 1999
Please confirm that the terms described here are in accordance with your
understanding by signing and returning to us the enclosed duplicate of this
letter. We are pleased to be working with Women.com Networks on this project and
look forward to a successful outcome.
Very truly yours,
BT Alex. Brown Incorporated
By: /s/ Dyan Triffo By: /s/ Donald D. Notman, Jr.
---------------------------- -----------------------------
Dyan Triffo Donald D. Notman, Jr.
Principal Principal
AGREED and CONFIRMED
Women.com Networks
By: /s/ Marleen McDaniel
-------------------------------------
Marleen McDaniel
Chief Executive Officer and President
Date: 4/22/99
----------------------------------
<PAGE> 1
EXHIBIT 10.24
ASSET PURCHASE AGREEMENT
WOMEN.COM NETWORKS,
WILD WILD WEB, INCORPORATED
AND
RAYMOND B. KROPP, M.D. AND VICTORIA KROPP
APRIL 2, 1998
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is entered into as of April 2, 1998, by
and among: WILD WILD WEB, INCORPORATED, a California corporation ("SELLER");
RAYMOND B. KROPP, M.D., and VICTORIA P. KROPP (each a "SHAREHOLDER" and
collectively, the "SHAREHOLDERS"); and WOMEN.COM NETWORKS, a California
corporation ("PURCHASER"). Certain capitalized terms used in this Agreement are
defined on Exhibit A.
RECITALS
A. Shareholders own shares of capital stock of Seller and are members of
the Board of Directors of the Seller.
B. Shareholders and Seller wish to provide for the sale of substantially
all of the assets of Seller to Purchaser on the terms set forth in this
Agreement (the "Acquisition"), with the expectation that Purchaser will use such
assets to carry on a business substantially similar to the business currently
being conducted by Seller.
C. The Acquisition is intended to qualify as a tax-free reorganization
within the provisions of Section 368 of the Internal Revenue Code of 1986, as it
may be amended from time to time.
AGREEMENT
The parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION 1. SALE OF ASSETS; RELATED TRANSACTIONS.
1.1 SALE OF ASSETS.
(a) Contemporaneously with the execution and delivery of this
Agreement, Shareholders and Seller shall cause to be sold, assigned,
transferred, conveyed and delivered to Purchaser, and Seller hereby sells,
assigns, transfers, conveys and delivers to Purchaser, good, valid and
marketable title to the Purchased Assets (as defined below), free and clear of
all Encumbrances, on the terms set forth in this Agreement.
(b) As used in this Agreement, "PURCHASED ASSETS" shall mean and
include: (a) all of the properties, rights, interests and other tangible and
intangible assets of Seller; and (b) any other assets that are owned by
Shareholders that are needed for the conduct of, or have been used in connection
with, the business of Seller, excluding the trademark "ask Tori, RN".
1.2 PURCHASE PRICE. As consideration for the sale of the Purchased
Assets to Purchaser, contemporaneously with the execution and delivery of this
Agreement, Purchaser shall: (a) issue to Seller an aggregate of five hundred
seventy-three thousand seven hundred fifty (573,750) shares of the Purchaser's
Common Stock (the "COMMON SHARES"); (b) retain one
1.
<PAGE> 3
hundred one thousand two hundred fifty (101,250) Common Shares in escrow; and
(c) assume the assumed liabilities set forth on Exhibit B (the "ASSUMED
LIABILITIES").
1.3 ESCROW. Contemporaneously with the execution and delivery of this
Agreement, Purchaser will maintain one hundred one thousand two hundred fifty
(101,250) Common Shares (the "ESCROW ACCOUNT") pursuant to the terms of the
Escrow Agreement of even date herewith. The Escrow Account will be released on
the terms and conditions as more fully described in the Escrow Agreement.
1.4 INSTRUMENTS OF ASSIGNMENT. The sale, assignment, conveyance and
transfer of the Purchased Assets to Purchaser shall be effected by Seller's
execution and delivery of all such bills of sale, deeds, endorsements,
assignments and other good and sufficient instruments of transfer and conveyance
as shall be necessary to vest in Purchaser all right, title and interest of
Seller in and to the Purchased Assets, free and clear of all Encumbrances.
1.5 ASSUMPTION OF LIABILITIES. The parties agree that Purchaser shall be
obligated to assume and to pay, perform and otherwise discharge only the Assumed
Liabilities set forth on Exhibit B and that no other liabilities of Seller are
assumed by Purchaser hereunder. Purchaser is not assuming and shall not take any
Purchased Assets subject to, and Seller shall retain and be solely responsible
and liable for, any and all Encumbrances, claims, damages, demands, obligations,
debts and liabilities of Seller or any other person of any nature whatsoever,
whenever arising, whether absolute, accrued or contingent, and whether known or
unknown, except that Purchaser shall assume and agree to perform and discharge
only those liabilities and obligations of Seller set forth on Exhibit B.
1.6 EXECUTORY CONTRACTS. Seller shall assign the Seller Contracts
identified on Exhibit C to Purchaser. Purchaser shall assume no liability under
any Seller Contract not identified on Exhibit C. Seller shall deliver all
necessary consents to permit the assumption and assignment by Seller to
Purchaser of each Seller Contract identified on Exhibit C.
1.7 SALES TAXES. Seller shall bear and pay all sales taxes, use taxes,
transfer taxes, documentary charges, recording fees or similar taxes, charges,
fees or expenses that may become payable in connection with the purchase of the
Purchased Assets from Seller or in connection with any of the Transactions.
1.8 CLOSING.
(a) The closing of the Acquisition (the "CLOSING") is taking
place contemporaneously with the execution and delivery of this Agreement at the
offices of Cooley Godward LLP at 3000 Sand Hill Road, Building 3, Suite 230,
Menlo Park, California 94025 on April 2, 1998 (the "CLOSING DATE").
(b) At the Closing, Purchaser shall deliver to Seller a stock
certificate representing five hundred seventy-three thousand seven hundred fifty
(573,750) Common Shares.
2.
<PAGE> 4
1.9 OTHER AGREEMENTS AND TRANSACTIONS. Contemporaneously with the
execution and delivery of this Agreement:
(a) Victoria P. Kropp and Purchaser are entering into an
Employment Agreement of even date herewith;
(b) Victoria P. Kropp, and Raymond B. Kropp, M.D. are each
executing and delivering to Purchaser a Noncompetition Agreement of even date
herewith;
(c) Victoria P. Kropp and Purchaser are entering into a Trademark
License Agreement of even date herewith;
(d) Seller and Purchaser are entering into an Escrow Agreement of
even date herewith;
(e) Each holder of capital stock of the Seller is executing and
delivering to Purchaser an Investment Representation Certificate; and
(f) Shareholders and Seller are causing to be executed and
delivered to Purchaser estoppel certificates with respect to various contractual
obligations of Seller and evidence that any notices or filings required to have
been given to or made with Governmental Bodies in connection with the
Transactions have been given and made and that all Consents required to have
been obtained in connection with the Transactions have been obtained.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND SELLER.
Seller and the Shareholders jointly and severally represent and warrant,
to and for the benefit of the Indemnitees, except as set forth in the Seller
Disclosure Schedule, as follows:
2.1 DUE ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Seller
is not required to be qualified, authorized, registered or licensed to do
business as a foreign corporation in any jurisdiction.
2.2 CAPITALIZATION. The authorized capital stock of the Company
immediately prior to the Closing will consist of ten million (10,000,000) shares
of Common Stock, no par value per share, eight hundred seventy six thousand
forty one (876,041) shares of which are issued and outstanding. Except as set
forth in Part 2.2 of the Seller Disclosure Schedule, there is no: (a)
outstanding option, warrant or other right to acquire any shares of the capital
stock or other securities of Seller; (b) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any shares
of the capital stock or other securities of Seller; or (c) contract under which
Seller is or may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities.
2.3 FINANCIAL STATEMENTS. The Shareholders and Seller have delivered to
Purchaser the following financial statements and notes (collectively, the
"SELLER FINANCIAL STATEMENTS"): the balance sheets of Seller as of December 31,
1997, January 31, 1998 and February 28, 1998, and the related statements of
income and retained earnings and cash flows for the year, one (1)
3.
<PAGE> 5
month and two (2) months then ended, together with the notes thereto. The Seller
Financial Statements are accurate and complete in all material respects and
present fairly the financial position of Seller as of the dates thereof and the
results of operations and cash flows of Seller for the periods covered thereby.
The Seller Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods covered.
2.4 ABSENCE OF CHANGES. Except as set forth in Part 2.4 of the Seller
Disclosure Schedule, since February 28, 1998: (a) there has not been any
material adverse change in, and no event has occurred that might have a material
adverse effect on, the business, condition, assets, liabilities, operations,
financial performance, net income or prospects of Seller; (b) there has not been
any loss, damage or destruction to, or any interruption in the use of, any of
the assets of Seller; (c) Seller has not made any capital expenditure, purchased
or otherwise acquired, sold or otherwise transferred, or leased or licensed, any
asset to any other Person; (d) Seller has not entered into any transaction or
taken any other action outside the Ordinary Course of Business; and (e) Seller
has not agreed, committed or offered (in writing or otherwise) to take any of
the actions referred to in clauses "(c)" and "(d)" above.
2.5 TITLE TO ASSETS. Seller owns, and has good, valid and marketable
title to, all assets purported to be owned by it, including: (a) all assets
reflected on the balance sheet dated February 28, 1998; (b) all assets acquired
by Seller since February 28, 1998; (c) all rights of Seller under Seller
Contracts; and (d) all other assets reflected in the books and records of Seller
as being owned by Seller. Except as set forth in Part 2.5 of the Seller
Disclosure Schedule, all of said assets are owned by Seller free and clear of
any Encumbrances. The Purchased Assets collectively constitute all of the
properties, rights, interests and other tangible and intangible assets necessary
to enable Seller to conduct its business in the manner in which such business is
currently being conducted.
2.6 PROPRIETARY ASSETS. Except as set forth in Part 2.6 of the Seller
Disclosure Schedule, there is no Proprietary Asset that is owned by or licensed
to Seller or that is otherwise used or useful in connection with the business of
Seller. The Proprietary Assets identified in Part 2.6 of the Seller Disclosure
Schedule constitute all of the Proprietary Assets necessary to enable Seller to
conduct its business in the manner in which such business is currently being
conducted and in the manner in which such business is proposed to be conducted.
Seller is not infringing or making any unlawful use of, and Seller has not at
any time infringed or made any unlawful use of, or received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement or unlawful use of, any Proprietary Asset owned or used
by any other Person.
2.7 CONTRACTS. Exhibit C identifies each Seller Contract, each of which
is valid and in full force and effect. To Seller's knowledge, no Person has
violated or breached, or declared or committed any default under, any Seller
Contract, and Seller has not received any notice or other communication
regarding any actual, alleged, possible or potential violation or breach of,
default under, or proposed termination of, any Seller Contract. The Seller
Contracts identified in Exhibit C collectively constitute all of the Seller
Contracts necessary to enable Seller to conduct its business in the manner in
which such business is currently being conducted.
4.
<PAGE> 6
2.8 LIABILITIES. Except as set forth in Part 2.8 of the Seller
Disclosure Schedule, Seller has no Liabilities, except for: (a) liabilities
identified as such in the "liabilities" columns of the February 28, 1998 balance
sheet; (b) accounts payable (of the type required to be reflected as current
liabilities in the "liabilities" column of a balance sheet prepared in
accordance with GAAP) incurred by Seller in bona fide transactions entered into
in the Ordinary Course of Business since February 28, 1998; and (c) obligations
under the Seller Contracts listed in Exhibit C.
2.9 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller is, and has at all times
been, in full compliance with each Legal Requirement that is applicable to it or
to the conduct of its business or the ownership or use of any of its assets. No
event has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) constitute or result directly or indirectly in
a violation by Seller of, or a failure on the part of Seller to comply with, any
Legal Requirement, and Seller has not received, at any time, any notice or other
communication (in writing or otherwise) from any Governmental Body or any other
Person regarding any actual, alleged, possible or potential violation of, or
failure to comply with, any Legal Requirement.
2.10 GOVERNMENTAL AUTHORIZATIONS. The Governmental Authorizations held
by Seller, if any, are identified in Part 2.10 of the Seller Disclosure Schedule
are valid, in full force and effect and constitute all of the Governmental
Authorizations necessary to enable Seller to conduct its business in the manner
in which such business is currently being conducted and in the manner in which
such business is proposed to be conducted by Purchaser. Seller is and has at all
times been in full compliance with all of the terms and requirements of each
such Governmental Authorization, and no event has occurred that might (with or
without notice or lapse of time) result in a violation of any requirement of any
such Governmental Authorization, or result in the termination or modification of
any such Governmental Authorization.
2.11 TAX MATTERS. Each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by Seller has been duly paid in full on a
timely basis. Any Tax required to have been withheld or collected by Seller has
been duly withheld and collected; and (to the extent required) each such Tax has
been paid to the appropriate Governmental Body. Except as set forth in Part 2.11
of the Seller Disclosure Schedule, no claim or other Proceeding is pending or
has been threatened against or with respect to Seller in respect of any Tax.
2.12 EMPLOYEE MATTERS. Part 2.12 of the Seller Disclosure Schedule lists
the name, title and annual compensation of each current employee of Seller. Part
2.12 of the Seller Disclosure Schedule accurately identifies each former
employee of Seller receiving or scheduled to receive (or whose dependent is
receiving or is scheduled to receive) any benefits from Seller, and accurately
describes such benefits. Seller is not a party to or bound by any employment
agreement, union contract, collective bargaining agreement or similar Contract,
and the employment of each employee of Seller is terminable by Seller at will.
2.13 BENEFIT PLANS. Part 2.13 of the Seller Disclosure Schedule
identifies and provides an accurate and complete description of each Seller
Plan. Seller has caused to be delivered to Purchaser accurate and complete
copies of all documents relating to each Seller Plan. Each Seller Plan is being
and has at all times been operated and administered in full compliance with
5.
<PAGE> 7
the provisions thereof. Each contribution or other payment that is required to
have been accrued or made under or with respect to any Seller Plan has been duly
accrued and made on a timely basis. Each Seller Plan has at all times complied
and been operated and administered in full compliance with all applicable Legal
Requirements.
2.14 INSURANCE. Seller has delivered to Purchaser accurate and complete
copies of all of the insurance policies maintained by or at the expense of, or
for the direct or indirect benefit of, (including all renewals thereof and
endorsements thereto) of Seller. Each of such policies is valid, enforceable and
in full force and effect. All of the information contained in the applications
submitted in connection with said policies was (at the times said applications
were submitted) accurate and complete, and all premiums and other amounts owing
with respect to said policies have been paid in full on a timely basis.
2.15 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.15 of the
Seller Disclosure Schedule: (a) no Related Party has any direct or indirect
interest of any nature in any of the assets of Seller; (b) no Related Party is
indebted to Seller; (c) no Related Party has entered into, or has had any
financial interest in, any Contract, transaction or business dealing involving
Seller; (d) no Related Party has any claim or right against Seller; and (e) no
event has occurred that might (with or without notice or lapse of time) give
rise to or serve as a basis for any claim or right in favor of any Related Party
against Seller.
2.16 PROCEEDINGS; ORDERS. There is no pending Proceeding and no Person
has threatened to commence any Proceeding that involves Seller or that otherwise
relates to or might affect the business of Seller or any of the Purchased Assets
(whether or not Seller is named as a party thereto), and no event has occurred
that could reasonably be expected to give rise to or serve as a basis for the
commencement of any such Proceeding. There is no Order to which Seller, or any
of the assets owned or used by Seller, is subject; and no Shareholder nor any
other Related Party is subject to any Order that relates to Seller's business or
to any of the assets of Seller. There is no proposed Order that, if issued or
otherwise put into effect, may have an adverse effect on the business,
condition, assets, liabilities, operations, financial performance, net income or
prospects of Seller or on the ability of the Shareholders or Seller to effect
the Transactions.
2.17 AUTHORITY; BINDING NATURE OF AGREEMENTS. Seller has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under the Transactional Agreements it is a party thereto; and the
execution, delivery and performance by Seller of the Transactional Agreements it
is a party thereto has been duly authorized by all necessary action on the part
of Seller and its shareholders, board of directors and officers. The
Transactional Agreements that the Seller is a party thereto constitute the
legal, valid and binding obligations of Seller, enforceable against Seller in
accordance with their terms. Each Shareholder has the absolute and unrestricted
right, power and capacity to enter into and to perform his or her obligations
under the Transactional Agreements he or she is a party thereto. The
Transactional Agreements that each Shareholder is a party thereto constitute the
legal, valid and binding obligations of each such Shareholder, enforceable
against him or her in accordance with their terms.
6.
<PAGE> 8
2.18 NON-CONTRAVENTION; CONSENTS. Neither the execution and delivery of
any of the Transactional Agreements, nor the consummation or performance of any
of the Transactions, will directly or indirectly (with or without notice or
lapse of time): (a) give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental Authorization that is to
be included in the Purchased Assets; (b) give any Person the right to (i)
declare a default or exercise any remedy under any Seller Contract, (ii)
accelerate the maturity or performance of any Seller Contract, or (iii) cancel,
terminate or modify any Seller Contract; (c) give any Person the right to
declare a default under any Contract to which any Shareholder is a party or by
which any Shareholder is bound; or (d) result in the imposition or creation of
any Encumbrance upon any of the Purchased Assets. Except as set forth in Part
2.18 of the Disclosure Schedule, neither the Seller nor any Shareholder was, is
or will be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with the execution and delivery of
any of the Transactional Agreements or the consummation or performance of any of
the Transactions.
2.19 BROKERS. Neither Seller nor either Shareholder has agreed or become
obligated to pay, or has taken any action that might result in any Person
claiming to be entitled to receive, any brokerage commission, finder's fee or
similar commission or fee in connection with any of the Transactions. Seller has
retained the consulting services of Monib Khademi in connection with the
Transactions and has agreed to pay a fee for such services.
2.20 SHAREHOLDERS. Neither Shareholder has ever (i) made a general
assignment for the benefit of creditors, (ii) filed, or had filed against such
Shareholder, any bankruptcy petition or similar filing or (iii) suffered the
attachment or other judicial seizure of such Shareholder's assets. Neither
Shareholder is subject to any Order nor bound by any Contract that may have an
adverse effect on such Shareholder's ability to comply with any of the
Transactional Agreements, and there is no Proceeding pending, and no Person has
threatened to commence any Proceeding, that may have such effect. To the best of
such Shareholder's knowledge, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that might directly or indirectly give
rise to or serve as a basis for the commencement of any such Proceeding against
such Shareholder.
2.21 FULL DISCLOSURE. None of the Transactional Agreements contains or
will contain any untrue statement of fact; and none of the Transactional
Agreements omits to state any fact necessary to make any of the representations,
warranties or other statements or information contained therein not misleading.
There is no fact within the knowledge of the Seller or any Shareholder (other
than publicly known facts relating exclusively to political or economic matters
of general applicability) that may have an adverse effect on Seller or may have
the effect of interfering with any of the Transactions. All of the information
regarding Seller and its business, condition, assets, liabilities, operations
(including the number of page views and visitors), financial performance, net
income and prospects that has been furnished to Purchaser by or on behalf of the
Seller or each Shareholder, is accurate and complete in all material respects.
7.
<PAGE> 9
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants, to and for the benefit of Seller and
the Shareholders, except as set forth in the Purchaser Disclosure Schedule, as
follows:
3.1 AUTHORITY; BINDING NATURE OF AGREEMENTS. Purchaser has the absolute
and unrestricted right, power and authority to enter into and perform its
obligations under the Transactional Agreements, and the execution and delivery
of the Transactional Agreements by Purchaser has been duly authorized by all
necessary action on the part of Purchaser and its boards of directors. The
Transactional Agreements constitute the legal, valid and binding obligations of
Purchaser, enforceable against it in accordance with their terms.
3.2 BROKERS. Purchaser has not become obligated to pay, and has not
taken any action that might result in any Person claiming to be entitled to
receive, any brokerage commission, finder's fee or similar commission or fee in
connection with any of the Transactions.
3.3 DUE ORGANIZATION. Purchaser is a corporation duly organized,
existing and in good standing under the laws of the State of California and has
all necessary power and authority under applicable corporate law and its
organizational documents to own or lease its properties, to perform the
obligations set forth in the Transaction Agreements to which it is a party, and
to carry on its business as presently conducted.
3.4 CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to Closing, will consist of fifteen million (15,000,000)
shares of Common Stock, seven hundred seventy eight thousand one hundred
thirty-three (778,133) shares of which are issued and outstanding and eleven
million (11,000,000) shares of Preferred Stock, of which two million seven
hundred seven thousand four hundred three (2,707,403) shares are designated
Series A Preferred Stock, of which two million six hundred eighty-five thousand
one hundred eighty-one (2,685,181) shares are issued and outstanding, of which
five hundred seventy-nine thousand four hundred seven (579,407) shares are
designated Series B Preferred Stock, all of which are issued and outstanding, of
which five million (5,000,000) shares are designated Series C Preferred Stock,
three million six hundred twenty-six thousand nine hundred twenty-two
(3,626,922) shares of which are issued and outstanding. Except as set forth in
Part 3.4 of the Purchaser Disclosure Schedule, there is no: (a) outstanding
option, warrant or other right to acquire any shares of the capital stock or
other securities of Purchaser; (b) outstanding security, instrument or
obligation that is or may become convertible into or exchangeable for any shares
of the capital stock or other securities of Purchaser; or (c) contract under
which Purchaser is or may become obligated to sell or otherwise issue any shares
of its capital stock or any other securities.
3.5 FINANCIAL STATEMENTS. The Purchaser has delivered to Seller and
Shareholders the balance sheet of Purchaser as of December 31, 1997 and the
related statement of income for the year then ended (the "PURCHASER FINANCIAL
STATEMENTS"). The Purchaser Financial Statements are accurate and complete in
all material respects and present fairly the financial position of Purchaser as
of the date thereof and the results of operations and cash flows of Purchaser
for the period covered thereby. The Purchaser Financial Statements have been
8.
<PAGE> 10
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered.
3.6 ABSENCE OF CHANGES. Except as set forth in Part 3.6 of the Purchaser
Disclosure Schedule, since December 31, 1997: (a) there has not been any
material adverse change in, and no event has occurred that might have a material
adverse effect on, the business, condition, assets, liabilities, operations,
financial performance, net income or prospects of Purchaser; and (b) there has
not been any loss, damage or destruction to, or any interruption in the use of,
any of the assets of Purchaser.
3.7 FULL DISCLOSURE. None of the Transactional Agreements contains or
will contain any untrue statement of fact; and none of the Transactional
Agreements omits to state any fact necessary to make any of the representations,
warranties or other statements or information contained therein not misleading.
There is no fact within the knowledge of the Purchaser (other than publicly
known facts relating exclusively to political or economic matters of general
applicability) that may have an adverse effect on Purchaser or may have the
effect of interfering with any of the Transactions. All of the information
regarding Purchaser and its business, condition, assets, liabilities, operations
(including the number of pageviews and visitors), financial performance, net
income and prospects that has been furnished to Seller by or on behalf of the
Purchaser is accurate and complete in all material respects.
3.8 OFFERING VALID.
(a) Assuming the accuracy of the representations and warranties
of the shareholders of the Seller contained in the Investment Representation
Certificates, the offer, sale and issuance of the Common Shares will be exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act") and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws. Neither the
Purchaser nor any agent on its behalf has solicited or will solicit any offers
to sell or has offered to sell or will offer to sell all or any part of the
Common Shares to any person or persons so as to bring the sale of such Common
Shares by the Purchaser within the registration provisions of the Securities Act
or any state securities laws.
(b) Each certificate representing Common Shares shall be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
9.
<PAGE> 11
SECTION 4. COVENANTS.
4.1 TAX RETURNS. At least ten days prior to the filing with any
Governmental Body (by either Seller or any Shareholder) of any Tax Return
relating to or reflecting any of the Transactions, Seller and such Shareholder
shall cause a copy of such Tax Return (in the form proposed to be filed) to be
delivered to Purchaser for its review. Seller and each Shareholder shall ensure
that each such Tax Return is materially accurate and complete and is filed on a
timely basis with the appropriate Governmental Body.
4.2 FURTHER ACTIONS. From and after the Closing Date, Seller and each
Shareholder shall cooperate with Purchaser and Purchaser's affiliates and
representatives, and shall execute and deliver such documents and take such
other actions as Purchaser may reasonably request for the purpose of evidencing
the Transactions and putting Purchaser in possession and control of all of the
Purchased Assets. Without limiting the generality of the foregoing, from and
after the Closing Date, Seller shall promptly remit to Purchaser any funds that
are received by Seller under the Seller Contracts identified on Exhibit C.
Seller hereby irrevocably authorizes Purchaser to endorse in the name of Seller
any check that is made payable to Seller and that represents the payment of any
amount due under any such Seller Contract. Seller hereby irrevocably nominates,
constitutes and appoints Purchaser as the true and lawful attorney-in-fact of
Seller (with full power of substitution) and authorizes Purchaser, in the name
of and on behalf of Seller, to execute, deliver, acknowledge, certify, file and
record any document, to institute and prosecute any Proceeding and to take any
other action that Purchaser may deem appropriate for the purpose of (i)
collecting, asserting, enforcing or perfecting any claim, right or interest of
any kind that is included in or relates to any of the Purchased Assets, (ii)
defending or compromising any claim or Proceeding relating to any of the
Purchased Assets, or (iii) otherwise carrying out or facilitating any of the
Transactions. The power of attorney referred to in the preceding sentence is
coupled with an interest and shall be irrevocable, and shall survive any
liquidation and dissolution of Seller.
4.3 PUBLICITY. Except with respect to Seller's obligations to its
shareholders as contemplated by Section 4.5 hereto, Seller and each Shareholder
shall keep strictly confidential, and the Seller and any Shareholder shall not
use or disclose to any other Person, any non-public document or other
information that relates directly or indirectly to the business of Seller,
Purchaser or any affiliate of Purchaser.
4.4 FIRPTA MATTERS. At the Closing (a) Seller shall deliver to Purchaser
a statement (in such form as may be reasonably requested by counsel to
Purchaser) conforming to the requirements of Section 1.897-2(h)(1)(i) of the
United States Treasury Regulations, and (b) Seller shall deliver to the Internal
Revenue Service the notification required under Section 1.897-2(h)(2) of the
United States Treasury Regulations.
4.5 DISSOLUTION. Seller and the Shareholders agree that, (a) as soon as
possible after the Closing Date, Seller shall be liquidated and dissolved, (b)
Seller shall not transact any business following the Closing Date except as
necessary to wind up its affairs and to be liquidated and dissolved, and (c)
Shareholders shall not transfer, encumber or dispose of any stock or other
securities of Seller at any time after the Closing Date. Prior to the
liquidation and dissolution of Seller, Seller shall pay and fully discharge all
of its Liabilities (other than the
10.
<PAGE> 12
Assumed Liabilities), including (i) all Liabilities to its current and former
employees, and (ii) all accounts payable and all short-term and long-term
indebtedness relating to its business. Following the liquidation and dissolution
of Seller, the Shareholders shall remain jointly and severally liable and
responsible for all obligations of Seller under this Agreement.
4.6 FINANCIAL INFORMATION.
(a) As soon as practicable after the end of each fiscal year of
the Purchaser, but no later than ninety (90) days thereafter, prior to (i) the
date the Purchaser is acquired or (ii) the effective date of a registration
statement filed in connection with the Purchaser's first underwritten public
offering of its Common Stock registered under the Securities Act, the Purchaser
will furnish each shareholder of the Seller, as determined immediately prior to
the Closing Date, a balance sheet of the Purchaser, as at the end of such fiscal
year, and a statement of income of the Purchaser, for such year, prepared in
accordance with generally accepted accounting principles consistently applied
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail.
(b) The Purchaser will furnish each shareholder of the Seller, as
determined immediately prior to the Closing Date, as soon as practicable after
the end of the first, second and third full quarterly accounting periods
immediately following the Closing Date, a balance sheet of the Purchaser as of
the end of each such quarterly period, and a statement of income of the
Purchaser for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the exception
that no notes need be attached to such statements and year-end audit adjustments
may not have been made.
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.
The obligations of Purchaser to effect the Closing and otherwise
consummate the Acquisition are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:
5.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Seller and the Shareholders in this Agreement and in each of
the other agreements and instruments delivered to Purchaser in connection with
the transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any
"MATERIAL ADVERSE EFFECT" or other materiality qualifications, or any similar
qualifications, contained or incorporated directly or indirectly in such
representations and warranties).
5.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Seller and the Shareholders are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all
respects.
5.3 CONSENTS. All Consents required to be obtained in connection with
the Agreement and the other Transactions contemplated by this Agreement shall
have been obtained and shall be in full force and effect.
11.
<PAGE> 13
5.4 SATISFACTORY COMPLETION OF PRE-ACQUISITION REVIEW. The Purchaser
shall have satisfactorily completed its pre-acquisition investigation and review
of Seller's business, condition, assets, liabilities, operations, financial
performance, net income and prospects and shall be satisfied with the results of
that investigation and review.
5.5 AGREEMENTS AND DOCUMENTS. Purchaser and Seller shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) An Employment Agreement executed by Purchaser and Victoria P.
Kropp;
(b) Noncompetition Agreements executed by the Shareholders;
(e) Trademark License Agreement executed by Purchaser and
Victoria P. Kropp;
(d) Escrow Agreement executed by Seller and Purchaser;
(e) an estoppel certificate, dated as of a date not more than
five days prior to the Closing Date and satisfactory in form and content to
Purchaser, executed by [required PARTIES];
(f) a legal opinion of Greg Bartko, dated as of the Closing Date,
in the form of Exhibit D;
(g) an Investment Representation Certificate executed by each
holder of capital stock of the Seller satisfactory in form and content to
Purchaser; and
(h) a Market Stand-Off Letter Agreement executed by each holder
of capital stock of the Seller satisfactory in form and content to Purchaser.
5.6 FIRPTA COMPLIANCE. Seller shall have filed with the Internal Revenue
Service the notification referred to in Section 4.4.
5.7 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Agreement
shall have been issued by any court of competent jurisdiction and which remains
in effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Agreement that makes consummation of the Agreement illegal.
5.8 NO PROCEEDINGS. No Person shall have commenced or threatened to
commence any Proceeding challenging or seeking the recovery of a material amount
of damages in connection with the Agreement or seeking to prohibit or limit the
exercise by Purchaser of any material right pertaining to its ownership of the
Purchased Assets.
12.
<PAGE> 14
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller to effect the Closing and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing of the following conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Purchaser in this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any
"MATERIAL ADVERSE EFFECT" or other materiality qualifications, or any similar
qualifications contained or incorporated directly or indirectly in such
representations and warranties), and shall be accurate in all material respects
as of the Closing.
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Purchaser is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
6.3 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Agreement
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Agreement that makes consummation of the Agreement illegal.
SECTION 7. INDEMNIFICATION, ETC.
7.1 SURVIVAL OF REPRESENTATIONS AND COVENANTS.
(a) The representations, warranties, covenants and obligations of
each party to this Agreement shall survive (without limitation): (i) the
execution and delivery of this Agreement and the sale of the Purchased Assets to
Purchaser; (ii) any subsequent sale or other disposition of any or all of the
Purchased Assets by Purchaser; (iii) the liquidation and dissolution of the
Seller; and (iv) the death of any Shareholder. All of said representations,
warranties, covenants and obligations shall remain in full force and effect and
shall survive until October 2, 1999; provided, however, that if a Claim Notice
relating to any representation or warranty is given to the Agent (as defined in
Section 7.4) on or prior to October 2, 1999; then, notwithstanding anything to
the contrary contained in this Section 7.1(a), such representation or warranty
shall not so expire, but rather shall remain in full force and effect until such
time as each and every claim (including any indemnification claim asserted by
any Indemnitee under Section 7.2) that is based directly or indirectly upon, or
that relates directly or indirectly to, any Breach or alleged Breach of such
representation or warranty has been fully and finally resolved, either by means
of a written settlement agreement executed on behalf of the Agent and Purchaser
or by means of a final, non-appealable judgement issued by a court of competent
jurisdiction.
(b) For purposes of this Agreement, a "CLAIM NOTICE" relating to
a particular representation, warranty, covenant or obligation shall be deemed to
have been given if any Indemnitee, acting in good faith, delivers to Agent or
Seller a written notice stating that such Indemnitee believes that there is or
has been a possible Breach of such representation, warranty, covenant or
obligation and containing (i) a brief description of the circumstances
supporting such
13.
<PAGE> 15
Indemnitee's belief that there is or has been such a possible Breach, and (ii) a
non-binding, preliminary estimate of the aggregate dollar amount of the actual
and potential Damages that have arisen and may arise as a direct or indirect
result of such possible Breach.
(d) For purposes of this Agreement, each statement or other item
of information set forth in the Seller Disclosure Schedule shall be deemed to be
a representation and warranty made by Seller and each Shareholder in this
Agreement pursuant to Section 2 hereof.
7.2 INDEMNIFICATION BY SHAREHOLDERS AND SELLER.
(a) Seller and the Shareholders, jointly and severally, shall
hold harmless and indemnify each of the Indemnitees from and against, and shall
compensate and reimburse each of the Indemnitees for, any Damages that are
directly or indirectly suffered or incurred by any of the Indemnitees or to
which any of the Indemnitees may otherwise become subject at any time
(regardless of whether or not such Damages relate to any third party claim) and
that arise directly or indirectly from or as a direct or indirect result of, or
are directly or indirectly connected with:
(i) any Breach of any of the representations or warranties
made by Seller or any Shareholder in this Agreement or any of the other
Transactional Agreements;
(ii) any Breach of any representation, warranty,
statement, information or provision contained in the Seller Disclosure Schedule
or in any other document delivered or otherwise made available to Purchaser or
any of its Representatives by or on behalf of Seller or any Shareholder, or any
Representative of Seller or any Shareholder;
(iii) any Breach of any covenant or obligation of Seller
or any Shareholder contained in any of the Transactional Agreements;
(iv) any Liability of Seller or of any Related Party
(including, but not limited to, any Liability of Seller under that certain
Consultant-Client Contract dated as of April 11, 1997, as amended February 14,
1998, between Seller and Monib Khademi), other than the Assumed Liabilities;
(v) any Liability (other than the Assumed Liabilities) to
which Purchaser or any of the other Indemnitees may become subject and that
arises directly or indirectly from or relates directly or indirectly to any
services performed by or on behalf of Seller, or the operation by Seller of its
business; or
(vi) any Proceeding relating directly or indirectly to any
Breach, alleged Breach, Liability or matter of the type referred to in clause
"(i)," "(ii)," "(iii)," "(iv)," or "(v)" above (including any Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this Section 7).
7.3 NON-EXCLUSIVITY OF INDEMNIFICATION REMEDIES. The indemnification
remedies and other remedies provided in this Section 7 shall not be deemed to be
exclusive. Accordingly, the exercise by any Person of any of its rights under
this Section 7 shall not be deemed to be an election of remedies and shall not
be deemed to prejudice, or to constitute or operate as a waiver
14.
<PAGE> 16
of, any other right or remedy that such Person may be entitled to exercise
(whether under this Agreement, under any other Contract, under any statute, rule
or other Legal Requirement, at common law, in equity or otherwise).
7.4 DESIGNATION OF AGENT. Seller hereby designates Victoria P. Kropp as
the representative of the Seller's shareholders (the "AGENT") to act on behalf
of Seller's shareholders in all matters pertaining to this Agreement. Following
the dissolution of Seller as contemplated by Section 4.5, to the extent that any
action would be taken or would be required to be taken by Seller pursuant to
this Agreement but for said dissolution, the Purchaser or the Seller agree that
such action may be taken by the Agent with the same effect as if Seller had
taken such action, provided that shareholders holding a majority of the
outstanding Capital Stock of Seller shall have approved of the Agent acting in
such capacity.
SECTION 8. MISCELLANEOUS PROVISIONS.
8.1 JOINT AND SEVERAL LIABILITY.
(a) Each Shareholder agrees that such Shareholder shall be
jointly and severally liable with Seller for the due and timely compliance with
and performance of each of the covenants and obligations of Seller set forth in
the Transactional Agreements. Each Shareholder's obligations and liability under
this Agreement and the other Transactional Agreements shall survive such
Shareholder's death (and shall be binding upon Shareholder's personal
representatives, executors, administrators, estate, heirs and successors) and
shall not be limited in any way, except as provided herein.
(b) Seller agrees that it shall be jointly and severally liable
with each Shareholder for the due and timely compliance with and performance of
each Shareholder's covenants and obligations set forth in the Transactional
Agreements. The obligations and liability of Seller under this Agreement and the
other Transactional Agreements shall not be limited in any way, except as
provided herein.
8.2 FEES AND EXPENSES.
(a) Each party shall bear and pay all fees, costs and expenses
(including all legal fees and expenses) that have been incurred or that are in
the future incurred by, on behalf of, such party in connection with the
negotiation, preparation and review of this Agreement (including the Disclosure
Schedule), the other Transactional Agreements and all bills of sale,
assignments, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions, and the
consummation and performance of the Transactions. The Purchaser shall reimburse
on the Closing Date, the reasonable fees of and expenses of counsel for the
Seller, not to exceed $7,500, incurred in connection with the negotiation,
preparation and review of this Agreement and the other Transactional Agreements.
(b) Subject to the provisions of Section 7 (including the indemnification and
other obligations of Seller thereunder), Purchaser shall bear and pay all fees,
costs and expenses that have been incurred or that are in the future incurred by
or on behalf of Purchaser in connection with the negotiation, preparation and
review of this Agreement, the other Transactional Agreements and all bills of
sale, assignments, certificates, opinions and other
15.
<PAGE> 17
instruments and documents delivered or to be delivered in connection with the
Transactions, and the consummation and performance of the Transactions.
8.3 DISPUTE RESOLUTION. Any claim, controversy or dispute arising out of
or in connection with or relating to this Agreement or the breach or alleged
breach thereof will be submitted by the parties to arbitration by the American
Arbitration Association ("AAA") in the County of San Mateo in the State of
California under the commercial rules then in effect for AAA. The parties will
agree on one (1) arbitrator within thirty (30) days of receipt of the notice of
intent to arbitrate. If no arbitrator is appointed within the time herein
provided, or any extension of time which is mutually agreed upon, AAA will make
such appointment within thirty (30) days of such failure. The award rendered by
the arbitrator will include costs of arbitration, reasonable costs for expert
and other witnesses, and judgment on the arbitration award may be entered in any
court having jurisdiction thereof. Nothing in this Agreement will be deemed as
preventing either party from seeking injunctive relief (or any other provisional
remedy) from any court having jurisdiction over the parties and the subject
matter of the dispute as necessary to protect either party's name, proprietary
information, trade secrets, know-how, or any other proprietary rights. Because
both parties to this Agreement have been represented by legal counsel, and the
parties have had the opportunity to negotiate individual provisions of this
Agreement, the arbitrator will not construe any ambiguity that may exist in this
Agreement in favor or against either party.
8.4 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
on the signature page (or to such other address or facsimile telephone number as
such party shall have specified in a written notice given to the other parties
hereto).
8.5 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
8.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
8.7 GOVERNING LAW. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws). Seller and each
Shareholder irrevocably constitutes and appoints Victoria P. Kropp as its agent
to receive service of process in connection with any legal proceeding relating
to this Agreement or the enforcement of any provision of this Agreement.
8.8 SUCCESSORS AND ASSIGNS; PARTIES IN INTEREST. This Agreement shall be
binding upon Seller and its successors and assigns, the Shareholders and the
Shareholders' personal representatives, executors, administrators, estate,
heirs, successors and assigns, and Purchaser and its successors and assigns.
Neither Seller nor any Shareholder shall be permitted to assign any rights or
delegate any obligations under this Agreement without Purchaser's prior written
16.
<PAGE> 18
consent, which will not be unreasonably withheld. Purchaser may freely assign
its indemnification rights under Section 7. Except for the provisions of Section
7, none of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties to this Agreement and their
respective successors and assigns.
8.9 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). Seller and each
Shareholder agree that: (a) in the event of any Breach or threatened Breach by
Seller or any Shareholder of any covenant, obligation or other provision set
forth in this Agreement, Purchaser shall be entitled (in addition to any other
remedy that may be available to it) to (i) a decree or order of specific
performance or mandamus to enforce the observance and performance of such
covenant, obligation or other provision, and (ii) an injunction restraining such
Breach or threatened Breach; and (b) neither Purchaser nor any other Indemnitee
shall be required to provide any bond or other security in connection with any
such decree, order or injunction or in connection with any related action or
Proceeding.
8.10 WAIVER. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
8.11 AMENDMENTS. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Purchaser, Seller and each Shareholder.
8.12 SEVERABILITY. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
8.13 ENTIRE AGREEMENT. The Transactional Agreements set forth the entire
understanding of the parties relating to the subject matter thereof and
supersede all prior agreements and understandings among or between any of the
parties relating to the subject matter thereof.
8.14 NO INTERPRETATION AGAINST DRAFTER. Because the parties hereto have
participated in drafting this Agreement, there shall be no presumption against
any party on the ground that such party was responsible for preparing this
Agreement or any part of it.
8.15 KNOWLEDGE. For purposes of this Agreement, Seller shall be deemed
to have "KNOWLEDGE" of a particular fact or other matter if any Representative
of Seller has knowledge of such fact or other matter.
17.
<PAGE> 19
The parties hereto have caused this ASSET PURCHASE AGREEMENT to be
executed and delivered as of the date set forth above.
SHAREHOLDERS: SELLER:
WILD WILD WEB, INCORPORATED
A CALIFORNIA CORPORATION
/s/ Victoria P. Kropp
- -------------------------------------
VICTORIA P. KROPP
By: /s/ Victoria P. Kropp
----------------------------------
Address: 1018 `E' Street, Suite 200 Victoria P. Kropp, President
San Rafael, California 94901
Facsimile: (415) 459-3684 Address: 1018 `E' Street, Suite 200
San Rafael, California 94901
Facsimile: (415) 459-3684
/s/ Raymond B. Kropp, M.D.
- -------------------------------------
RAYMOND B. KROPP, M.D. PURCHASER:
WOMEN.COM NETWORKS,
Address: 1018 `E' Street, Suite 200 A CALIFORNIA CORPORATION
San Rafael, California 94901
Facsimile: (415) 459-3684
By: /s/ Marleen R. McDaniel
----------------------------------
Marleen McDaniel, President
Address: 1820 Gateway Drive, Suite 100
San Mateo, California 94404
Facsimile: (650) 378-6550
ASSET PURCHASE AGREEMENT
SIGNATURE PAGE
<PAGE> 20
EXHIBITS INDEX
Exhibit A............Certain Definitions
Exhibit B............Assumed Liabilities
Exhibit C............Assumed Seller Contracts
Exhibit D............Form of Legal Opinion
i.
<PAGE> 21
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
BREACH. There shall be deemed to be a "BREACH" of a representation,
warranty, covenant, obligation or other provision if there is or has been (a)
any inaccuracy in or breach (including any inadvertent or innocent breach) of,
or any failure (including any inadvertent failure) to comply with or perform,
such representation, warranty, covenant, obligation or other provision, or (b)
any claim (by any Person) or other circumstance that is inconsistent with such
representation, warranty, covenant, obligation or other provision; and the term
"Breach" shall be deemed to refer to any such inaccuracy, breach, failure, claim
or circumstance.
CONSENT. "CONSENT" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "CONTRACT" shall mean any written, oral, implied or other
agreement, contract, understanding, arrangement, instrument, note, guaranty,
indemnity, representation, warranty, deed, assignment, power of attorney,
certificate, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, assurance or undertaking of any nature.
DAMAGES. "DAMAGES" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including any legal fee incurred by counsel reasonably
acceptable to indemnifying party, expert fee, accounting fee or advisory fee),
charge, cost (including any cost of investigation) or expense of any nature.
EMPLOYEE BENEFIT PLAN. "EMPLOYEE BENEFIT PLAN" shall have the meaning
specified in Section 3(3) of ERISA.
ENCUMBRANCE. "ENCUMBRANCE" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
transfer of any asset, any restriction on the receipt of any income derived from
any asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
ENTITY. "ENTITY" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
ASSET PURCHASE AGREEMENT
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<PAGE> 22
GAAP. "GAAP" shall mean generally accepted accounting principles,
applied on a basis consistent with the basis on which the Financial Statements
were prepared.
GOVERNMENTAL AUTHORIZATION. "GOVERNMENTAL AUTHORIZATION" shall mean any
permit, license, certificate, franchise, concession, approval, consent,
ratification, permission, clearance, confirmation, endorsement, waiver,
certification, designation, rating, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement, or right under any
Contract with any Governmental Body.
GOVERNMENTAL BODY. "GOVERNMENTAL BODY" shall mean any (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental division, subdivision,
department, agency, bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative, organization, unit, body or
Entity and any court or other tribunal); (d) multi-national organization or
body; or (e) individual, Entity or body exercising, or entitled to exercise, any
executive, legislative, judicial, administrative, regulatory, police, military
or taxing authority or power of any nature.
INDEMNITEES. "Indemnitees" shall mean Purchaser, Purchaser's current and
future affiliates, the respective Representatives of Purchaser, and the
respective successors and assigns of any of the foregoing Persons.
LEGAL REQUIREMENT. "LEGAL REQUIREMENT" shall mean any federal, state,
local, municipal, foreign or other law, statute, legislation, constitution,
principle of common law, resolution, ordinance, code, edict, decree,
proclamation, treaty, convention, rule, regulation, ruling, directive,
pronouncement, requirement, specification, determination, decision, opinion or
interpretation issued, enacted, adopted, passed, approved, promulgated, made,
implemented or otherwise put into effect by or under the authority of any
Governmental Body.
LIABILITY. "LIABILITY" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
MATERIAL ADVERSE EFFECT. "MATERIAL ADVERSE EFFECT" as it applies to
Seller or Purchaser means an adverse effect on the business, operations,
condition (financial or otherwise), assets or prospects of Seller or Purchaser,
respectively, which is material.
ORDER. "ORDER" shall mean any (a) order, judgment, injunction, edict,
decree, ruling, pronouncement, determination, decision, opinion, verdict,
sentence, subpoena, writ or award issued, made, entered, rendered or otherwise
put into effect by or under the authority of any court, administrative agency or
other Governmental Body or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Body entered into in connection with any Proceeding.
ASSET PURCHASE AGREEMENT
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ORDINARY COURSE OF BUSINESS. "ORDINARY COURSE OF BUSINESS" shall mean an
action taken by or on behalf of a Seller so long as: (a) such action is
recurring in nature, is consistent with the past practices of such Seller and is
taken in the ordinary course of the normal day-to-day operations of such Seller;
(b) such action is taken in accordance with sound and prudent business
practices; (c) such action is not required to be authorized by the stockholders
of such Seller, the board of directors of such Seller and does not require any
other separate or special authorization of any nature; and (d) such action is
similar in nature and magnitude to actions customarily taken, without any
separate or special authorization, in the ordinary course of the normal
day-to-day operations of similarly situated businesses.
PERSON. "PERSON" shall mean any individual, Entity or Governmental Body.
PROCEEDING. "PROCEEDING" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Body or any arbitrator or arbitration panel.
PROPRIETARY ASSET. "PROPRIETARY ASSET" shall mean any patent, patent
application, trademark (whether registered or unregistered and whether or not
relating to a published work), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered), service mark
application, copyright (whether registered or unregistered), copyright
application, maskwork, maskwork application, trade secret, know how, customer
list, franchise, system, computer software, invention, design, blueprint,
engineering drawing, proprietary product, technology, proprietary right or other
intellectual property right or intangible asset.
PURCHASER DISCLOSURE SCHEDULE. "PURCHASER DISCLOSURE SCHEDULE" shall
mean the schedule (dated as of the date of the Agreement) delivered to Seller
and Shareholders on behalf of Purchaser, a copy of which is attached to the
Agreement and incorporated in the Agreement by reference.
RELATED PARTY. Each of the following shall be deemed to be a "RELATED
PARTY": (a) each individual (including Shareholder) who is, or who has at any
time been, an officer of Seller; (b) each member of the family of each of the
individuals referred to in clause "(a)" above; and (c) any Entity (other than
Seller) in which any one of the individuals referred to in clauses "(a)" and
"(b)" above holds or held (or in which more than one of such individuals
collectively hold or held), beneficially or otherwise, a controlling interest or
a material voting, proprietary or equity interest.
REPRESENTATIVES. "REPRESENTATIVES" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SELLER CONTRACT. "SELLER CONTRACT" shall mean any Contract: (a) to which
Seller is a party; (b) by which Seller or any of its assets is or may become
bound or under which Seller has, or may become subject to, any obligation; or
(c) under which Seller has or may acquire any right or interest.
ASSET PURCHASE AGREEMENT
A-3
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SELLER DISCLOSURE SCHEDULE. "SELLER DISCLOSURE SCHEDULE" shall mean the
schedule (dated as of the date of the Agreement) delivered to Purchaser on
behalf of each Shareholder and Seller, a copy of which is attached to the
Agreement and incorporated in the Agreement by reference.
SELLER PLAN. "SELLER PLAN" shall mean any Employee Benefit Plan: (a)
that is or was established, adopted, maintained or sponsored by Seller or any
ERISA Affiliate; (b) in which Seller participates or has participated; (c) with
respect to which Seller or any ERISA Affiliate is, has been or may be required
or permitted to make any contribution; or (d) with respect to which Seller or
any ERISA Affiliate is or may become subject to any Liability.
TAX. "TAX" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
may in the future be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax sharing
agreement or similar Contract.
TAX RETURN. "TAX RETURN" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
TRANSACTIONAL AGREEMENTS. "TRANSACTIONAL AGREEMENTS" shall mean: (a) the
Agreement; (b) the Employment Agreement; (c) the Noncompetition Agreements; (d)
the Trademark License Agreement; and (e) the Escrow Agreement.
TRANSACTIONS. "TRANSACTIONS" shall mean (i) the execution and delivery
of the respective Transactional Agreements, and (ii) all of the transactions
contemplated by the respective Transactional Agreements, including: (a) the sale
of the Purchased Assets by Seller to Purchaser in accordance with the Agreement;
(b) the assumption of the Assumed Liabilities by Purchaser; and (c) the
performance by Seller, each Shareholder and Purchaser of their respective
obligations under the Transactional Agreements, and the exercise by Seller, each
Shareholder and Purchaser of their respective rights under the Transactional
Agreements.
ASSET PURCHASE AGREEMENT
A-4
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TABLE OF CONTENTS
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SECTION 1. SALE OF ASSETS; RELATED TRANSACTIONS..........................................1
1.1 Sale of Assets................................................................1
1.2 Purchase Price................................................................1
1.3 Escrow........................................................................2
1.4 Instruments of Assignment.....................................................2
1.5 Assumption of Liabilities.....................................................2
1.6 Executory Contracts...........................................................2
1.7 Sales Taxes...................................................................2
1.8 Closing.......................................................................2
1.9 Other Agreements and Transactions.............................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND SELLER.....................3
2.1 Due Organization..............................................................3
2.2 Capitalization................................................................3
2.3 Financial Statements..........................................................3
2.4 Absence of Changes............................................................4
2.5 Title to Assets...............................................................4
2.6 Proprietary Assets............................................................4
2.7 Contracts.....................................................................4
2.8 Liabilities...................................................................5
2.9 Compliance with Legal Requirements............................................5
2.10 Governmental Authorizations...................................................5
2.11 Tax Matters...................................................................5
2.12 Employee Matters..............................................................5
2.13 Benefit Plans.................................................................6
2.14 Insurance.....................................................................6
2.15 Related Party Transactions....................................................6
2.16 Proceedings; Orders...........................................................6
2.17 Authority; Binding Nature of Agreements.......................................6
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
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2.18 Non-Contravention; Consents...................................................7
2.19 Brokers.......................................................................7
2.20 Shareholders..................................................................7
2.21 Full Disclosure...............................................................7
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER...................................8
3.1 Authority; Binding Nature of Agreements.......................................8
3.2 Brokers.......................................................................8
3.3 Due Organization..............................................................8
3.4 Capitalization................................................................8
3.5 Financial Statements..........................................................9
3.6 Absence of Changes............................................................9
3.7 Full Disclosure...............................................................9
3.8 Offering Valid................................................................9
SECTION 4. COVENANTS....................................................................10
4.1 Tax Returns..................................................................10
4.2 Further Actions..............................................................10
4.3 Publicity....................................................................10
4.4 FIRPTA Matters...............................................................10
4.5 Dissolution..................................................................11
4.6 Financial Information........................................................11
SECTION 5. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.............................11
5.1 Accuracy of Representations..................................................11
5.2 Performance of Covenants.....................................................12
5.3 Consents.....................................................................12
5.4 Satisfactory Completion of Pre-Acquisition Review............................12
5.5 Agreements and Documents.....................................................12
5.6 FIRPTA Compliance............................................................12
5.7 No Restraints................................................................13
5.8 No Proceedings...............................................................13
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...................................13
6.1 Accuracy of Representations..................................................13
6.2 Performance of Covenants.....................................................13
6.3 No Restraints................................................................13
SECTION 7. INDEMNIFICATION, ETC.........................................................13
7.1 Survival of Representations And Covenants....................................13
7.2 Indemnification By Shareholders And Seller...................................14
7.3 Non-exclusivity of Indemnification Remedies..................................15
7.4 Designation of Agent.........................................................15
SECTION 8. MISCELLANEOUS PROVISIONS.....................................................15
8.1 Joint and Several Liability..................................................15
8.2 Fees And Expenses............................................................15
8.3 Dispute Resolution...........................................................16
8.4 Notices......................................................................16
8.5 Headings.....................................................................16
8.6 Counterparts.................................................................17
8.7 Governing Law................................................................17
8.8 Successors and Assigns; Parties In Interest..................................17
8.9 Remedies Cumulative; Specific Performance....................................17
8.10 Waiver.......................................................................17
8.11 Amendments...................................................................17
8.12 Severability.................................................................18
8.13 Entire Agreement.............................................................18
8.14 No Interpretation Against Drafter............................................18
8.15 Knowledge....................................................................18
</TABLE>
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An extra section break has been inserted above this paragraph. Do not delete
this section break if you plan to add text after the Table of
Contents/Authorities. Deleting this break will cause Table of
Contents/Authorities headers and footers to appear on any pages following the
Table of Contents/Authorities.
1.
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EXHIBIT 10.25
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE (this "Amendment") is dated for reference
purposes only as March 24, 1999, by and between CARRAMERICA REALTY CORPORATION,
a Maryland corporation ("Landlord"), and WOMEN.COM NETWORKS, LLC ("Tenant").
RECITALS
A. Golden Century Investment Company ("Golden Century"), Landlord's
predecessor in interest, and Wire Networks Inc. ("Wire Networks"),
Tenant's predecessor in interest, entered into that certain Lease
Agreement dated November 7, 1994, and the Addendum thereto (collectively,
the "Original Lease") for Suite 150 (approximately 6,500 rentable square
feet) of that certain building commonly known as 1820 Gateway Drive in San
Mateo, California ("Building 3"). Golden Century and Wire Networks entered
into that certain Addendum II to the Original Lease pursuant to which the
size of Suite 150 was increased by 3,041 rentable square feet for a total
of 9,541 rentable square feet (the "Initial Premises"). Landlord and
Tenant agree and acknowledge that the date of the Original Lease is
incorrectly identified as November 8, 1994 (instead of November 7, 1994)
in both Addendum and Addendum II.
B. Landlord and Wire Networks entered into that certain First Amendment to
Lease dated July 21, 1997 (the "First Amendment"), pursuant to which the
size of the Initial Premises was expanded to include Suites 105, 107 and
108, and the Lease Term was extended.
C. Landlord and Wire Networks entered into that certain Second Amendment to
Lease dated August 31, 1997 (the "Second Amendment"), pursuant to which
the commencement dates for the expansion space added by the First
Amendment were modified.
D. Landlord and Wire Networks entered into that certain Third Amendment to
Lease dated October 27, 1998 (the "Third Amendment"), pursuant to which
the size of the Initial Premises was further expanded and the Lease Term
was extended. The Initial Premises with the expansion space added by the
First Amendment and the Third Amendment is collectively referred to herein
as the "Original Premises". The size of the Original Premises is 17,486
rentable square feet.
E. Wire Networks recently assigned its interest under the Lease to Tenant
pursuant to that certain Lease Assignment.
F. The Initial Lease as amended by the Addendum, Addendum II, the First
Amendment, Second Amendment, the Third Amendment and this Amendment shall
be referred to herein as the Lease.
G. Landlord and Tenant desire to further expand the size of the Original
Premises and to extend the Term, pursuant to the terms and conditions set
forth below.
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<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the adequacy of
which is hereby acknowledged, the parties hereby mutually promise, covenant and
agree as follows:
1. Premises.
(a) Suite 100. As of the Suite 100 Commencement Date (as defined
in paragraph 2 below), Section 1 of the Lease shall be amended to include
approximately 1,207 rentable square feet identified as Suite 100 in Building 3
(the "Suite 100 Expansion Space") and described in more detail in Exhibit A,
attached hereto. As of the Suite 100 Commencement Date, the term "Premises"
shall mean all of the Original Premises and the Suite 100 Expansion Space.
Landlord and Tenant hereby agree that as of the Suite 100 Commencement Date,
the rentable square footage of the Premises shall be increased by 1,207
rentable square feet.
(b) Suite 109. As of the Suite 109 Commencement Date (as defined
in paragraph 2 below), Section 1 of the Lease shall be amended to include
approximately 1,207 rentable square feet identified as Suite 109 in Building 3
(the "Suite 109 Expansion Space") and described in more detail in Exhibit A,
attached hereto. As of the Suite 109 Commencement Date, the term "Premises"
shall mean all of the Original Premises and the Suite 109 Expansion Space.
Landlord and Tenant hereby agree that as of the Suite 109 Commencement Date,
the rentable square footage of the Premises shall be increased by 3,550
rentable square feet.
(c) Suite 200. As of the Suite 200 Commencement Date (as defined
in paragraph 2 below), Section 1 of the Lease shall be amended to include
approximately 9,959 rentable square feet identified as Suite 200 in Building 3
(the "Suite 200 Expansion Space") and described in more detail in Exhibit A,
attached hereto. As of the Suite 200 Commencement Date, the term "Premises"
shall mean all of the Original Premises and the Suite 200 Expansion Space.
Landlord and Tenant hereby agree that as of the Suite 200 Commencement Date,
the rentable square footage of the Premises shall be increased by 9,959
rentable square feet.
(d) The Original Premises as expanded by the Suite 100 Expansion
Space, the Suite 109 Expansion Space and/or the Suite 200 Expansion Space shall
be collectively referred to herein as the "Premises".
2. Term.
(a) Suite 100. The "Suite 100 Commencement Date" shall be
October 1, 1999. The prior lease for the Suite 100 Expansion Space shall
terminate on August 31, 1999. Commencing on the Suite 100 Commencement Date and
continuing through and including December 31, 2002, Tenant shall commence to
perform all of its covenants and obligations under the Lease with respect to
the Suite 100 Expansion Space, including the obligation to pay rent and all
other amounts due under the Lease. Notwithstanding the foregoing, Landlord
shall exercise commercially reasonable efforts to make the Suite 100 Expansion
Space available to Tenant for early occupancy on September 1, 1999, for the
sole purpose of installing certain equipment, trade fixtures and furniture
therein. Any early occupancy of any of the Suite 100 Expansion Space by
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<PAGE> 3
Tenant shall be subject to the terms of the Lease, except that Tenant's
obligation to pay Landlord the Base Monthly Rental for the Suite 100 Expansion
Space shall not commence until the Suite 100 Commencement Date. The Suite 100
Commencement Date shall not be dependent upon the completion of any interior
tenant improvements.
(b) Suite 109. The "Suite 109 Commencement Date" shall be that
date which is thirty (30) days after the date upon which the prior lease for the
Suite 109 Expansion Space terminates (the "Suite 109 Prior Lease Termination
Date"). Landlord estimates that the Suite 109 Prior Lease Termination Date will
be April 30, 1999 and accordingly estimates that the Suite 109 Commencement Date
will be June 1, 1999. In the event that the Suite 109 Prior Lease Termination
Date does not occur by July 31, 1999, (1) Tenant shall have the right, but not
the obligation, to terminate its obligation to lease the Suite 109 Expansion
Space from Landlord by delivering written notice of such decision to Landlord so
long as such notice is delivered to Landlord prior to Landlord's delivery to
Tenant of written notice specifying the Suite 109 Prior Lease Termination Date,
and (2) Landlord shall have the right, but not the obligation, to terminate its
obligation to lease the Suite 109 Expansion Space to Tenant by delivering
written notice of such decision to Tenant so long as Landlord has not previously
delivered written notice to Tenant specifying the Suite 109 Prior Lease
Termination Date. The decision of either Landlord or Tenant pursuant to the
preceding sentence shall not affect the obligations of Landlord and Tenant in
connection with the Suite 100 Expansion Space or the Suite 200 Expansion Space.
Commencing on the Suite 109 Commencement Date and continuing through and
including December 31, 2002, Tenant shall commence to perform all of its
covenants and obligations under the Lease with respect to the Suite 109
Expansion Space, including the obligation to pay rent and all other amounts due
under the Lease. Notwithstanding the foregoing, Landlord shall exercise
commercially reasonable efforts to make the Suite 109 Expansion Space available
to Tenant for early occupancy one (1) day after the Suite 109 Prior Lease
Termination Date, for the sole purpose of installing certain equipment, trade
fixtures and furniture therein. Any early occupancy of any of the Suite 109
Expansion Space by Tenant shall be subject to the terms of the Lease, except
that Tenant's obligation to pay Landlord the Base Monthly Rental for the Suite
109 Expansion Space shall not commence until the Suite 109 Commencement Date.
The Suite 109 Commencement Date shall not be dependent upon the completion of
any interior tenant improvements.
(c) Suite 200. The "Suite 200 Commencement Date" shall be
that date which is thirty (30) days after the date upon which the prior lease
for the Suite 200 Expansion Space terminates (the "Suite 200 Prior Lease
Termination Date"). Landlord estimates that the Suite 200 Prior Lease
Termination Date will be November 30, 1999 and accordingly estimates that the
Suite 200 Commencement Date will be January 1, 2000. In the event that the Suite
200 Prior Lease Termination Date does not occur by January 31, 2000, (1) Tenant
shall have the right, but not the obligation, to terminate its obligation to
lease the Suite 200 Expansion Space from Landlord by delivering written notice
of such decision to Landlord so long as such notice is delivered to Landlord
prior to Landlord's delivery to Tenant of written notice specifying the Suite
200 Prior Lease Termination Date, and (2) Landlord shall have the right, but not
the obligation, to terminate its obligation to lease the Suite 200 Expansion
Space to Tenant by delivering written notice of such decision to Tenant so long
as Landlord has not previously delivered written notice to Tenant
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<PAGE> 4
specifying the Suite 200 Prior Lease Termination Date. The decision of either
Landlord or Tenant pursuant to the preceding sentence shall not affect the
obligations of Landlord and Tenant in connection with the Suite 100 Expansion
Space or the Suite 109 Expansion Space.
Commencing on the Suite 200 Commencement Date and continuing through and
including December 31, 2002, Tenant shall commence to perform all of its
covenants and obligations under the Lease with respect to the Suite 200
Expansion Space, including the obligation to pay rent and all other amounts due
under the Lease. Notwithstanding the foregoing, Landlord shall exercise
commercially reasonable efforts to make the Suite 200 Expansion Space available
to Tenant for early occupancy one (1) day after the Suite 200 Prior Lease
Termination Date, for the sole purpose of installing certain equipment, trade
fixtures and furniture therein. Any early occupancy of any of the Suite 200
Expansion Space by Tenant shall be subject to the terms of the Lease, except
that Tenant's obligation to pay Landlord the Base Monthly Rental for the Suite
200 Expansion Space shall not commence until the Suite 200 Commencement Date.
The Suite 200 Commencement Date shall not be dependent upon the completion of
any interior tenant improvements.
(d) Original Premises. Section 2 of the Lease is hereby amended to extend
the Term for the Original Premises by twelve (12) months so that "Expiration
Date" for the entire Premises (including the Suite 100 Expansion Space, the
Suite 109 Expansion Space and the Suite 200 Expansion Space) shall now be
December 31, 2002. Tenant's obligations pursuant to extension of the Term of the
Original Premises shall no be affected by Tenant's obligations in connection
with the Suite 100 Expansion Space, the Suite 109 Expansion Space of the Suite
200 Expansion Space.
(c) Expansion Spaces Not Contingent. Tenant acknowledges and agrees that
Tenant shall be obligated to lease the Suite 100 Expansion Space, the Suite 109
Expansion Space and the Suite 200 Expansion Space (collectively, the "Expansion
Spaces") on October 1, 1999, the Suite 109 Prior Lease Termination Date and the
Suite 200 Prior Lease Termination Date, respectively, whenever such dates occur
(except as specifically provided above), and that Tenant's obligation to lease
each of the Suite 100 Expansion Space, the Suite 109 Expansion Space and the
Suite 200 Expansion Space shall not be contingent upon the availability of any
of the other Expansion Spaces.
3. Rent.
(a) Suite 100. As of the Suite 100 Commencement Date, the first
sentence of Section 3(a) of the Lease shall be amended to set forth the Base
Monthly Rental for the Suite 100 Expansion Space only as follows:
<TABLE>
<CAPTION>
Suite 100 Expansion Space
Period: Base Monthly Rental:
- ------- -------------------------
<S> <C>
Months 1-12: $3,681.35 per month
Months 13-24: $3,802.05 per month
Months 25-December 31, 2002: $3,922.75 per month
</TABLE>
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<PAGE> 5
(b) Suite 109. As of the Suite 109 Commencement Date, the first
sentence of Section 3(a) of the Lease shall be amended to set forth the Base
Monthly Rental for the Suite 109 Expansion Space only as follows:
<TABLE>
<CAPTION>
<S> <C>
Suite 109 Expansion Space
Period: Base Monthly Rental:
-------------- -------------------------
Months 1-12: $10,827.50 per month
Months 13-24: $11,182.50 per month
Months 25-December 31, 2002: $11,537.50 per month
</TABLE>
(c) Suite 200. As of the Suite 200 Commencement Date, the first
sentence of Section 3(a) of the Lease shall be amended to set forth the Base
Monthly Rental for the Suite 200 Expansion Space only as follows:
<TABLE>
<CAPTION>
<S> <C>
Suite 200 Expansion Space
Period: Base Monthly Rental:
-------------- -------------------------
Months 1-12: $30,374.95 per month
Months 13-24: $31,370.85 per month
Months 25-December 31, 2002: $32,366.75 per month
</TABLE>
(d) Original Premises. The first sentence of Section 3(a) of the
Lease is hereby amended to provide that the Base Monthly Rental for the Original
Premises (i.e., 17486 rentable square feet) shall be $59,452.40 per month for
the period beginning on January 1, 2002 and ending on December 31, 2002.
4. Base Year. As of the Suite 100 Commencement Date, the Suite 109
Commencement Date, and the Suite 200 Commencement Date, Section 3(b) of the
Lease shall be amended to establish the "Base Year" for the Suite 100 Expansion
Space, the Suite 109 Expansion Space and the Suite 200 Expansion Space,
respectively, as the 1999 calendar year. The Base Year for the Original Premises
shall remain the same.
5. Tenant's Proportionate Share.
(a) Suite 100. As of the Suite 100 Commencement Date, the Tenant's
Proportionate Share of Building 3 for the Suite 100 Expansion Space shall be
increased by 1.72%.
(b) Suite 109. As of the Suite 109 Commencement Date, the Tenant's
Proportionate Share of Building 3 for the Suite 109 Expansion Space shall be
increased by 5.07%.
(c) Suite 200. As of the Suite 200 Commencement Date, the Tenant's
Proportionate Share of Building 3 for the Suite 200 Expansion Space shall be
increased by 14.22%.
6. Security Deposit. Section 4 of the Lease is amended to increase the
amount of the Security Deposit (a) upon the Suite 100 Commencement Date by
$3,922.75 (the "Suite 100 Security Deposit"), (b) upon the Suite 109
Commencement Date by $11,537.50 (the "Suite 109 Security Deposit"), and (c) upon
the Suite 200 Commencement Date by $32,366.75 (the "Suite 200 Security
Deposit"). Tenant shall deliver (i) the Suite 100 Security Deposit to Landlord
concurrently with execution of this Amendment, (ii) the Suite 109 Security
Deposit to Landlord
5
<PAGE> 6
within thirty (30) days after Tenant's receipt of Landlord's notice specifying
the Suite 109 Prior Lease Termination Date but in no event later than the Suite
109 Commencement Date, and (iii) the Suite 200 Security Deposit to Landlord
within thirty (30) days after Tenant's receipt of Landlord's notice specifying
the Suite 200 Prior Lease Termination Date, so that the total amount of
Security Deposit held by Landlord pursuant to Section 4 of the Lease shall be
equal to the total Base Monthly Rental to be paid by Tenant for the entire
Premises during the last month of the Term.
7. Tenant Improvements. Tenant agrees and acknowledges that Landlord shall
provide each of the Expansion Spaces in its "as-is" condition with existing
paint and carpet, except that Landlord shall provide the HVAC, electrical,
plumbing and roof systems for each of the Expansion Spaces in good working
condition as of the commencement date for each of the Expansion Spaces. Tenant
may, at its own cost, construct any interior improvements or alterations within
the Expansion Spaces, subject to Landlord's prior written approval, which shall
not be unreasonably withheld.
Notwithstanding the foregoing, Landlord shall provide the following
"Expansion Spaces Tenant Improvement Allowance" in connection with the
construction of such approved interior improvements or alterations in the
Expansion Spaces (the "Expansion Spaces Tenant Improvements"), on the terms and
conditions set forth below. The Expansion Spaces Tenant Improvement Allowance
shall be used only for the costs and expenses incurred in connection with
materials, construction and installation of the standard interior improvements
within the Expansion Spaces (the "Expansion Spaces Tenant Improvement Costs").
None of the Expansion Spaces Tenant Improvement Allowance shall be used for
specialized improvements, cabling, equipment or trade fixtures. Tenant shall
submit written requests to Landlord for disbursement out of the Expansion
Spaces Tenant Improvement Allowance. Such requests shall be accompanied by
invoices or other evidence reasonably satisfactory to Landlord showing that the
expenses are part of the Expansion Spaces Tenant Improvement Costs.
(a) First Level Tenant Improvement Allowance.
(1) Suite 100. Included in the Base Rent payable for the Suite 100
Expansion Space, Landlord shall provide up to $4,828.00 (i.e., $4.00 per square
foot of the Suite 100 Expansion Space) (the "Suite 100 First Level Tenant
Improvement Allowance"). The entire Suite 100 First Level Tenant Improvement
Allowance must be used for the Expansion Spaces Tenant Improvement Costs for the
Suite 100 Expansion Space. Any portion of the Suite 100 First Level Tenant
Improvement Allowance which is not requested by Tenant within six (6) months of
the Suite 100 Commencement Date shall be forfeited (i.e., the unused shall not
be applied against rent or other obligations of Tenant under the Lease).
(2) Suite 109. Included in the Base Rent payable for the Suite
109 Expansion Space, Landlord shall provide up to $14,200.00 (i.e., $4.00 per
square foot of the Suite 109 Expansion Space) (the "Suite 109 First Level
Tenant Improvement Allowance"). The entire Suite 109 First Level Tenant
Improvement Allowance must be used for the Expansion Spaces Tenant Improvement
Costs for the Suite 200 Expansion Space. Any portion of the Suite 109 First
Level Tenant Improvement Allowance which is not requested by Tenant within six
(6) months of
6
<PAGE> 7
the Suite 109 Commencement Date shall be forfeited (i.e., the unused shall not
be applied against rent or other obligations of Tenant under the Lease).
(3) Suite 200. Included in the Base Rent payable for the Suite 200
Expansion Space, Landlord shall provide up to $39,836.00 (i.e., $4.00 per
square foot of the Suite 200 Expansion Space) (the "Suite 200 First Level
Tenant Improvement Allowance"). The entire Suite 200 First Level Tenant
Improvement Allowance must be used for the Expansion Spaces Tenant Improvement
Costs for the Suite 200 Expansion Space. Any portion of the Suite 200 First
Level Improvement Allowance which is not requested by Tenant within six (6)
months of the Suite 200 Commencement Date shall be forfeited (i.e., the unused
shall not be applied against rent or other obligations of Tenant under the
Lease).
(b) Second Level Tenant Improvement Allowance.
(1) Suite 100. A second level Expansion Spaces Tenant Improvement
Allowance (the "Suite 100 Second Level Tenant Improvement Allowance") of up to
$1,207.00 (i.e., $1.00 per square foot of the Premises) shall also be made
available to Tenant for the Expansion Spaces Tenant Improvement Costs for the
Suite 100 Expansion Space; provided that for each dollar ($1.00) of the Suite
100 Second Level Tenant Improvement Allowance disbursed by Landlord, the
monthly Base Rent payable hereunder for the Suite 100 Expansion Space would be
increased by $0.032 per square foot per month. Thus, if all of the Suite 100
Second Level Tenant Improvement Allowance is used, the initial monthly Base
Rent payable hereunder for the Suite 100 Expansion Space would be increased by
$38.63 per month (i.e., $1,207.00 x 0.032/sq. ft.). In the event any portion of
the Suite 100 Second Level Tenant Improvement Allowance is used, Landlord and
Tenant agree to execute an amendment to the Lease to increase the amount of
Base Rent payable hereunder for the Suite 100 Expansion Space in the manner
described above (i.e., retroactively to the Suite 100 Commencement Date) and at
such time Tenant shall be required to pay to Landlord in a single cash lump sum
all Base Rent increases for the Suite 100 Expansion Space for those months
which preceded the date of such amendment. Any portion of the Suite 100 Second
Level Tenant Improvement Allowance which is not requested by Tenant within six
(6) months of the Suite 100 Commencement Date shall be forfeited (i.e., the
unused shall not be applied against rent or other obligations of Tenant under
the Lease).
(2) Suite 109. A second level Expansion Spaces Tenant Improvement
Allowance (the "Suite 109 Second Level Tenant Improvement Allowance") of up to
$3,550.00 (i.e., $1.00 per square foot of the Premies) shall also be made
available to Tenant for the Expansion Spaces Tenant Improvement Costs for the
Suite 109 Expansion Space; provided that for each dollar ($1.00) of the Suite
109 Second Level Tenant Improvement Allowance disbursed by Landlord, the
monthly Base Rent payable hereunder for the Suite 109 Expansion Space would be
increased by $0.032 per square foot per month. Thus, if all of the Suite 109
Second Level Tenant Improvement Allowance is used, the initial monthly Base
Rent payable hereunder for the Suite 109 Expansion Space would be increased by
$113.60 per month (i.e., $3,550.00 x 0.032/sq. ft.). In the event any portion of
the Suite 109 Second Level Tenant Improvement Allowance is used, Landlord and
Tenant agree to execute an amendment to the Lease to increase the amount of
Base Rent payable hereunder for the Suite 109 Expansion Space in the manner
described above (i.e.,
7
<PAGE> 8
retroactively to the Suite 109 Commencement Date) and at such time Tenant shall
be required to pay to Landlord in a single cash lump sum all Base Rent
increases for the Suite 109 Expansion Space for those months which preceded the
date of such amendment. Any portion of the Suite 109 Second Level Tenant
Improvement Allowance which is not requested by Tenant within six (6) months of
the Suite 109 Commencement Date shall be forfeited (i.e., the unused shall not
be applied against rent or other obligations of Tenant under the Lease).
(3) Suite 200. A second level Expansion Spaces Tenant Improvement
Allowance (the "Suite 200 Second Level Tenant Improvement Allowance") of up to
$9,959.00 (i.e., $1.00 per square foot of the Premises) shall also be made
available to Tenant for the Expansion Spaces Tenant Improvement Costs for the
Suite 200 Expansion Space; provided that for each dollar ($1.00) of the Suite
200 Second Level Tenant Improvement Allowance disbursed by Landlord, the
monthly Base Rent payable hereunder for the Suite 200 Expansion Space would be
increased by $0.032 per square foot per month. Thus, if all of the Suite 200
Second Level Tenant Improvement Allowance is used, the initial monthly Base
Rent payable hereunder for the Suite 200 Expansion Space would be increased by
$318.68 per month (i.e., $9,959.00 x 0.032/sq.ft.). In the event any portion of
the Suite 200 Second Level Tenant Improvement Allowance is used, Landlord and
Tenant agree to execute an amendment to the Lease to increase the amount of
Base Rent payable hereunder for the Suite 200 Expansion Space in the manner
described above (i.e., retroactively to the Suite 200 Commencement Date) and
at such time Tenant shall be required to pay to Landlord in a single cash lump
sum all Base Rent increases for the Suite 200 Expansion Space for those months
which preceded the date of such amendment. Any portion of the Suite 200 Second
Level Tenant Improvement Allowance which is not requested by Tenant within six
(6) months of the Suite 200 Commencement Date shall be forfeited (i.e., the
unused shall not be applied against rent or other obligations of Tenant under
the Lease).
8. Monument Sign. Tenant, at Tenant's cost and expense, shall install its
name on the existing monument sign base located in front of Building 3,
provided, however, that such installation shall strictly conform to all
applicable governmental laws, ordinances and regulations, any CC&R's recorded
against the Project, and Landlord's Signage Standards in effect at the time,
and shall be installed (and removed upon the Termination Date) at Tenant's
expense. Tenant, at its sole cost and expense, shall maintain the sign in good
condition and repair. Landlord's current Signage Standards are attached hereto
as Exhibit B.
9. Real Estate Broker. Tenant warrants for Landlord's benefit that it has
not had any dealings with any real estate brokers or salesmen or incurred any
obligations for the payment of real estate brokerage commissions or finder's
fees which would be earned or due and payable by reason of the execution of
this Amendment, except for the leasing commission to be paid to Cushman &
Wakefield to be paid by Landlord, and Tenant agrees to indemnify, defend and
hold Landlord harmless from any claims made any party other than Cushman &
Wakefield to the extent such third party's claims arise as a result of or in
connection with Tenant's activities.
10. Governing Law. This Amendment shall be governed by and be construed
under the laws of the State of California.
8
<PAGE> 9
11. Attorneys' Fees. In any arbitration, quasi-judicial or
administrative proceedings or any action in any court of competent
jurisdiction, brought by either party to enforce any covenant or any of such
party's rights or remedies under this covenant or any of such party's rights or
remedies under this Amendment, including any action for declaratory relief, or
any action to collect any payments required under this Amendment or to quiet
title against the other party, the prevailing party shall be entitled to
reasonable attorneys' fees and all costs, expenses and disbursements in
connection with such action, including the costs of reasonable investigation,
preparation and professional or expert consultation, which sums may be included
in any judgment or decree entered in such action in favor of the prevailing
party.
12. Successors. All terms and provisions of this Amendment shall be
binding upon, be enforceable by, and shall inure to the benefit of, the
respective assignees and successors of the parties hereof.
13. Confirmation of Lease. Except as amended by this Third Amendment,
the parties hereby agree and confirm that the Lease is in full force and
effect. In the event of any conflict between the Lease and this Third
Amendment, the terms of this Third Amendment shall control.
IN WITNESS HEREOF, the parties hereto have executed this Third Amendment
as of the date first written above.
"Tenant"
WOMEN.COM NETWORKS, LLC,
By: /s/ M. PERRY
-------------------------------
Name: M. Perry
-----------------------------
Its: CFO Date: 4/22/99
------------------------------ ----------------------
"Landlord"
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ PHILIP L. HAWKINS
-------------------------------
Name: Philip L. Hawkins
-----------------------------
Its: Chief Operating Officer Date: 4/27/99
------------------------------ ----------------------
9
<PAGE> 10
EXHIBIT A
DESCRIPTION OF EXPANSION SPACES
[TO BE ATTACHED]
10
<PAGE> 11
EXHIBIT B
LANDLORD'S SIGN REQUIREMENTS
[TO BE ATTACHED]
11
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our reports dated May 7, 1999 relating to the financial statements and financial
statement schedule of Women.com Networks, Inc., which appear in such
Registration Statement. We also consent to the references to us under the
headings "Experts" and "Selected Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
---------------------------------------
San Jose, California
May 12, 1999
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Women.Com Networks, Inc.
on Form S-1 of our report dated April 29, 1999 relating to the consolidated
financial statements and financial statement schedule of Certain Operations of
the New Media & Technology Division of The Hearst Corporation as of December 31,
1998 and 1997 and for the three years in the period ended December 31, 1998,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts " in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
May 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH S-1.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 19,164 12,235
<SECURITIES> 0 0
<RECEIVABLES> 4,002 2,737
<ALLOWANCES> 425 295
<INVENTORY> 0 0
<CURRENT-ASSETS> 26,401 15,203
<PP&E> 4,238 1,915
<DEPRECIATION> 898 654
<TOTAL-ASSETS> 95,377 18,062
<CURRENT-LIABILITIES> 9,714 5,347
<BONDS> 0 0
35,515 35,420
0 0
<COMMON> 21 3
<OTHER-SE> 50,127 (22,708)
<TOTAL-LIABILITY-AND-EQUITY> 95,377 18,062
<SALES> 0 0
<TOTAL-REVENUES> 3,413 7,247
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 16,667 20,831
<LOSS-PROVISION> 130 248
<INTEREST-EXPENSE> 17 57
<INCOME-PRETAX> (13,254) (13,584)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (13,254) (13,584)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (13,095) (13,045)
<EPS-PRIMARY> (.95) (10.52)
<EPS-DILUTED> (.95) (10.52)
</TABLE>
