<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 5, 1999
REGISTRATION NO. 333-78363
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 6
TO THE
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WOMEN.COM NETWORKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 7375 13-4059516
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION 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:
<TABLE>
<S> <C>
MARK P. TANOURY DAVID J. SEGRE
JOHN M. GESCHKE AMY E. REES
DAVID E. LILLEVAND JAMIE W. STEWART
COOLEY GODWARD LLP WILSON SONSINI GOODRICH & ROSATI
3000 SAND HILL ROAD PROFESSIONAL CORPORATION
BUILDING 3, SUITE 230 650 PAGE MILL ROAD
MENLO PARK, CALIFORNIA 94025 PALO ALTO, CALIFORNIA 94304
</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: [ ]
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 October 5, 1999
3,750,000 Shares
Women.com Networks 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 $8 AND $10 PER
SHARE.
------------------------
OUR COMMON STOCK HAS BEEN APPROVED FOR QUOTATION ON THE NASDAQ NATIONAL MARKET
UNDER THE SYMBOL "WOMN."
------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.......................... $ $ $
Total.............................. $ $ $
</TABLE>
Women.com Networks, Inc. has granted the underwriters the right to purchase up
to an additional 562,500 shares of common stock to cover over-allotments.
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.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 1999.
------------------------
MORGAN STANLEY DEAN WITTER DEUTSCHE BANC ALEX. BROWN
SALOMON SMITH BARNEY
, 1999
<PAGE> 3
INSIDE COVER
- Title text reading: "Welcome to Women.com" (centered across the top) with
company description (centered across bottom of page) reading
"High-quality content, lively communities, time-saving tools and shopping
for millions of women"
- Full-length screen shot of Women.com home page (centered)
GATEFOLD
- Title text reading "Women.com" (top left-hand corner of gatefold)
- Bordering the left side of the gatefold are the 20 Women.com channels
- Bordering the right side of the gatefold are the logos of the 12
magazines Women.com offers through its relationships with Hearst and
Rodale
- Centered is the Small Business channel screen shot (descriptive text
reading: "Each Women.com channel provides an easy way to navigate our
extensive network by topic and has contexual links to content, community,
services, shopping and more")
- Surrounding the Small Business channel screen are four smaller screen
shot overlays focusing on services (text reading: "Contexual links to
personalized tools and services"), content (text reading: "Relevant,
useful content to help women get things done"), community (text reading:
"Lively clubs, experts, conversations and more") and shopping (text
reading: "Brand names, deals of the week, easy navigation")
BACK INSIDE COVER
- Title text reading "My.Women.com" (top left corner)
- Screen shot of my.women.com with descriptive text reading "Women.com
members can create their own personalized pages with the content and
layout of their choice"
- Screen shot has highlighted: personalized greeting, time management
tools, relevant content, personal interests, financial data, daily tips
and customized options
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 5
Use of Proceeds...................... 16
Dividend Policy...................... 16
Capitalization....................... 17
Dilution............................. 18
Selected Financial Information....... 20
Selected Pro Forma Financial Data.... 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Business............................. 31
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management........................... 47
Certain Relationships and Related
Transactions....................... 58
Principal Stockholders............... 60
Description of Capital Stock......... 63
Shares Eligible for Future Sale...... 66
Underwriting......................... 68
Legal Matters........................ 70
Experts.............................. 70
Additional Information............... 71
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 address is www.women.com. The information
on our Internet site is not a part of this prospectus.
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.
Women.com, HomeArts, Astronet, their respective logos and other trademarks
of Women.com Networks, Inc. mentioned in this prospectus are the property of
Women.com Networks, Inc. All other trademarks or trade names referred to in this
prospectus are the property of their respective owners.
i
<PAGE> 5
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.
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 20 topical channels, including career, cars, entertainment,
family, fashion and beauty, fitness, food, garden, health, home, horoscopes,
money, news and trends, pregnancy, relationships, shopping, small business,
technology and Internet, travel and weddings. Our approximately 1.4 million
members receive services and benefits, including personalized content, product
discounts, 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
12 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. Hearst is a
diversified communications company engaged in a broad range of publishing,
broadcasting, cable television networks and other communications activities. 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 promotion of our online network.
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 August 1999 our network attracted more than 4.6 million
visitors, ranking us among the top 30 Internet sites as measured by reach.
During the same period, our users generated approximately 136 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 second quarter of 1999, we had over 150 industry-leading advertisers
including IBM, Jenny Craig, Kraft, Macy's, Proctor & Gamble, Sears, Strong
Funds, Toyota, Unilever, 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.
Although substantially all of our revenues to date have been derived from
advertising, we have and expect to continue to derive revenues from other
sources, including web site production and e-commerce. Our advertising revenues
are obtained from a variety of advertising forms, including running advertisers'
banners on our network, performing customized research studies and offering
content sponsorship opportunities. Our web site production revenues are derived
from the design and production of web sites for third parties which appear on
our network or their own sites. To date, we have obtained e-commerce revenues
primarily through the sale of magazine subscriptions and astrological readings
on our network. In the future, we intend to expand our e-commerce business
through the direct sale of products on our network. For the fiscal year ended
December 31, 1998, our net revenues were approximately $7.2 million and our net
loss was approximately $13.0 million.
1
<PAGE> 6
MARKET OPPORTUNITY
Women.com was founded to capitalize on the opportunity to provide women
with information, expert advice and shopping on the Internet. Today women
represent an increasingly significant and fast-growing segment of the worldwide
Internet 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. 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.
HISTORY
We were formed in October 1992 as Wire Networks, Inc. and in 1993 we
launched our first product, an online subscription service named Women's Wire.
We launched our first site, women.com, 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, Inc. In August 1999, Women.com Networks
was merged into Hearst HomeArts, Inc. and Women.com Networks LLC was dissolved.
Hearst HomeArts, Inc. was the surviving entity and was renamed Women.com
Networks, Inc.
CONCURRENT PRIVATE PLACEMENTS
Concurrent with this offering, The Walt Disney Company has agreed to
purchase up to 1,250,000 shares of common stock in a private placement at the
public offering price. In no event will Disney purchase a number of shares that
would cause its investment to exceed $14.5 million. Hearst Communications, Inc.
has also agreed to purchase in a concurrent private placement a number of shares
of common stock that, together with 1,250,000 shares purchased by Hearst in a
private placement completed in September 1999, is equal to one-third of the
aggregate number of shares offered to the public, sold to Disney in the Disney
concurrent private placement and sold to Torstar Corporation in a private
placement completed in September 1999, plus that number of additional shares of
common stock that may be purchased for $5.0 million at the public offering
price. Assuming a price per share to the public of $9, Hearst will purchase
1,203,705 shares in the Hearst concurrent private placement. In addition,
Torstar, Hearst and other existing stockholders have the benefit of antidilution
protection in the event that the public offering price is less than the price at
which they acquired their shares. Assuming a public offering price of $9,
Torstar, Hearst and other existing stockholders will receive an aggregate of
777,746 additional shares of common stock pursuant to these antidilution
provisions.
2
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Common stock offered in this
offering.................... 3,750,000 shares
Common stock to be outstanding
after this offering and the
Disney and Hearst concurrent
private placements.......... 45,155,883 shares
Over-allotment option......... 562,500 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."
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 August 31, 1999, and
includes:
- 3,750,000 shares offered in this offering
- 1,250,000 shares to be sold in the Disney concurrent private placement
- 1,203,705 shares to be sold in the Hearst concurrent private placement
- 2,500,000 shares sold to Torstar and Hearst in private placements
completed in September 1999
- an aggregate of 777,746 shares to be issued to Torstar, Hearst and other
existing stockholders pursuant to antidilution provisions
- the net exercise of warrants for a total of 144,006 shares of common
stock
The number of shares of common stock to be outstanding after this offering
excludes the following:
- 5,063,128 shares of common stock issuable upon exercise of outstanding
options under our 1994 Stock Option Plan and 1998 Equity Incentive Plan
- 2,806,368 shares of common stock reserved for future issuance under our
1998 Equity Incentive Plan
- 1,000,000 shares of common stock reserved for issuance under our Employee
Stock Purchase Plan
- 1,805,776 shares of common stock issuable upon exercise of outstanding
warrants
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.
Unless otherwise indicated, all information in this prospectus assumes the
following:
- the net exercise of warrants for a total of 144,006 shares of common
stock
- the sale of 1,203,705 shares of common stock to Hearst and 1,250,000
shares of common stock to Disney in concurrent private placements
- the issuance of an aggregate of 777,746 shares of common stock to
Torstar, Hearst and other existing stockholders pursuant to antidilution
provisions
- that the underwriters' over-allotment option will not be exercised. See
"Description of Capital Stock" and "Underwriting"
3
<PAGE> 8
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 Women.com's pro forma data for the year ended December
31, 1998 and actual and pro forma data for the six months ended June 30, 1999.
The pro forma statement of operations data reflects the combination with
HomeArts and Astronet as if this combination had occurred on January 1, 1998.
The pro forma balance sheet data as of June 30, 1999 reflects the net proceeds
of $27.5 million from the Torstar and Hearst private placements completed in
September 1999 and the conversion of all outstanding preferred stock into common
stock upon the consummation of the merger in August 1999. The pro forma, as
adjusted balance sheet data gives effect to the net proceeds from the sale of
common stock in this offering and the Disney and Hearst concurrent private
placements at an assumed offering price of $9.00 per share.
<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 ----------
------------ SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1998 1999 1999
------------ ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................... $ 11,650 $ 9,431 $ 9,681
-------- -------- --------
Operating expenses:
Production, product and
technology................... 15,015 8,944 9,615
Sales and marketing............ 21,024 17,299 18,051
General and administrative..... 2,754 3,544 3,572
Stock-based compensation....... 1,170 1,540 1,540
Amortization of acquired
intangibles.................. 21,827 8,947 10,771
-------- -------- --------
Total operating expenses... 61,790 40,274 43,549
-------- -------- --------
Loss from operations............ (50,140) (30,843) (33,868)
Other income, net............... 539 454 454
-------- -------- --------
Net loss........................ (49,601) (30,389) (33,414)
Dividend accretion on
mandatorily redeemable
convertible preferred stock.... (570) (245) (245)
-------- -------- --------
Net loss attributable to common
stockholders................... $(50,171) $(30,634) $(33,659)
======== ======== ========
Basic and diluted net loss per
share attributable to common
stockholders................... $ (1.83)
========
Shares used in computing basic
and diluted net loss per
share.......................... 16,760
========
Basic and diluted pro forma net
loss per share................. $ (1.71) $ (.99) $ (1.00)
======== ======== ========
Shares used in computing pro
forma basic and diluted net
loss per share................. 29,347 30,786 33,575
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.... $26,815 $ 54,315 $106,286
Working capital.............. 25,260 52,760 104,731
Total assets................. 101,601 129,101 181,072
Mandatorily redeemable
convertible preferred stock
and warrants................ 35,665 -- --
Total stockholders' equity... 53,282 116,447 168,418
</TABLE>
4
<PAGE> 9
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of our
common stock could decline due to any of these risks, and you may lose all or
part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
AND OUR BUSINESS MODEL IS UNPROVEN
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 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.
WE HAVE A HISTORY OF OPERATING LOSSES AND WE ANTICIPATE INCREASED LOSSES IN THE
FUTURE
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. If we fail to achieve
profitability or sustain or increase profitability if we achieve it, our
financial condition would be materially harmed. As of June 30, 1999, we had an
accumulated deficit of $56.6 million. Successfully achieving our growth and
profitability plan depends on, among other things, our ability to significantly
increase our revenues and meet the other challenges set forth in the following
risk factors.
OUR QUARTERLY OPERATING RESULTS FLUCTUATE SIGNIFICANTLY WHICH MAKES OUR FUTURE
OPERATING RESULTS DIFFICULT TO EVALUATE AND MAY ADVERSELY AFFECT OUR STOCK PRICE
Our operating results have fluctuated and are likely to continue to
fluctuate significantly from quarter to quarter as a result of several factors,
many of which are outside our control, and any of which could materially harm
our business. These factors include:
- fluctuations in the demand for Internet advertising or electronic
commerce
- changes in the level of traffic on our network
- fluctuations in marketing expenses and technology infrastructure costs
If our revenues in a particular quarter are lower than we anticipate, we
may be unable to reduce spending in that quarter. As a result, any shortfall in
revenues would likely adversely affect our quarterly operating results.
Specifically, in order to attract and retain a larger user base, we plan to
significantly increase our expenditures on sales and marketing, content
development, technology and infrastructure. Many of these expenditures are
planned or committed in advance and in anticipation of future revenues.
Due to the factors noted above and the other risks discussed in this
section, quarter-to-quarter comparisons of our results of operations may not
accurately predict future performance. It is possible that
5
<PAGE> 10
in some future quarters our results of operations may be below the expectations
of public market analysts or investors. If this occurs, the price of our common
stock may decline.
IF WE ARE UNABLE TO GENERATE ADDITIONAL ADVERTISING REVENUES, WHICH ACCOUNT FOR
SUBSTANTIALLY ALL OF OUR REVENUES, OUR BUSINESS WOULD BE MATERIALLY HARMED
We derive substantially all of our revenues from the sale of advertisements
on our network. If we fail to sell advertising, our revenues will be
significantly reduced. Market acceptance of Internet-based advertising is
uncertain and depends largely on advertisers' determinations that the Internet
is an effective medium for advertising. Most of our customers have limited
experience with the Internet as an advertising medium. Our ability to generate
significant advertising revenues depends upon several other factors, including:
- 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 maintain and increase our advertising rates given the
growing number of outlets for advertisers on the Internet
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, e-commerce partners and Internet users, and there are few barriers
to entry. We expect this competition to increase. 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. See "Business -- Competition."
HEARST WILL CONTROL ACTIONS REQUIRING BOARD AND STOCKHOLDER APPROVAL AFTER THIS
OFFERING WHICH WILL WEAKEN THE EFFECT OF OTHER STOCKHOLDERS' VOTES
Hearst representatives currently fill five of the ten 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 six 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 and the concurrent Disney and Hearst private
placements, Hearst will beneficially own approximately 48.4% of our outstanding
common stock. If the underwriters' over-allotment option is exercised in full,
Hearst may purchase up to 326,389 additional shares of common stock in the
private placement. 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
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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.
HEARST'S LARGE OWNERSHIP PERCENTAGE MAY LIMIT THE TRADING VOLUME OF OUR COMMON
STOCK AND INCREASE THE VOLATILITY OF OUR STOCK PRICE
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 AND LOSS OF THIS RELATIONSHIP
WOULD HARM OUR BUSINESS
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.
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.
Our relationship with Hearst is governed by a magazine content license and
hosting agreement. While this agreement will continue to provide us with
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.
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 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 decline, the content of our network would
suffer and our business, financial condition and results of operations would be
materially harmed.
We may not be able to attract enough user traffic or advertisers to our
network to achieve profitability without Hearst's name or promotional
capabilities. Even with Hearst's support, we may never achieve profitability or
sustain or increase profitability if we achieve it. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations," "Business -- The
Hearst Relationship" and "Certain Relationships and Related Transactions" for a
more complete discussion of our relationship with Hearst.
HEARST'S RIGHT TO LICENSE ITS CONTENT TO OTHER PARTIES AND OUR RESTRICTIONS ON
LICENSING OTHER THIRD-PARTY CONTENT MAY RESTRICT OUR ABILITY TO COMPETE OR
EXPAND OUR NETWORK
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 dilute the value of the Hearst
magazine content to our network. 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
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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 FACE DIFFICULTY IN RE-LAUNCHING CRITICAL HEARST MAGAZINE SITES
In connection with our acquisition of the rights to acquire content from
the Hearst magazines, we are 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.
IF THE POPULARITY OF ASTRONET DECLINES OR WE ARE UNABLE TO EFFECTIVELY MAINTAIN
ITS DISTRIBUTION, OUR PAGE VIEWS AND NUMBER OF USERS WOULD DECREASE AND OUR
BUSINESS COULD BE MATERIALLY HARMED
We rely on Astronet to generate a significant portion of our page views and
Astronet depends on America Online for traffic. In August 1999, approximately
48% of our page views were generated by Astronet and, during the same period,
approximately 69% 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.
ASTRONET CURRENTLY GENERATES NO ADVERTISING REVENUES AND WE MAY NOT BE ABLE TO
GENERATE SIGNIFICANT ADVERTISING REVENUES THROUGH ASTRONET IN THE FUTURE
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. Failure to generate significant revenues through Astronet in the future
may limit our growth and otherwise materially harm our business.
IF WE ARE NOT SUCCESSFUL IN INTEGRATING THE HOMEARTS AND ASTRONET OPERATIONS,
OUR BUSINESS WILL BE MATERIALLY HARMED
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. 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 particular, our integration of HomeArts and Astronet may be complicated
by the fact that management and other operations of these businesses have taken
place and, to some extent, will continue to take place in the eastern United
States as opposed to our headquarters in California. In addition, since HomeArts
has been operated as a division of Hearst, a widely diversified publishing
company, integration difficulties may arise in integrating it into our
stand-alone operations. This integration process involves a significant amount
of our management's time, resources and energy. We are also 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.
OUR PROMOTION OF THE WOMEN.COM BRAND MUST BE SUCCESSFUL IN ORDER FOR US TO
ATTRACT USERS AS WELL AS ADVERTISERS AND OTHER STRATEGIC PARTNERS
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
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sites. Successful promotion and marketing of our brand will depend on providing
interesting and 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.
IF WE ARE UNABLE TO DELIVER ORIGINAL AND COMPELLING INTERNET CONTENT, COMMUNITY,
SHOPPING AND PERSONALIZED SERVICES THAT ATTRACT A SUFFICIENT NUMBER OF USERS TO
OUR NETWORK, OUR BUSINESS WOULD BE MATERIALLY HARMED
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 or 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.
IF WE FAIL TO RETAIN EXISTING BRANDING AND CONTENT RELATIONSHIPS OR FAIL TO
ATTRACT NEW ONES, THE AMOUNT AND QUALITY OF CONTENT ON OUR NETWORK MAY DECLINE,
TRAFFIC TO OUR NETWORK MAY DECREASE 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 further enhance our brand awareness
and expand and broaden our reach to a wider variety of users.
With the exception of our Hearst relationship, our existing 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.
OUR EXCLUSIVITY AGREEMENT WITH DISNEY MAY PREVENT US FROM SUCCESSFULLY EXPANDING
OUR BRAND AWARENESS AND CONTENT OFFERINGS THROUGH PARTNERSHIPS WITH TELEVISION
OR CABLE NETWORKS
In connection with the Disney private placement, we have agreed not to
accept any equity investment from, or enter into a strategic relationship with,
another television or cable network for a period of six months, during which
time Disney and we will discuss the possibility of entering into a strategic
relationship. We cannot assure you that we will agree to a strategic
relationship with Disney on acceptable terms. If we fail to do so, we may not be
able to enter into a strategic relationship with another television or cable
network after the six month exclusivity period with Disney has ended. If we fail
to enter into such a strategic relationship, our ability to develop greater
brand awareness and expand our content offerings may be limited or delayed.
WE MUST ESTABLISH AND MAINTAIN ONLINE DISTRIBUTION CHANNELS TO GENERATE TRAFFIC
TO OUR NETWORK IN ORDER TO BE SUCCESSFUL
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. 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. In August 1999, a
substantial portion of our network's traffic was generated
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by our distribution relationships and, in particular, America Online. 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.
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 may not be able to achieve any or all of the necessary components of a
successful e-commerce operation. 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 which may adversely affect our results of operations.
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. Specifically, we expect
that future transactions may involve the acquisition of early-stage Internet
content and technology companies. Integration of these companies may result in
problems related to integration of technology and inexperienced management
teams. 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.
GROWTH IN OUR OPERATION HAS AND WILL CONTINUE TO STRAIN OUR RESOURCES AND OUR
FAILURE TO MANAGE GROWTH EFFECTIVELY COULD HARM OUR BUSINESS
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 August 31, 1998, we had 75
employees, compared to 264 employees as of August 31, 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 Senior Vice President, Marketing and
Strategic Partnerships and our Chief Financial Officer. As a result, our
management team may have difficulty working together to successfully manage our
anticipated growth.
OUR SYSTEMS MAY FAIL OR BE INTERRUPTED AND THEREBY LIMIT OUR USER TRAFFIC AND
POTENTIALLY HARM OUR BUSINESS
If our network fails for any reason, even for only a short period of time,
our business and reputation would be materially harmed. 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
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by fire, flood, power loss, telecommunications failure, break-ins, earthquake
and similar events. In May and June 1999, user access to our pregnancy channel
was disrupted as a result of a system failure. Although this disruption has been
remedied, we may encounter unforeseen difficulties in maintaining full access to
this or other channels on our network, and, therefore, there may be additional
delays. This failure and any additional failures may adversely affect our user
traffic results in our current or any future quarters, which could adversely
affect our revenues and operating results and harm our reputation with users,
advertisers and commerce partners.
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.
IF USE OF THE INTERNET DOES NOT CONTINUE TO GROW, OUR BUSINESS WILL BE
MATERIALLY HARMED
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
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
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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 CANNOT PREDICT TO WHAT EXTENT WE MAY BE HELD LIABLE FOR OUR SERVICES AND USER
GENERATED CONTENT AND IF WE ARE SUBJECT TO SUBSTANTIAL LIABILITY OUR BUSINESS
MAY BE MATERIALLY HARMED
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. 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. The laws relating to the
liability of providers of these online services for the activities of their
users are currently unsettled. 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 illegal or inappropriate material 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 currently
imposes liability for, and in some cases prohibits, the transmission over the
Internet of some types of information. This legislation or any similar future
regulation 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
arising out of the content or services we offer, which may require the
expenditure of substantial resources, or to discontinue some 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 become liable for our content or services. Any
liability in excess of our general liability 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 and assist advertisers in targeting their advertising
campaigns to particular demographic groups. However, privacy concerns may cause
users to resist providing the personal data necessary to support this tailoring
capability. Even the perception of security and privacy concerns, whether or not
valid, may indirectly inhibit market acceptance of our network. In addition,
legislative or 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
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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 MAY EXPEND SIGNIFICANT RESOURCES TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS
OR TO DEFEND CLAIMS OF INFRINGEMENT BY THIRD PARTIES, AND IF WE ARE NOT
SUCCESSFUL WE MAY LOSE RIGHTS TO USE SIGNIFICANT MATERIAL OR BE REQUIRED TO PAY
SIGNIFICANT FEES
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 expense and could prove difficult or
impossible. In the past, third parties have alleged that we have infringed upon
their patent rights and we cannot assure you that in the future third parties
will not bring additional 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. Any new laws
or regulations relating to the Internet could substantially increase our
operating expenses or otherwise materially harm our business. It is possible
that in the future a number of laws and 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.
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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 due to Hearst's share ownership and, for the six
months immediately following the offering, contractual restrictions on
resale
- a significant increase in the number of shares available for resale
beginning six months after this offering
- 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.
IF WE, OR THIRD PARTIES ON WHICH WE RELY, FAIL TO ACHIEVE YEAR 2000 READINESS,
OUR BUSINESS COULD BE MATERIALLY HARMED
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, 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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THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES AND ACTUAL RESULTS THAT DIFFER FROM THOSE STATEMENTS MAY
MATERIALLY HARM OUR BUSINESS
This prospectus contains forward-looking statements that are inherently
uncertain. We use words such as "anticipates," "believes," "plans," "expects,"
"future," "intends" and similar expressions to identify any 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 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.
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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 $29.9 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 from this offering will be $34.6 million. The net
proceeds we will receive from the sale of shares of common stock in the Disney
concurrent private placement are estimated to be approximately $11.3 million.
The net proceeds we will receive from the sale of shares in the Hearst private
placement are estimated to be approximately $10.8 million. In the event that the
underwriters' over-allotment option is exercised in full, Hearst will have the
right to purchase up to 326,389 additional shares of common stock, in which case
the total net proceeds from the Hearst private placement will be approximately
$13.8 million. If the underwriters exercise their over-allotment option in part,
Hearst will have an option to purchase a pro rata portion of these additional
shares.
While we cannot predict with certainty how the proceeds of this offering,
the Disney and Hearst concurrent private placements and the $27.5 million in net
proceeds we received in the Torstar and Hearst private placements completed in
September 1999 will be used, we currently intend to use them approximately as
follows:
- $5 million for expansion of our sales force
- $20 million for marketing and distribution activities
- $40 million for expansion of our business operations, including $15
million for the launch of international operations, $10 million for
increased staffing, $10 million for content production and $5 million for
technology infrastructure
- The remainder for working capital
In addition, we may use a significant portion of the proceeds for the
acquisition of complementary businesses, content and technologies. Although we
are currently investigating certain opportunities to acquire complementary
businesses, we are not currently a party to any contracts or binding 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. The allocation of the net proceeds from this offering, the
Disney and Hearst concurrent private placements and the Torstar and Hearst prior
private placements discussed above represents management's current estimates
only. Management's plans for the proceeds are subject to change due to
unforeseen opportunities and, as such, actual allocation of the net proceeds may
differ substantially from these estimates. We cannot specify with certainty the
particular uses for the net proceeds to be received upon the completion of this
offering and the Disney and Hearst concurrent private placements and the net
proceeds we received from the Torstar and Hearst prior private placements.
Accordingly, our management team will have broad discretion in using the net
proceeds of this offering, the Disney and Hearst concurrent private placements
and the Torstar and Hearst prior private placements. We intend to invest the net
proceeds from this offering and the Disney and Hearst concurrent private
placements 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 -- Liquidity and Capital Resources."
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.
16
<PAGE> 21
CAPITALIZATION
The following table sets forth our total capitalization as of June 30,
1999:
- on an actual basis
- on a pro forma basis to reflect (1) the increase in the authorized number
of shares of common stock, (2) the net proceeds of $27.5 million from the
sale of common stock to Torstar and Hearst in private placements
completed in September 1999, (3)the net exercise of warrants for a total
of 144,006 shares of common stock concurrent with this offering and (4)
the conversion of all outstanding preferred stock and convertible units
into common stock upon the consummation of the merger between Hearst
HomeArts and Women.com Networks in August 1999
- on a pro forma basis, as adjusted, to give effect to the issuance and
sale by Women.com of the common stock offered in this offering and sold
in the Disney and Hearst concurrent private placements at an assumed
initial public offering price of $9.00 per share, after deducting
estimated underwriting discounts, commissions and offering expenses, and
the issuance of an aggregate of 777,746 additional shares of common stock
to Torstar, Hearst and other existing stockholders pursuant to
antidilution provisions. 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 JUNE 30, 1999
----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Mandatorily 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).................. 8,770 -- --
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 -- --
-------- --------- --------
Total mandatorily redeemable convertible preferred
stock and warrants............................... 35,665 -- --
-------- --------- --------
Stockholders' equity
Preferred Stock, $0.001 par value: 5,000,000 shares
authorized (pro forma and pro forma as adjusted)
Convertible Units; 2,000,000 shares issued and outstanding
(actual); no shares issued or outstanding (pro forma
and pro forma as adjusted)............................. $ 19,249 $ -- $ --
Common Stock, $0.001 par value: 60,000,000 shares
authorized (actual); 195,000,000 (pro forma and pro
forma as adjusted); 19,987,357 shares issued and
outstanding (actual); 38,069,242 shares, issued and
outstanding (pro forma); and 45,050,693 shares issued
and outstanding (pro forma as adjusted)................ 21 38 45
Additional paid-in capital.................................. 95,464 177,861 229,825
Notes receivable from stockholders.......................... (44) (44) (44)
Unearned compensation....................................... (4,820) (4,820) (4,820)
Accumulated deficit......................................... (56,588) (56,588) (56,588)
-------- --------- --------
Total stockholders' equity........................ 53,282 116,447 168,418
-------- --------- --------
Total capitalization.............................. $ 88,947 $ 116,447 $168,418
======== ========= ========
</TABLE>
The above information excludes:
- 4,528,083 shares of common stock issuable on exercise of options
outstanding as of June 30, 1999 under the 1994 Stock Option Plan and the
1998 Equity Incentive Plan, with a weighted average exercise price of
$3.51 per share,
- 3,446,603 shares of common stock reserved for future issuance under the
1998 Equity Incentive Plan
- 1,000,000 shares of common stock reserved for future issuance under the
Employee Stock Purchase Plan
- 1,805,776 shares of common stock issuable upon exercise of warrants
outstanding as of June 30, 1999, with a weighted average exercise price
of $3.02 per share
17
<PAGE> 22
DILUTION
The pro forma net tangible book value of Women.com Networks, Inc. at June
30, 1999 was approximately $60.7 million, or $1.56 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:
- the consummation of the merger between Hearst HomeArts, Inc. and
Women.com Networks in August 1999
- the conversion of all outstanding shares of our convertible preferred
stock into shares of common stock in the merger
- the net exercise of warrants for a total of 144,006 shares of common
stock
- the sale of 1,250,000 shares of common stock to each of Torstar and
Hearst in private placements completed in September 1999
- the issuance of an aggregate of 777,746 additional shares of common stock
to Torstar, Hearst and other existing stockholders pursuant to
antidilution provisions
Assuming the sale of the 3,750,000 shares of common stock offered in this
offering, the sale of 1,250,000 shares of common stock in the Disney concurrent
private placement and the sale of 1,203,705 shares of common stock in the Hearst
concurrent private placement at an assumed offering price of $11.00 per share
after deducting estimated underwriting discounts and commissions and offering
expenses payable by us, the pro forma, as adjusted, net tangible book value of
Women.com Networks, Inc. as of June 30, 1999 would have been approximately
$112.7 million, or $2.50 per share. This represents an immediate increase in the
pro forma net tangible book value of $.94 per share to existing stockholders and
an immediate dilution of $6.50 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............. $ 9.00
Pro forma net tangible book value per share as of June 30,
1999................................................... $1.56
Increase in pro forma tangible book value per share
attributable to new investors (including the Disney and
Hearst concurrent private placements).................. .94
-----
Pro forma, as adjusted, net tangible book value per share
after this offering and the Disney and Hearst concurrent
private placements........................................ 2.50
------
Dilution per share to new investors (including the Disney
and Hearst concurrent private placements)................. $ 6.50
======
</TABLE>
18
<PAGE> 23
The following table summarizes, on a pro forma basis as of June 30, 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 consummation of the merger between Hearst HomeArts, Inc. and
Women.com Networks in August 1999
- the conversion of all outstanding shares of mandatorily redeemable
convertible preferred stock into common stock in the merger
- the net exercise of warrants for a total of 144,006 shares of common
stock
- the sale of a total of 2,500,000 shares common stock in the Torstar and
Hearst private placements completed in September 1999
- the sale of shares of common stock to investors in this offering and the
Disney and Hearst concurrent private placements
- the issuance of an aggregate of 777,746 shares of common stock to
Torstar, Hearst and other existing stockholders pursuant to antidilution
provisions
The calculation is based on an assumed initial public offering price of
$9.00 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
(including the Torstar and
Hearst private placements
completed in September 1999
and antidilution shares).... 38,846,988 86.2% $171,341,337 75.4% $4.41
New investors (including the
Disney and Hearst concurrent
private placements)......... 6,203,705 13.8 55,833,345 24.6 9.00
---------- ----- ------------ -----
Total............... 45,050,693 100.0% $227,174,682 100.0%
========== ===== ============ =====
</TABLE>
The discussion and table above assume 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 June 30, 1999, there were options outstanding to purchase a
total of 4,528,083 shares of common stock at a weighted average price of $3.51
per share and 1,805,776 shares of common stock issuable upon exercise of
outstanding warrants with a weighted average exercise price of $3.02 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> 24
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 in this prospectus. 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 in
this prospectus. The Women.com statement of operations data for the year ended
December 31, 1994 are derived from the unaudited financial statements of
Women.com which are not included in this prospectus. The Women.com statement of
operations data for the six months ended June 30, 1999 and 1998 and the balance
sheet data as of June 30, 1999 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 six months ended June 30, 1999 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 in this prospectus.
<TABLE>
<CAPTION>
WOMEN.COM HOMEARTS
-------------------------------------------------------------------- ----------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30, 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 $ 2,746 $ 9,431 $ 1,279 $ 1,896 $ 2,957
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Operating expenses:
Production, product and
technology.............. 123 797 1,174 2,922 5,728 2,495 8,944 4,254 4,998 8,095
Sales and marketing....... 305 368 957 3,907 12,042 3,605 17,299 3,529 5,946 8,625
General and
administrative.......... 245 673 956 1,101 1,374 622 3,544 990 878 970
Stock-based
compensation............ -- -- -- -- 1,170 325 1,540 -- -- --
Amortization of acquired
intangibles............. -- -- -- -- 517 172 8,947 -- -- --
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Total operating
expenses............ 673 1,838 3,087 7,930 20,831 7,219 40,274 8,773 11,822 17,690
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Loss from operations........ (553) (1,710) (2,358) (5,132) (13,584) (4,473) (30,843) (7,494) (9,926) (14,733)
Other income, net........... 2 4 53 37 539 120 454 -- -- --
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Net loss.................... (551) (1,706) (2,305) (5,095) (13,045) (4,353) (30,389) (7,494) (9,926) (14,733)
Dividend accretion on
mandatorily redeemable
convertible preferred
stock..................... (34) (236) (682) (1,517) (570) 285 (245) -- -- --
------ ------- ------- ------- -------- ------- -------- ------- ------- --------
Net loss attributable to
common
stockholders.............. $ (585) $(1,942) $(2,987) $(6,612) $(13,615) $(4,638) $(30,634) $(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) $ (4.20) $ (1.83)
====== ======= ======= ======= ======== ======= ========
Shares used in computing
basic and diluted net loss
per share................. 287 692 702 722 1,294 1,105 16,760
====== ======= ======= ======= ======== ======= ========
Basic and diluted pro forma
net loss per share........ $ (1.13) $ (.99)
======== ========
Shares used in computing pro
forma basic and diluted
net loss per share........ 11,548 30,786
======== ========
</TABLE>
<TABLE>
<CAPTION>
WOMEN.COM HOMEARTS
----------------------------------------------------------- ------------------
AS OF DECEMBER 31, AS OF AS OF DECEMBER 31,
------------------------------------------------ JUNE 30, ------------------
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 $ 26,815 $ -- $ 24
Working capital................................ 530 153 83 2,874 9,856 25,260 (830) (989)
Total assets................................... 801 719 2,208 6,430 18,062 101,601 2,504 8,218
Mandatorily redeemable convertible preferred
stock and
warrants..................................... 1,342 2,839 5,817 15,012 35,420 35,665 -- --
Total stockholders' equity (deficit)........... (748) (2,663) (5,650) (12,256) (22,705) 53,282 -- --
</TABLE>
20
<PAGE> 25
SELECTED PRO FORMA FINANCIAL DATA
The pro forma statement of operations data for the year ended December 31,
1998 and the six months ended June 30, 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>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 11,650 $ 9,681
-------- --------
Operating expenses:
Production, product and technology........................ 15,015 9,615
Sales and marketing....................................... 21,024 18,051
General and administrative................................ 2,754 3,572
Stock-based compensation.................................. 1,170 1,540
Amortization of acquired intangibles...................... 21,827 10,771
-------- --------
Total operating expenses.......................... 61,790 43,549
-------- --------
Loss from operations........................................ (50,140) (33,868)
Other income, net........................................... 539 454
-------- --------
Net loss.................................................... (49,601) (33,414)
Dividend accretion on mandatorily redeemable convertible
preferred stock........................................... (570) (245)
-------- --------
Net loss attributable to common stockholders................ (50,171) (33,659)
======== ========
Basic and diluted pro forma net loss per share.............. $ (1.71) $ (1.00)
======== ========
Shares used in computing pro forma basic and diluted net
loss per share............................................ 29,347 33,575
======== ========
</TABLE>
21
<PAGE> 26
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 20 topical channels, and offers content from 12 of the world's
leading women's magazines, including Cosmopolitan, Good Housekeeping, Prevention
and Redbook.
Women.com Networks was formed in October 1992 and introduced its current
Internet site, located at www.women.com, 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 was jointly owned
by Women.com and HomeArts. In August 1999, Women.com and HomeArts merged and the
business previously conducted by Women.com Networks LLC was 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's operations since the formation of Women.com
Networks LLC on January 29, 1999.
Women.com has incurred significant net losses and negative cash flows from
operations since its inception. As of June 30, 1999, Women.com had an
accumulated deficit of $56.6 million. Women.com intends to continue to make
significant financial investments in its business, including product, technology
and 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.
Substantially all of Women.com's revenues to date have been generated from
advertising. To a much lesser extent, Women.com has derived revenues from other
sources, including 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 sites branded by both Women.com
and the sponsor 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.
22
<PAGE> 27
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 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, sale 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 magazine
sites. Women.com derives Astronet e-commerce revenues from services offered on
its 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 -- The Hearst Relationship."
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
June 30, 1999, Women.com had recorded $7.5 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. All acquisitions to date 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 $65.2 million, $4.4 million of which will be
amortized over two years, $58.7 million of which will be amortized over three
years and $2.1 million of which will be amortized over five years, the
23
<PAGE> 28
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.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Results of operations for the first six months 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 $9.4 million in the first six
months of 1999 from $2.7 million in the first six months of 1998. The increase
was primarily due to an increase in advertising revenues. In the first six
months of 1999, barter revenues accounted for 1.9% of total revenues.
Production, product and technology expenses. Production, product and
technology expenses increased to $8.9 million in the first six months of 1999
from $2.5 million in the first six months of 1998. This increase was primarily
due to increased expenses of approximately $2.3 million associated with
increased production costs related to the combination with HomeArts and
Astronet, increased costs related to the hiring of additional production and
product development personnel of approximately $700,000 as well as increased
content acquisition costs and other production costs associated with growth in
Women.com's business. 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 re-launches the Hearst magazine sites.
Sales and marketing expenses. Sales and marketing expenses increased to
$17.3 million in the first six months of 1999 from $3.6 million in the first six
months of 1998. This increase was primarily due to a $4.3 million increase in
online distribution expenses as a result of agreements with, among others,
America Online, Microsoft Network and Netscape, approximately $3.0 million of
television advertising expenses, a $1.7 million dollar increase in other
advertising expenses and costs associated with increased sales and personnel.
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 $3.5 million in the first six months of 1999 from $622,000 in the
first six months of 1998. The increase was primarily due to increased costs
related to additional administrative staffing of approximately $500,000 to
support the overall growth in the business, and expenses related to the
combination with HomeArts and Astronet of approximately $1 million. 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
$1.5 million in the first six months of 1999 from $325,000 in the first six
months 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 10 of Notes to Financial Statements.
Amortization of acquired intangibles. Amortization of acquired intangibles
increased to $8.9 million in the first six months of 1999 from $172,000 in the
first six months of 1998. This increase was primarily due to the combination
with HomeArts and Astronet in January 1999. See Note 3 of Notes to Financial
Statements.
Other Income, net. Other income, net consists of interest income and
interest expense. Other income, net increased to $454,000 in the first six
months of 1999 from $120,000 in the first six months of
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1998. The increase was primarily due to higher cash balances as a result of the
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 in
August 1999. 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 $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 11 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 of approximately $2.2 million, a full year of production revenues from
MediaOne and Hallmark of approximately $1.3 million, and new revenues from the
initiation of e-commerce affiliate and barter programs of approximately $200,000
and $700,000, respectively. 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 $356,000, 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
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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.
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 of approximately $1.5 million, offset in
part by a decrease in production revenue of approximately $400,000. 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 some 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.
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SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth quarterly pro forma net revenue information
for Women.com for each of the six quarters in the period ended June 30, 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, JUN. 30,
1998 1998 1998 1998 1999 1999
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NET REVENUES........... $1,829 $2,486 $3,064 $4,271 $3,663 $6,018
====== ====== ====== ====== ====== ======
</TABLE>
The significant increase in net revenues for 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.
The significant increase in net revenues for the quarter ended June 30,
1999 was primarily the result of a full quarter of combined operations of
Women.com, HomeArts and Astronet.
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 occurs 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
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- 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 $54.1 million, and to a lesser extent from $13.9 million in cash
contributed by HomeArts in connection with the formation of Women.com Networks
LLC. Women.com had approximately $26.8 million in cash and cash equivalents at
June 30, 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 Astronet and the private sale of
equity securities. In September 1999, Women.com raised an additional $27.5
million through the sale of common stock to Torstar and Hearst in private
placements.
Net cash used in operating activities increased to $17 million in the first
six months of 1999 from $3.6 million in the first six months 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 six months of 1999, as well as increased
amortization of intangibles in the first six months of 1999.
Net cash provided by investing activities was $12.5 million in the first
six months of 1999 as compared to net cash used in investing activities of
$254,000 in the first six months of 1998. The increase was due to the $13.9
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 $19.1 million in the first
six months of 1999 as compared to net cash provided by financing activities of
$19.9 million in the first six months of 1998. 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.
Women.com expects to increase staffing, make significant capital
expenditures, make acquisitions of complementary businesses, products and
technologies, and expand its sales and marketing programs. Women.com currently
expects that the net proceeds from this offering, the Disney and Hearst
concurrent private placements, together with available funds, will be sufficient
to meet its 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.
Women.com 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, Women.com 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 its business, financial condition and results of operations.
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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 our 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 our 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 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, 2000. We are assessing
the potential impact of this pronouncement on our financial statements and do
not anticipate any significant impact as we do not have any derivative
instruments and do not anticipate acquiring any derivative instruments. See Note
2 of Notes to Financial Statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We maintain our cash equivalents in a money market fund. As of December 31,
1998, all of our cash equivalent investments will mature in one year or less.
See Note 2 of Notes to Financial Statements. We did not hold derivative
financial instruments as of December 31, 1998, and have never held any such
instruments. Currently all of our sales and expenses are denominated in U.S.
dollars and as a result we have experienced no foreign exchange gains or losses
to date. We do not expect to effect a material amount of transactions in foreign
currencies during 1999. We have 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 our operating,
financial and administrative systems, including the hardware and software that
support our systems.
Our task force is currently conducting an inventory of and developing
testing procedures for all software and other systems that we believe might be
affected by Y2K issues. Since we use third-party systems, a significant part of
this effort will be to ensure that these third-party systems are Y2K ready. We
plan to confirm this readiness through a combination of the representation by
these third parties of their products' year 2000 readiness, as well as specific
testing of these systems. We plan to complete this process prior to the
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end of October 1999. Until such testing is completed and such vendors and
providers are contacted, we will not be able to completely evaluate whether our
systems will need to be revised or replaced.
COSTS
We have spent an immaterial amount on Y2K readiness to date but expect to
incur an additional $200,000 to $300,000 in connection with identifying,
evaluating and addressing Y2K readiness issues. Most of these expenses are
operating costs associated with time spent by employees and consultants
evaluating Y2K readiness matters. Such expenses, if higher than anticipated,
could have a material adverse effect on our business, results of operations and
financial condition. Although we cannot predict with any certainty the
additional costs which we may incur in the event our third party vendors and
service providers are not Y2K ready, such costs may be substantial and could
have a material and adverse effect on our business and results of operations.
RISKS
We are not currently aware of any Y2K readiness problems relating to our
internally developed 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 readiness problems in our systems that
will require substantial revision. There can also be no assurance that
third-party software, hardware or services incorporated into our systems are Y2K
ready and will not need to be revised or replaced. Any revision or replacement
of our systems or third party systems could be time consuming and costly.
Our failure to replace our software, hardware or services or third party
software, hardware and 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 readiness issues
could result in claims of mismanagement, misrepresentation or breach of
contract. The resulting litigation could affect our financial and time
resources.
We are dependent on third party vendors to provide significant network
services and equipment. A Y2K disruption of the network services and equipment
provided by third party 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.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside our control may not
be Y2K ready. The failure by such entities to be Y2K ready could result in a
systemic failure beyond our control, such as a prolonged Internet,
telecommunications or electrical failure, which could also prevent us from
delivering our services to our customers, decrease the use of the Internet, or
prevent users from accessing our web sites, which 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 October
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 20 topical channels. Our strategic relationships with Hearst and
Rodale enable us to offer an online newstand featuring content from 12 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 August 1999 our
network attracted more than 4.6 million visitors, ranking us among the top 30
Internet sites as measured by reach. During the same period, our users generated
approximately 136 million page views. In the second quarter of 1999, we had over
150 industry-leading advertisers including IBM, Jenny Craig, Kraft, Macy's,
Proctor & Gamble, Sears, Strong Funds, Toyota, Unilever, 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, Mindspring, Netscape, WebTV, Xoom.com and Yahoo!.
In 1993, we launched our first product, Women's Wire, an online
subscription service. In 1995 we introduced our current web site, located at
www.women.com. In April 1998, we purchased Wild Wild Web Incorporated, which
operated StorkSite, a web site focused on content and community for expectant
mothers. In January 1999, we combined our business with HomeArts and Astronet,
both of which were business units of Hearst's New Media and Technology Division.
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
130 million at the end of 1998 to approximately 260 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 rate that consumers directly respond to advertisements
through keystrokes 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.
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The interactive nature of the Internet as well as the growing online
community have also resulted in dramatic growth in the amount of e-commerce that
is being transacted on the Internet. Jupiter Communications estimates that the
online business-to-consumer market will grow from $3 billion in 1997 to $44
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 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 we
believe the Internet will 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 all Internet users by the end of 2002.
- 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 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. We believe most women are seeking rather than
exploring on the Internet and are more interested in
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finding sites that enable them to achieve their objectives efficiently. The
increased time constraints women face as they balance family, work and social
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 for women.
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 have engaged
more than 150 editors, 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 articles in Cosmopolitan, Good Housekeeping, Prevention and Redbook
and other magazines which reach more than 57 million women in the United States.
We have developed partnerships with brand-name companies such as Bloomberg and
Crayola which enable us to supplement our network with 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 believe 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. In June 1999, we entered into an agreement with
Harlequin, a leading publisher of romance novels and a subsidiary of Torstar, a
leading Canadian media company. We believe this agreement offers us an
opportunity to develop an online community for Harlequin's large and loyal
reader base.
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
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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 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. In addition, the proposed Harlequin site
will be designed to provide visitors the opportunity to purchase Harlequin
romance novels and related merchandise online.
DELIVERING VALUE TO ADVERTISERS
Our advertising partners have access to our large and loyal user base
demonstrated by the approximately 136 million page views delivered to over 4.6
million visitors in August 1999. In addition, we believe our users constitute a
valuable demographic due to their high income, spending and education levels. We
offer advertisers more than 90,000 pages 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 advertisers, including:
- the ability to display banner advertisements on our network
- the opportunity to sponsor a specific program or site on our network
- the ability to place links in our shopping center in order to promote an
advertiser's products or services
- the opportunity to engage us to produce banner advertisements or
minisites, which are sites dedicated to a single advertiser
- the opportunity to engage us to perform market research to help
advertisers understand market reaction to their products or services
These features and services combined with our audience's attractive
demographics have attracted leading advertisers to our network. Our magazine
sites, which already benefit from their well-recognized brands, offer
advertisers additional well-defined audience and advertising options. During the
second quarter of 1999, we had over 150 advertising customers, including IBM,
Jenny Craig, John Hancock, Kraft, 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, Harlequin, 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
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advertising demographics, our users are more likely to purchase products and
services while shopping on our network. According to @Plan Summer 1999, in the
six months prior to the report, approximately 80% of our audience made purchases
on the Internet in the previous six months, while only approximately 74% 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 continue to expand our 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 which
combines cable television, telephone, audio and video capability. 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 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' 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 monthly print circulation of over 15 million
paid readers. Through our relationship with Hearst, our network will receive at
least 100 pages of print promotion in Hearst magazines over a two year period.
In addition to our relationship with Hearst, we have relationships with other
leading offline content providers, including Bloomberg, Crayola, Harlequin 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 12 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-
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awareness by expanding our online distribution partnerships. We currently have
over 30 online distribution partners, including 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. Although we currently have no arrangements in place with
respect to international distribution, we 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 our 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.
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. Some advertisers have also taken advantage of our internal
market research capability. 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.
Although we do not generate revenues directly from our consulting services, we
believe our consultative approach provides us the opportunity to establish
broader, long-term relationships with important advertisers. In addition, 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 20 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 12 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 20 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.
Garden................. Provides viewers with advice and tools for the design and
care of gardens. Features content from Country Living
Gardener and expert advice from Ms. Grow-it-all.
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................... Offers home improvement ideas and other fix-it tips where
visitors can access the Country Living and Good
Housekeeping. Provides decorating advice from experts and
features interactive tools for kitchen design provided by
House Beautiful.
</TABLE>
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<TABLE>
<CAPTION>
CHANNEL NAME DESCRIPTION
------------ -----------
<S> <C>
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.
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 12 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 and New Woman magazines, as
reported by the Fall 1998 Mediamark Research Inc. Report.
<TABLE>
<CAPTION>
PRINT MEDIA DATA
---------------------------------
PAID AVERAGE
CIRCULATION AVERAGE HOUSEHOLD
MAGAZINE RELATED WEB SITE DESCRIPTION (MILLIONS) AGE 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.
New Woman.................... Features topics relating to 1.1 36 $ 44,000
beauty, fashion, health,
fitness and relationships for
active women.
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 and 2.8 43 $ 43,000
marriage.
Town & Country............... Focuses on living, arts, 0.4 43 $124,000
travel and weddings.
Victoria..................... Offers support and advice for 1.0 42 $ 47,000
women entrepreneurs,
including stories and
lifestyle tips.
</TABLE>
ADVERTISING SALES
As of August 31, 1999 we had a direct sales force comprised of 32 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.
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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 AND KEYWORDS. An advertiser may purchase banners, which are
graphical advertisements with the advertiser's logo, for placement throughout
our entire network or on a specific channel or commerce area within the network.
Generally, higher rates are charged for banner advertisements displayed to a
more targeted audience. An advertiser may also purchase advertising space
adjacent to a specified word or "key word" on our network that is related to the
advertiser's product or service. For example, Toyota may purchase advertising
space next to any content containing the word "car."
CONTENT SPONSORSHIP. Content areas may be sponsored by advertisers on an
exclusive basis such as Toyota's sponsorship of "The Breast Health Center," 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 space that may connect to an advertiser's web 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 including:
- advertising banners, through which a merchant can advertise in our
shopping center and create a link to its e-commerce site
- preferred placement in our shopping center as a featured product
- the opportunity to sponsor a product or service in our shopping center
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," promotional banners branded by Women.com and GreenTree
Vitamins 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 to help them understand the objectives of
Women online. 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 Squibb 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 partnerships. For example, our 1999 Toyota sponsorship
includes a sponsorship of a National Public Radio program entitled "Tech Nation"
branded by Women.com and Toyota.
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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 second quarter of 1999, we had over 150 advertising
customers and no one customer accounted for more than 10% of our net revenues in
that quarter. 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 Internet Avon
General Motors Fidelity Investments IBM Shopping Bristol-Myers
Mercedes Benz John Hancock Intel Network Squibb
Toyota Strong Funds Lycos JC Penney Clinique
Union Bank of Microsoft Macy's Kellogg
California Sprint Sears Kraft
Visa Proctor & Gamble
Unilever
</TABLE>
THE HEARST RELATIONSHIP
COMBINATION WITH HOMEARTS AND ASTRONET. In January 1999, Women.com Networks
combined its operations with HomeArts and Astronet, both of which were business
units of Hearst's New Media and Technology Division. The combination with
HomeArts and Astronet afforded us the opportunity to substantially increase the
breadth of our network and provide our users with access to additional
attractive content. The combination with HomeArts and Astronet was accomplished
through the contribution by Women.com Networks of substantially all of its
assets and liabilities to Women.com Networks LLC and the concurrent contribution
by Hearst HomeArts, Inc., a subsidiary of Hearst Communications, Inc., of
HomeArts and Astronet to Women.com Networks LLC. After the combination,
Women.com Networks LLC was approximately 50% owned by each of Women.com and
Hearst HomeArts, Inc. In August 1999, Women.com Networks merged with and into
Hearst HomeArts, Inc. and Women.com LLC was dissolved. Hearst HomeArts, Inc. was
the surviving entity in the merger and was renamed Women.com Networks, Inc.
HEARST CONTENT RELATIONSHIP. In January 1999, we formed a content
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 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
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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 in cash
- Hearst agreed to brand the 10 magazine sites with Women.com
- Hearst agreed during the term of the agreement that it would not:
- grant Internet distribution or Internet publication rights to the
Hearst magazine content to any of our competitors
- advertise or promote the magazine sites on or in connection with any
of our competitors
- promote the magazine sites on or in connection with any of our
competitors
- 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 and New Woman,
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
- 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
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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 Relationships and Related
Transactions" and "Risk Factors -- Hearst will control actions requiring board
and stockholder approval after this offering which will weaken the effect of
other stockholders' votes" and "-- We rely on Hearst for content and
cross-promotion and loss of this relationship would harm our business" for risks
relating to our relationship with Hearst.
HEARST PRIVATE PLACEMENT. In September 1999, Hearst purchased 1,250,000
shares of our common stock at $11.00 per share. Concurrent with this offering
and the Disney private placement, Hearst has agreed to purchase additional
shares of common stock in a private placement. Under the terms of a stock
purchase agreement, Hearst will purchase a total of 648,149 shares of common
stock at the public offering price plus that number of shares which could be
purchased for $5.0 million at a per share price equal to the public offering
price. Based on an assumed public offering price of $9.00 per share, Hearst will
purchase 1,203,705 shares of common stock and will receive 397,332 additional
shares of common stock pursuant to antidilution provisions. In addition, Hearst
will have an option, but no obligation, to purchase additional shares in the
event the underwriters exercise their over-allotment option in connection with
this offering. In the event that the underwriters' over-allotment option is
exercised in full, Hearst will have the right to purchase up to 326,389
additional shares of common stock. If the underwriters exercise the
over-allotment option in part, Hearst will have the option to purchase a
pro-rata portion of these additional shares.
OTHER 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 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 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 channel branded by
Women.com and Bloomberg. This agreement was entered into in December 1997 and
has an initial term of three years.
CRAYOLA. The Crayola FamilyPlay.com site was developed in partnership with
Crayola, a leading producer of children's art products. FamilyPlay.com is
designed for busy mothers 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.
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HARLEQUIN ENTERPRISES. We have entered into an agreement to create a new
web site in cooperation with Harlequin, a leading publisher of romance novels.
Harlequin will be the premier content provider for the site, and the site is
expected to include book sales, reviews, chats with Harlequin's authors and
previews of new books. In addition, Harlequin will use commercially reasonable
efforts to promote the site and its relationship with Women.com in all of its
books published in North America. We have the right to sell advertising on the
proposed web site and will share with Harlequin a percentage of the revenues
generated by the site. In addition, Harlequin will pay us royalties on books and
related merchandise sold through the site. In September 1999, Torstar, the
parent of Harlequin, purchased 1,250,000 shares of our common stock for $11.00
per share. Assuming a public offering price of $9.00 per share Torstar will
receive 277,777 additional shares of common stock pursuant to antidilution
provisions.
RODALE PRESS, INC. In 1997, we entered into a partnership with Rodale Press
pursuant to which we develop, produce and host web sites for two leading Rodale
magazines, New Woman and Prevention. As part of this partnership, in May 1997,
we launched HealthyIdeas.com, a web site focused on health and fitness featuring
interactive tools, articles, on-site experts, message boards and chat.
Prevention provides the majority of the content for the HealthyIdeas.com site,
which features personalized information to help visitors achieve better health
for themselves and their families. In May 1999, we re-launched the NewWoman.com
site with Rodale and New Woman. The site is branded by Women.com and New Woman.
New Woman is the primary provider of content on the site, which features message
boards, horoscopes, questions and answers with experts and compelling articles
on news, relationships and beauty for active women. Rodale has agreed to devote
at least one page in each edition of New Woman and Prevention magazines to
promote these web sites. We share a percentage of the revenues, net of
commissions, generated from the ads sold on HealthyIdeas.com and NewWoman.com.
In addition, we receive a percentage of the revenue generated from the New Woman
and Prevention magazine subscription sales on our network. The Prevention
agreement has an initial term of two years and is up for renewal in May 2000.
Although the New Woman site is operational, our agreement with Rodale with
respect to the site is not yet finalized.
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!. Under our online distribution relationships, our
distribution partners host Women.com content on their sites. By clicking on the
Women.com button placed on a partner's site, a user can immediately access our
content, tools and services. The term of these relationships range from six
months to two years.
The Internet landscape is changing as cable companies begin to offer
high-speed Internet access over distribution outlets, also known as broadband.
With broadband, Internet companies are able to deliver not just web pages, but
also combined cable television, telephone, audio and video capabilities. We have
established a partnership with MediaOne Interactive Services, Inc., one of the
leading broadband communications companies. Under our agreement, we develop
content for MediaOne. This content is distributed through MediaOne's established
customer distribution channel, which assists in promoting the Women.com brand.
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 the
amount of traffic to our network and minimizing our customer acquisition costs.
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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 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. We also promote our network
through radio broadcasts and newsletter programs. In addition, under our
agreement with Harlequin, Harlequin will promote our jointly developed web site
in all of its books published in North America.
In July 1999, we entered into an agreement with Disney to spend a fixed
amount on advertising and promotion over the next six years on wholly-owned
Disney properties, as selected by us. In addition, we have agreed not to enter
into any strategic agreement with, or sell equity to, a television or cable
network not affiliated with Disney for six months, during which time Disney and
we will discuss the possibility of entering into a strategic relationship.
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 August 31, 1999, our marketing department consisted of 31 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 United States
Patent and Trademark Office is pending: "Astronet," "Beatrice's Web Guide,"
"Family Play," "Healthy Ideas," "MoneyMode," "PlanetLunch.com" "StorkSite," "The
Smart Way to Get Things Done" and "Women.com." We also have registered
trademarks and trademark applications pending in other countries.
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.
Our goal is to maintain the technological infrastructure required to enable
heavy traffic, e-commerce and memory-intensive graphics on our network. We
maintain several Internet servers and application servers, which each contain
software that balances the amount of content, traffic and transactions conducted
on each. Each server has one or more replicas and our user traffic is balanced
among them. As a result, if a server fails, there are enough back-up servers to
ensure that our service interruption is minimized. We house our servers at
Exodus Communications. Exodus is an environmentally controlled data center with
multiple communication lines and uninterrupted power.
We provide ways for our visitors to search through our content using our
servers and are implementing a system that will help us assemble web pages in
real time based upon user or editorial requirements. We utilize third party
software to manage and deliver advertisements and to provide advertisers online
access to the information they need to measure how their advertisements are
performing on our network.
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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
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 August 31, 1999, we had 264 full-time employees, of whom 116 are in
content development, 38 are in sales, 32 are in technical operations, 31 are in
marketing, 24 are in general and administrative and 23 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 August 31, 1999, our headquarters are located in approximately 43,000
square feet of office space in San Mateo, California under lease agreements that
expire on December 31, 2001 as to approximately 14,000 square feet, December 31,
2002 as to approximately 10,000 square feet and August 31, 2003 as to the
remainder. In July 1999, we entered into a lease agreement which expires
December 31, 2010 for approximately 49,000 square feet of office space in New
York City. We also lease an aggregate of approximately 22,000 square feet at two
additional locations in New York, pursuant to lease agreements that expire on
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 information regarding our directors and executive
officers as of August 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Marleen McDaniel........................... 49 Chairperson, Chief Executive Officer and
President
Ellen Pack................................. 34 Founder, General Manager and Senior Vice
President
Michael Perry.............................. 52 Chief Financial Officer
Gina Garrubbo.............................. 39 Executive Vice President, Sales
A. Erin Ruane.............................. 35 Senior Vice President, Business Development
Anna Zornosa............................... 40 Senior Vice President, Marketing and
Strategic Partnerships
James Asher................................ 49 Director
Cathleen Black............................. 55 Director
Natalie Egleston........................... 35 Director
David Galloway............................. 55 Director
Nancy Lindemeyer........................... 64 Director
Mark Miller................................ 52 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 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.
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A. Erin Ruane has served as our Senior Vice President, Business Development
since August 1999 and served as Vice President, Business Development from 1996
to August 1999. 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, Marketing and
Strategic Partnerships since August 1999 and served as Senior Vice President,
Strategic Partnerships from February 1999 to August 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. 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.
James Asher was appointed to the board of directors as a representative of
Hearst in September 1999. Mr. Asher has served as Vice President and Chief Legal
and Development Officer of The Hearst Corporation since October 1997. From 1990
to 1997, Mr. Asher served as Managing Partner and Executive Committee Chair of
the law firm Rogers & Wells. Mr. Asher holds a B.A. in Government from Harvard
University and an L.L.B. from New York University School of Law.
Cathleen Black has served as one of our directors since January 1999 and
was nominated to the board of directors as a representative of Hearst. 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.
David Galloway was appointed as a director as a representative of Torstar
in September 1999. Mr. Galloway has served as the President and Chief Executive
Officer of Torstar Corporation, a Canadian media company, since September 1988.
Mr. Galloway joined Torstar in 1981 and served as President and Chief Executive
Officer for Harlequin Enterprises, Ltd., a subsidiary of Torstar from 1982 to
1988. Prior to joining Torstar, Mr. Galloway was a partner in the Canada
Consulting Group, a strategic management consulting group, for approximately ten
years. Mr. Galloway also serves on the board of directors of Clearnet
Communications, Inc., a wireless communications company, Westburne, Inc., an
integrated distributor of industrial and construction-related supplies and
equipment, and the Bank of Montreal. Mr. Galloway holds a B.A. from the
University of Toronto and an M.B.A. from the Harvard Graduate School of
Business.
Nancy Lindemeyer has served as one of our directors since January 1999 and
was nominated to the board of directors as a representative of Hearst. Ms.
Lindemeyer is the Editor-in-Chief of Victoria, a
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<PAGE> 53
magazine owned by Hearst and 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 and was
nominated to the board of directors as a representative of Hearst. 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. 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 positions as Chief
Executive Officer and Chairman of the Board of SRI Development Company, a market
research company, which 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 and was
nominated to the board of directors as a representative of Hearst. Mr. Sikes has
served as both 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.,
a provider of online interactive services, InfoGear, Inc., Quokka Sports, Inc.
and Be, Inc., a computer software company. 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, which is up for election in
the first annual meeting of stockholders following this offering, will consist
of three members, all of whom are representatives of Hearst. Class II shall
consist of four members. Class III shall consist of three members and be
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.
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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
Messrs. Mark Miller and William Miller. The audit committee reviews our
financial statements and accounting practices, makes recommendations to the
board of directors 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 Relationships and
Related 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 annual 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
A. Erin Ruane................................ 105,000 -- 25,000 --
Senior Vice President, Business Development
</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, 75,000
shares of common stock to Ms. Pack and 10,000 shares of common stock to Ms.
Ruane 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 one year after the vesting commencement date and
1/48 of the total monthly thereafter.
(2) Represents sales commissions.
Ms. Zornosa was hired in February 1999 and her annual salary is $175,000.
Mr. Perry was hired in October 1998 and his annual salary is $200,000. In the
first quarter of 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. Pack's salary was increased to
$185,000 and Ms. Ruane's salary was increased to $150,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grant of stock
options to our Chief Executive Officer and each of our other four most highly
compensated executive officers during the fiscal year ended December 31, 1998.
The exercise price per share of each option was equal to the fair market value
of the common stock of the date of grant as determined by the board of
directors. The potential realizable value is calculated based on the term of the
option at its time of grant (10 years). It is calculated assuming that the fair
market value of common stock on the date of grant appreciates at the indicated
annual rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the appreciated
stock price. These numbers are
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calculated based on the requirements of the Securities and Exchange Commission
and do not reflect our estimate of future stock price growth.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
SHARES OPTIONS OF STOCK APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
GRANTED(#) FISCAL YEAR(%) PER SHARE($) 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
A. Erin Ruane..... 10,000 .45 .80 1/15/08 5,031 12,750
15,000 .70 2.50 8/13/08 23,584 59,765
</TABLE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth summary information concerning the number of
shares underlying unexercised stock options as of December 31, 1998 and the
value of in-the-money options as of December 31, 1998 held 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
A. Erin Ruane................................. 26,045 48,955 65,633 83,617
</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. 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 August 31, 1999, there were 8,822,500 shares of common stock reserved
for issuance under the plan and the 1994 Stock Option Plan, 4,275,755 of which
were subject to outstanding options under the plan, 2,806,368 of which were
available for grant under the plan and 787,373 of which were issued or are
subject to outstanding options under the 1994 Stock Option Plan. If stock awards
granted under the
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plan expire or otherwise terminate without being exercised, the shares of common
stock not acquired pursuant to those 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 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 Hearst or to any
officer, member of the board of directors or employee of any affiliate of
Hearst, 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 this offering and then only upon
the earliest to occur of 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 termination of the optionholder's service is due to the
optionholder's disability, the option generally may be exercised at any time
within 12 months of the termination. If the optionholder dies before the
optionholder's service has terminated, or within three months after termination
of the optionholder's 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 the option pass by will or by the laws of descent and distribution. An
optionholder may designate a beneficiary who may
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<PAGE> 58
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 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 a merger, combination, 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 August 31, 1999, 54,832 shares of common stock had been issued upon
the exercise of options granted under the plan, options to purchase 4,275,755
shares of common stock at a weighted average exercise price of $5.14 were
outstanding and 2,806,368 shares remained available for future grant. As of
August 31, 1999, 80,549 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 plan will terminate in October 2004 unless the board
terminates it sooner.
If options granted under the plan expire or otherwise terminate without
being exercised, the shares of common stock not acquired pursuant to these
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
plan.
The plan provides for the grant of incentive stock options and nonstatutory
stock options. Incentive stock options granted under the 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 plan are not
intended to qualify as incentive stock options under the Internal Revenue Code.
The maximum term of options under the plan is 10 years. Generally options
under the plan terminate 30 days after termination of the optionholder's
service. If termination of the optionholder's service is due to the
optionholder's disability, the option generally may be exercised at any time
within 12 months of the termination. If the optionholder dies before the
optionholder's service has terminated,
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<PAGE> 59
or within 30 days after termination of the optionholder's 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 the 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.
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 options. 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 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 a merger, combination, 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 August 31, 1999, 817,623 shares of common stock had been issued upon
the exercise of options granted under the plan, and options to purchase 787,373
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 plan will become effective
on the effective date of this offering and will terminate at the board's
direction or when all of the shares reserved for issuance under the plan have
been issued. The plan was approved by stockholders in June 1999.
The plan is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423 of the Internal Revenue Code. Under the plan, the
board may authorize participation by eligible employees, including officers, in
periodic offerings following the adoption of the plan. The offering period for
any offering will be no longer than 27 months. The board has authorized a 24
month offering under the plan which will commence on the effective date of this
offering.
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 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 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.
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<PAGE> 60
In the event of 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.
As of August 31, 1999, none of the shares of common stock reserved under
the plan had been issued.
EMPLOYMENT ARRANGEMENTS
Pursuant to an employment agreement, dated as of January 29, 1999, between
Women.com Networks LLC, 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. Ms. McDaniel is entitled to
severance benefits in the event that, prior to January 27, 2002, her employment
with Women.com is terminated involuntarily without cause or voluntarily within
sixty days of a material reduction in her responsibilities or compensation or a
relocation of her place of employment by more than fifty miles. These severance
benefits include continuation of base salary and benefits until the longer of
six months from termination or January 27, 2002, and acceleration of vesting on
all options that would have vested as of January 27, 2002.
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 some 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 our directors for
monetary damages for breach of fiduciary duty as a director, except for
liability:
- for any breach of the director's duty of loyalty to us or our
stockholders
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
- under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases
- for any transaction from which the director derived an improper personal
benefit
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As permitted by Delaware law, our restated certificate of incorporation
provides that:
- we are required to indemnify our directors and officers to the fullest
extent permitted by Delaware law, subject to very limited exceptions
- 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
- 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 very limited exceptions
- 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.
In addition to the indemnification provided for in our restated certificate
of incorporation and amended and restated bylaws, we have entered into
agreements to indemnify our directors and executive officers. These agreements,
among other things, indemnify our directors and executive officers for expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by
any director or executive officer in any action or proceeding, including any
action by us arising out of services as one of our directors or executive
officers, any of our subsidiaries or any other company or enterprise to which
the director or executive officer 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 RELATIONSHIPS AND RELATED TRANSACTIONS
In July 1997, Women.com Networks, a California corporation, issued 995,342
shares of Series C Preferred Stock at a purchase price of $3.04 per share. In
connection with this 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 was converted into one share of our common stock upon
completion of the merger of Hearst HomeArts, Inc. and Women.com Networks in
August 1999. 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 2,631,580 shares of Series C Preferred Stock at a purchase price of $1.90
per share. In connection with this 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 was converted into one
share of our common stock upon completion of the merger. 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-linked products that are to be developed by
Women.com Networks in association with MediaOne and are to be branded by both
Women.com and 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 former holders of our Series C Preferred
Stock and Series D Preferred Stock. As of August 31, 1999, $150,000 of
MediaOne's investment remained subject to this condition.
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 6,546,369 shares of Series D Preferred Stock at a purchase price of $3.29
per share. 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 was converted into one share of our common stock upon completion of the
merger.
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. 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 (2)
90,475 shares of Series E Preferred Stock to HC Crown Corp. for cash and (3)
195,627 shares of Series E Preferred Stock to MediaOne Interactive Services,
Inc. for cash. Each share of Series E Preferred Stock was converted into one
share of our common stock upon completion of the merger. Pursuant to the terms
of the merger, if the per share price in this offering is below $10.00, the
former holders of Series E Preferred Stock will receive additional shares in
Women.com so that these holders will receive the same number of shares of
Women.com common stock as if they had purchased Series E Preferred Stock at a
purchase price equal to the public offering price. Accordingly, if the per share
price in this offering is below $10.00, the total number of outstanding shares
after this offering must be adjusted to reflect the increased number of common
shares. Assuming a public offering price of $9.00 per share,the former holders
of Series E Preferred Stock will receive an aggregate of 102,637 additional
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shares of common stock pursuant to this provision. 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.
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 -- The Hearst Relationship," 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, the Executive Vice President and General Manager of Hearst
Magazines and the President of Hearst New Media & Technology, a unit of Hearst,
respectively. In addition, Mr. Asher, who was appointed to the board in
September 1999, is the Vice President and Chief Legal and Development Officer of
Hearst. Hearst owns in excess of 5% of our outstanding common stock.
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. received additional shares of
Women.com as a result of this investment. If Women.com sells shares in this
offering below $10.00 per share, Hearst will receive additional shares in
Women.com so that Hearst will receive the same number of shares of Women.com
common stock as if it had purchased units in Women.com Networks LLC at a
purchase price equal to the public offering price. Accordingly, if the per share
price in this offering is below $10.00, the total number of outstanding shares
after this offering must be adjusted to reflect the increased number of common
shares to be held by Hearst as a result of this adjustment. Assuming a public
offering price of $9.00 per share, Hearst will receive 119,555 additional shares
of common stock pursuant to this provision.
In September 1999, Hearst purchased 1,250,000 of Women.com common stock at
a price of $11.00 per share. If Women.com sells shares in this offering for a
per share price below $11.00, Hearst will receive additional shares of Women.com
common stock so that it will receive the same number of shares of Women.com
common stock as if it had purchased shares in this prior private placement at
the public offering price. Assuming a public offering price of $9.00 per share,
Hearst will receive 277,777 additional shares of common stock pursuant to this
provision. Concurrent with this offering and the Disney private placement,
Hearst will be purchasing additional shares of our common stock in a private
placement. See "Business -- The Hearst Relationship -- Hearst Private
Placement."
In June 1999, Women.com Networks LLC entered into an agreement with Torstar
and its subsidiary, Harlequin Enterprises Limited, pursuant to which Women.com
will produce and host a web site for which Harlequin will be the primary content
provider. Women.com and Harlequin will share revenues from advertising on the
site and Women.com will receive royalties on sales of Harlequin books and
related merchandise on the site. In addition, in September 1999, Torstar
purchased 1,250,000 shares of Women.com common stock in the Torstar private
placement and, upon the closing of the Torstar private placement, Mr. Galloway,
the Chief Executive Officer of Torstar, was appointed to our board of directors.
If Women.com sells shares in this offering for a per share price below $11.00,
Torstar will receive additional shares of Women.com common stock so that it will
receive the same number of shares of Women.com common stock as if it had
purchased shares in this prior private placement at the public offering price.
Assuming a public offering price of $9.00 per share, Torstar will receive
277,777 additional shares of common stock pursuant to this provision.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of the common stock, as of August 31, 1999 and as adjusted to reflect
the sale of common stock in this offering and the Disney and Hearst concurrent
private placements, for:
- each person known by us to beneficially own more than 5% of the common
stock
- each of our directors and nominees
- each executive officer named in the Summary Compensation Table
- all of our directors, nominees 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 August 31, 1999 but excludes shares of common
stock underlying options or warrants held by any other person. Percentage of
beneficial ownership is based on 38,174,432 shares of common stock outstanding
as of August 31, 1999, assuming:
- net exercise of warrants for a total of 144,006 shares of common stock
- the sale of 1,250,000 shares to each of Torstar and Hearst in private
placements completed in September 1999
- a public offering price of $9.00 per share in this offering
- 45,155,883 shares of common stock outstanding after completion of this
offering, the Disney and Hearst concurrent private placements and the
issuance of 777,746 additional shares of common stock issued to Torstar,
Hearst and other stockholders pursuant to antidilution provisions
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<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) ..................... 22,002,597 53.0% 48.4%
The Hearst Corporation
959 Eighth Avenue
New York, NY 10019
MediaOne Interactive Services, Inc.(2).............. 3,028,721 7.7 6.6
188 Inverness Drive West
Suite 600
Englewood, CO 80112
Natalie Egleston(3)................................. 3,028,721 7.7 6.6
188 Inverness Drive West
Suite 600
Englewood, CO 80112
HC Crown Corp.(4)................................... 2,303,982 5.9 5.0
2501 McGee, Mail Drop 339
Kansas City, MO 64141
Marleen McDaniel(5)................................. 561,666 1.5 1.3
Barry Weinman(6).................................... 1,655,393 4.3 3.7
William Miller(7)................................... 6,875 * *
James Asher......................................... -- -- --
Cathleen Black...................................... -- -- --
Nancy Lindemeyer.................................... -- -- --
Alfred Sikes........................................ -- -- --
Mark Miller......................................... -- -- --
David Galloway(8)................................... 1,527,777 3.3 3.4
Ellen Pack(9)....................................... 432,702 1.1 1.0
Gina Garrubbo(10)................................... 141,666 * *
A. Erin Ruane(11)................................... 40,833 * *
Michael Perry(12)................................... 75,000 * *
All executive officers and directors as a group (15
persons)(13)...................................... 5,985,177 15.4 13.1
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%.
(1) Includes 1,250,000 shares purchased in a private placement in September
1999. Also includes, for purposes of calculating the percentage of common
stock beneficially owned after the offering, 1,203,705 shares that are to
be purchased in a concurrent private placement, 326,389 shares issuable
upon exercise of an option exercisable within 60 days of August 31, 1999
and 397,332 shares of common stock issuable pursuant to antidilution
provisions. 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 August 31, 1999. Also includes, for purposes of calculating the
percentage of common stock beneficially owned after the offering, 21,736
shares of common stock issuable pursuant to antidilution provisions.
(3) Natalie Egleston is the Vice President 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 August 31, 1999. Also includes, for purposes of calculating the
percentage of common stock beneficially owned after the offering, 10,052
shares of common stock issuable pursuant to antidilution provisions.
(5) Includes 226,666 shares issuable upon exercise of options exercisable
within 60 days of August 31, 1999. Also includes 75,000 shares held by Ms.
McDaniel's spouse in a trust for his benefit,
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75,000 shares held in a trust established for the benefit of Ms. McDaniel
and 50,000 shares held in a trust established for the benefit of Ms.
McDaniel's family. Ms. McDaniel disclaims beneficial ownership of shares
held in trust for the benefit of her spouse.
(6) Includes 231,933 shares held by Associated Venture Investors III, L.P.,
1,395,775 shares held by AVI Capital, L.P. and 15,937 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. Also
includes, for purposes of calculating the percentage of common stock
beneficially owned after the offering, 11,748 shares of common stock
issuable pursuant to antidilution provisions.
(7) Includes 6,875 shares issuable upon exercise of options exercisable within
60 days of August 31, 1999.
(8) Includes 1,250,000 shares purchased by Torstar in September 1999. David
Galloway is the President and Chief Executive Officer of Torstar
Corporation. Mr. Galloway does not have voting or investment power over the
shares purchased by Torstar in the Torstar private placement. Mr. Galloway
disclaims beneficial ownership of the shares of common stock purchased by
Torstar in the Torstar private placement. Also includes, for purposes of
calculating the percentage of common stock beneficially owned after the
offering, 277,777 shares of common stock issuable pursuant to antidilution
provisions.
(9) Includes 87,500 shares issuable upon exercise of options exercisable within
60 days of August 31, 1999. Also includes, for purposes of calculating the
percentage of common stock beneficially owned after the offering, 1,980
shares of common stock issuable pursuant to antidilution provisions.
(10) Includes 9,375 shares issuable upon exercise of options exercisable within
60 days of August 31, 1999.
(11) Includes 7,500 shares issuable upon exercise of options exercisable within
60 days of August 31, 1999.
(12) Includes 75,000 shares issuable upon exercise of options exercisable within
60 days of August 31, 1999.
(13) Includes the shares, shares issuable pursuant to antidilution provisions
and shares issuable upon the exercise of options and warrants described in
footnotes (3) and (5) through (12).
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Immediately prior to the consummation of this offering and the Disney and
Hearst concurrent private placements, 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 and the Disney and Hearst concurrent private placements, there will be
45,155,883 outstanding shares of common stock, outstanding options to purchase
5,063,128 shares of common stock and outstanding warrants to purchase 1,805,776
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 receive dividends out of assets legally available thereof at any
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 and the Disney and Hearst concurrent private placements 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 August 31, 1999, options to purchase a total of 5,063,128 shares of
common stock were outstanding and 2,806,368 additional shares of common stock
were available for future grant under the 1998 Equity Incentive Plan. See
"Management -- Stock Based Plans."
WARRANTS
Immediately prior to this offering and the Disney and Hearst private
placements, we will have outstanding warrants to purchase 1,805,776 shares of
common stock at a weighted average exercise price of $3.02 per share. Warrants
for a total of 144,006 shares will be exercised in connection with this
offering. The remaining warrants expire on dates ranging from October 2000 to
February 2006.
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<PAGE> 68
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 and the Disney and Hearst concurrent
private placements, 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.
These 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:
- 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
- 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 (1) by persons who are
directors and also officers and (2) 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
- 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:
- any merger or consolidation involving the corporation and the interested
stockholder
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation
- subject to specified exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder
- 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
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<PAGE> 69
- 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. Because the board of directors approved the
transaction in which Hearst became an interested stockholder, Hearst is not
subject to the restrictions of Section 203.
REGISTRATION RIGHTS
After this offering, the holders of an aggregate of 18,050,288 shares of
common stock or securities convertible into common stock will be entitled to
registration rights as provided under the terms of an Amended and Restated
Investor Rights' Agreement. These stockholders include Ms. McDaniel, Ms. Pack,
AVI Management and all affiliated entities, MediaOne Interactive Services, Inc.,
HC Crown Corp., holders of 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.
In connection with the Disney concurrent private placement and the Torstar
private placement completed in September 1997, Disney and Torstar are entitled
to registration rights. Disney may require us to register shares purchased in
the Disney private placement for resale, subject to specified limitations,
beginning six months after this offering. Torstar may require us to register
shares purchased in the Torstar private placement for resale, subject to
specified limitations, beginning twelve months after this offering. Disney and
Torstar's registration rights terminate two years after the completion of their
respective private placements.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
LISTING
Our common stock has been approved for quotation on the Nasdaq National
Market under the trading symbol "WOMN."
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<PAGE> 70
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 our equity securities.
Assuming a public offering price of $9 per share, upon completion of this
offering, the Disney and Hearst concurrent private placements and the issuance
of shares to certain existing investors pursuant to antidilution provisions, we
will have outstanding 45,155,883 shares of common stock, assuming no exercise of
Hearst's option or the underwriters' over-allotment option and no exercise of
the outstanding warrants not exercised in connection with this offering or
outstanding options as of August 31, 1999. Of these shares, all shares 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
limitations and restrictions described below.
SALES OF RESTRICTED SHARES
The 35,530,426 shares of common stock held by existing stockholders, the
2,500,000 shares sold in the Torstar and Hearst prior private placements, the
1,250,000 shares sold to Disney in the Disney concurrent private placement, the
1,203,705 shares sold in the Hearst concurrent private placement were or, in the
case of the Disney and Hearst concurrent private placements, any shares issued
to existing stockholders pursuant to antidilution provisions and any shares
issued upon the net exercise of warrants that expire upon the offering will be
issued by us in reliance on exemptions from the registration requirements of the
Securities Act. Of the shares held by existing stockholders, approximately
36,160,770 shares will be subject to lock-up agreements described below on the
effective date of this offering. Upon expiration of the lock-up agreements after
the effective date of this offering, these 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 451,558 shares
immediately after this offering, and the Disney and Hearst concurrent private
placements, 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 acquired by Disney in the Disney private placement will be
restricted securities as such term is defined under Rule 144 of the Securities
Act. Upon expiration of the required holding period, Disney will be entitled to
sell its shares pursuant to the manner of sale, notice and availability of
current public information requirements of Rule 144. The shares held by Hearst
prior to this offering and the shares acquired in the Hearst concurrent private
placement are also restricted securities. 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 August 31, 1999, there were a total of 5,063,128 shares of common
stock subject to outstanding options under our 1994 Stock Option Plan and under
our 1998 Equity Incentive Plan, 496,861 of which were
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<PAGE> 71
vested and exercisable. All of the shares issuable under the 1998 Equity
Incentive Plan are subject to lock-up agreements or otherwise subject to
restrictions on transfer. Immediately after the completion of this offering and
the Disney and Hearst concurrent private placements, 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 date 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.
LOCK-UP AGREEMENTS
Our executive officers, directors and substantially all of our other
existing stockholders are subject to lock-up agreements under which they 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, our existing stockholders who are subject to "lock-up"
agreements have agreed that, without the prior written consent of Morgan Stanley
& Co. Incorporated on behalf of the underwriters, such stockholders 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. Disney may make a demand for registration of the
shares of common stock purchased in the Disney private placement so as to enable
Disney to sell such shares to the public beginning 180 days after the date of
this prospectus. 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. See "Description of Capital Stock -- Registration Rights."
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<PAGE> 72
UNDERWRITING
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, Deutsche Bank Securities Inc. 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...........................
Deutsche Bank Securities Inc. ..............................
Salomon Smith Barney Inc. ..................................
----------
Total............................................. 3,750,000
==========
</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 in this offering are subject to the
approval of legal matters by their counsel and to other conditions. The
underwriters are obligated to take and pay for all of the shares of common stock
offered in this offering, other than those covered by the over-allotment option
described below, if any such shares are taken. Discover Brokerage Direct, Inc.,
an affiliate of Morgan Stanley & Co. Incorporated, is acting as a selected
dealer in connection with this offering and will be the sole distributor of
shares of common stock over the Internet to its eligible account holders.
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 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 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 562,500
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 other 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.
In connection with the Disney private placement, Disney is purchasing the
lesser of 1,250,000 shares or that number of shares of common stock having an
aggregate public offering price of $14.5 million to Disney at the per share
price equal to the price per share in this offering. The Disney private
placement is
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<PAGE> 73
conditioned upon, among other things, the sale of at least 3,000,000 shares in
this offering. In connection with the Hearst private placement, Hearst is
purchasing, at a per share price equal to the price per share in this offering,
a total of 648,149 million shares of our common stock plus that number of shares
of our common stock which could be purchased, at a per share price equal to the
price per share in this offering, for $5.0 million. Assuming an offering price
of $9.00 per share in this offering, Hearst will purchase 1,203,705 shares in
the Hearst private placement and will receive 397,332 additional shares of
common stock pursuant to antidilution provisions. In addition, Hearst will have
an option, but no obligation, to purchase additional shares in the event the
underwriters exercise their over-allotment option in connection with this
offering. In the event that the underwriters' over-allotment option is exercised
in full, Hearst will have the right to purchase up to 326,389 additional shares
of common stock. If the underwriters exercise their over-allotment option in
part, Hearst will have an option to purchase a pro rata portion of these
additional shares.
At our request, the underwriters have reserved up to five percent of the
shares of common stock to be issued by us and offered in this offering for sale,
at the price per share in this offering, to persons with preexisting strategic
or other relationships with Women.com. 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 purchased will be
offered by the underwriters to the general public on the same basis as the other
shares of common stock offered by the prospectus for this offering.
Our common stock has been approved for quotation 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 some
circumstances, including:
- the sale of the shares to the underwriters in this offering;
- the sale of shares in the Disney and Hearst concurrent private
placements;
- 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 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 existing stockholders who are subject to lock-up
agreements 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
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<PAGE> 74
common stock or any security convertible into or exercisable or exchangeable for
common stock. Disney may make a demand for registration of the shares of common
stock purchased in the Disney private placement so as to enable Disney to sell
such shares to the public beginning 180 days after the date of this prospectus.
In order to facilitate this offering, the underwriters may engage in
transactions that stabilize, maintain or affect the price of the common stock.
Specifically, the underwriters may over-allot in connection with this 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 this
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
liabilities related to this offering, including liabilities we may face under
the Securities Act.
PRICING OF THIS OFFERING AND THE DISNEY AND HEARST CONCURRENT PRIVATE PLACEMENTS
Prior to this offering, there has been no public market for our common
stock. Consequently, the per share price for the shares of common stock to be
offered in this offering will be determined by negotiations between us and the
representatives of the underwriters. Among the factors to be considered in
determining this price will be our future prospects and our industry in general,
our revenues and other financial and operating information in recent periods,
and the price-earnings ratios, price-sales ratios, market prices of securities
and financial and operating information of companies engaged in activities
similar to us. The per share price for the shares of the common stock to be sold
in the Disney and Hearst concurrent private placements will be the same as the
per share price of the common stock to be offered in this offering.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered in this
offering and 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 in
this offering and other matters 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,
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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 in this offering. The prospectus for this offering, 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 the prospectus for this
offering 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 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 Exchange Act, as amended,
and, accordingly, will file periodic reports, proxy statements and other
information with the Commission. These periodic reports, proxy statements and
other information will be available for inspection and copying at the
Commission's public reference rooms, and the Internet 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-28
Consolidated Balance Sheets............................... F-29
Consolidated Statements of Operations..................... F-30
Consolidated Statements of Cash Flows..................... F-31
Notes to Consolidated Financial Statements................ F-32
PRO FORMA COMBINED FINANCIAL STATEMENTS
Pro Forma Combined Statements of Operations (unaudited)... F-38
Notes to Pro Forma Combined Statements of Operations
(unaudited)............................................ F-40
</TABLE>
F-1
<PAGE> 77
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 Networks, 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.
/s/ PricewaterhouseCoopers LLP
San Jose, California
May 7, 1999, except for Note 1 and Note 13,
as to which the date is September 27, 1999
F-2
<PAGE> 78
WOMEN.COM NETWORKS, INC.
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
-------- -------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 4,885 $ 12,235 $ 26,815 $ 26,815
Accounts receivable, less allowance for doubtful
accounts of $47, $295 and $513 (unaudited),
respectively......................................... 962 2,442 6,064 6,064
Accounts receivable, related party..................... -- -- 1,225 1,225
Prepaid and other current assets....................... 28 526 3,810 3,810
-------- -------- -------- --------
Total current assets..................................... 5,875 15,203 37,914 37,914
Property and equipment, net.............................. 493 1,261 3,934 3,934
Intangible assets, net................................... -- 1,505 55,763 55,763
Other assets............................................. 62 93 3,990 3,990
-------- -------- -------- --------
Total assets............................................. $ 6,430 $ 18,062 $101,601 $101,601
======== ======== ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND WARRANTS AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 611 $ 2,828 $ 6,270 $ 6,270
Accounts payable, related party........................ -- -- 925 925
Accrued liabilities.................................... 5 337 2,289 2,289
Accrued compensation and related benefits.............. 263 364 900 900
Current portion of capital lease obligation............ 65 15 -- --
Notes payable.......................................... 244 348 -- --
Deferred revenue....................................... 1,813 1,455 2,270 2,270
-------- -------- -------- --------
Total current liabilities................................ 3,001 5,347 12,654 12,654
Other liabilities........................................ 673 -- -- --
-------- -------- -------- --------
Total liabilities........................................ 3,674 5,347 12,654 12,654
-------- -------- -------- --------
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 June 30, 1999 (unaudited) and none in pro
forma (unaudited)
(Aggregate liquidation value of $37,482 (unaudited) at
June 30, 1999)....................................... 14,512 34,905 35,150 --
Mandatorily redeemable convertible preferred stock
warrants............................................. 500 515 515 --
-------- -------- -------- --------
15,012 35,420 35,665 --
-------- -------- -------- --------
Commitments and contingencies (Notes 7 and 13)
Stockholders' equity (deficit):
Preferred stock, $0.001 par value:
Authorized: 5,000 shares at June 30, 1999 and pro
forma
Issued or outstanding; none at June 30, 1999
(unaudited)........................................ -- -- -- --
Convertible units, 2,000 issued and outstanding at
June 30, 1999........................................ -- -- 19,249 --
Common stock, par value: $0.001
Authorized: 60,000 shares at June 30, 1999 and
195,000 shares pro forma
Issued and outstanding: 749 shares at December 31,
1997, 1,497 shares at December 31, 1998, 19,987
(unaudited) shares at June 30, 1999 and 35,569
(unaudited) shares pro forma....................... 1 3 21 36
Additional paid-in capital............................. 126 5,269 95,464 150,363
Notes receivable from stockholders..................... (44) (44) (44) (44)
Unearned compensation.................................. -- (1,979) (4,820) (4,820)
Accumulated deficit.................................... (12,339) (25,954) (56,588) (56,588)
-------- -------- -------- --------
Total stockholders' equity (deficit)..................... (12,256) (22,705) 53,282 88,947
-------- -------- -------- --------
Total liabilities, mandatorily redeemable convertible
preferred stock and warrants and stockholders' equity
(deficit).............................................. $ 6,430 $ 18,062 $101,601 $101,601
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 79
WOMEN.COM NETWORKS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues....................... $ 729 $ 2,798 $ 7,247 $ 2,746 $ 8,512
Net revenues, related party........ -- -- -- -- 919
------- ------- -------- ------- --------
Total net revenues................. 729 2,798 7,247 2,746 9,431
Operating expenses:
Production, product and
technology.................... 1,174 2,922 5,728 2,495 8,944
Sales and marketing.............. 957 3,907 12,042 3,605 17,299
General and administrative....... 956 1,101 1,374 622 3,544
Stock-based compensation......... -- -- 1,170 325 1,540
Amortization of acquired
intangibles................... -- -- 517 172 8,947
------- ------- -------- ------- --------
Total operating expenses...... 3,087 7,930 20,831 7,219 40,274
------- ------- -------- ------- --------
Loss from operations............... (2,358) (5,132) (13,584) (4,473) (30,843)
Other income, net.................. 69 154 596 142 480
Interest expense................... (16) (117) (57) (22) (26)
------- ------- -------- ------- --------
Net loss........................... (2,305) (5,095) (13,045) (4,353) (30,389)
Dividend accretion on mandatorily
redeemable convertible preferred
stock............................ (682) (1,517) (570) (285) (245)
------- ------- -------- ------- --------
Net loss attributable to common
stockholders..................... $(2,987) $(6,612) $(13,615) $(4,638) $(30,634)
======= ======= ======== ======= ========
Basic and diluted net loss per
share attributable to common
stockholders..................... $ (4.26) $ (9.15) $ (10.52) $ (4.20) $ (1.83)
======= ======= ======== ======= ========
Shares used in computing basic and
diluted net loss per share....... 702 722 1,294 1,105 16,760
======= ======= ======== ======= ========
Basic and diluted pro forma net
loss per share................... $ (1.13) $ (.99)
======== ========
Shares used in computing pro forma
basic and diluted net loss per
share............................ 11,548 30,786
======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 80
WOMEN.COM NETWORKS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE NOTES
UNITS COMMON STOCK ADDITIONAL RECEIVABLE
---------------- --------------- PAID-IN FROM UNEARNED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT
------ ------- ------ ------ ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1995..................... -- -- 700 $ 1 $ 120 $(44) $ -- $ (2,740)
Issuance of common stock
pursuant to exercise of
stock options............ -- -- 3 -- -- -- -- --
Accretion of mandatorily
redeemable convertible
preferred stock.......... -- -- -- -- -- -- -- (682)
Net loss................... -- -- -- -- -- -- -- (2,305)
----- ------- ------ --- ------- ---- ------- --------
Balances, December 31,
1996..................... -- -- 703 1 120 (44) -- (5,727)
Issuance of common stock
pursuant to exercise of
stock options............ -- -- 46 -- 6 -- -- --
Accretion of mandatorily
redeemable convertible
preferred stock.......... -- -- -- -- -- -- -- (1,517)
Net loss................... -- -- -- -- -- -- -- (5,095)
----- ------- ------ --- ------- ---- ------- --------
Balances, December 31,
1997..................... -- -- 749 1 126 (44) -- (12,339)
Issuance of common stock
pursuant to exercise of
stock options............ -- -- 73 -- 15 -- -- --
Issuance of common stock
pursuant to acquisition
of Wild Wild Web......... -- -- 675 2 1,753 -- -- --
Issuance of warrants....... -- -- -- -- 226 -- -- --
Unearned compensation...... -- -- -- -- 3,149 -- (3,149) --
Amortization of unearned
compensation............. -- -- -- -- -- -- 1,170 --
Accretion of mandatorily
redeemable convertible
preferred stock.......... -- -- -- -- -- -- -- (570)
Net loss................... -- -- -- -- -- -- -- (13,045)
----- ------- ------ --- ------- ---- ------- --------
Balances, December 31,
1998..................... -- -- 1,497 3 5,269 (44) (1,979) (25,954)
Issuance of common stock
pursuant to exercise of
stock options............ -- -- 639 -- 248 -- -- --
Issuance of common stock
pursuant to acquisition
of HomeArts.............. -- -- 17,799 18 85,332 -- -- --
Issuance of common stock
pursuant to exercise of
warrants................. -- -- 21 -- 3 -- -- --
Issuance of restricted
stock.................... -- -- 31 -- 231 -- -- --
Issuance of convertible
units.................... 2,000 19,249
Unearned compensation...... -- -- -- -- 4,381 -- (4,381) --
Amortization of unearned
compensation............. -- -- -- -- -- -- 1,540 --
Accretion of mandatorily
redeemable convertible
preferred stock.......... -- -- -- -- -- -- -- (245)
Net loss................... -- -- -- -- -- -- -- (30,389)
----- ------- ------ --- ------- ---- ------- --------
Balances, June 30, 1999
(unaudited).............. 2,000 19,249 19,987 $21 $95,464 $(44) $(4,820) $(56,588)
===== ======= ====== === ======= ==== ======= ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
Balances, December 31,
1995..................... $ (2,663)
Issuance of common stock
pursuant to exercise of
stock options............ --
Accretion of mandatorily
redeemable convertible
preferred stock.......... (682)
Net loss................... (2,305)
--------
Balances, December 31,
1996..................... (5,650)
Issuance of common stock
pursuant to exercise of
stock options............ 6
Accretion of mandatorily
redeemable convertible
preferred stock.......... (1,517)
Net loss................... (5,095)
--------
Balances, December 31,
1997..................... (12,256)
Issuance of common stock
pursuant to exercise of
stock options............ 15
Issuance of common stock
pursuant to acquisition
of Wild Wild Web......... 1,755
Issuance of warrants....... 226
Unearned compensation...... --
Amortization of unearned
compensation............. 1,170
Accretion of mandatorily
redeemable convertible
preferred stock.......... (570)
Net loss................... (13,045)
--------
Balances, December 31,
1998..................... (22,705)
Issuance of common stock
pursuant to exercise of
stock options............ 248
Issuance of common stock
pursuant to acquisition
of HomeArts.............. 85,350
Issuance of common stock
pursuant to exercise of
warrants................. 3
Issuance of restricted
stock.................... 231
Issuance of convertible
units.................... 19,249
Unearned compensation...... --
Amortization of unearned
compensation............. 1,540
Accretion of mandatorily
redeemable convertible
preferred stock.......... (245)
Net loss................... (30,389)
--------
Balances, June 30, 1999
(unaudited).............. $ 53,282
========
</TABLE>
See accompanying notes.
F-5
<PAGE> 81
WOMEN.COM NETWORKS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ------------------
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) $(4,353) $(30,389)
Adjustments to reconcile net loss to net cash
used in operating activities, net of the
effects of acquisitions:
Depreciation and amortization of
tangible assets...................... 78 181 323 147 590
Amortization of intangibles............. -- -- 517 172 8,947
Provision for doubtful accounts......... -- 47 248 73 218
Interest converted to preferred stock... (226) 109 -- -- --
Amortization of stock-based
compensation......................... -- -- 1,170 325 1,540
Issuance of common stock warrant in
exchange for financing services...... -- -- 15 -- --
Issuance of restricted stock in exchange
for services......................... -- -- -- -- 231
Decrease (increase) in accounts
receivable........................... (27) (783) (1,728) 158 (2,863)
Decrease (increase) in accounts
receivable -- related party.......... -- -- -- -- (1,225)
Decrease (increase) in prepaids and
other current assets................. -- 25 (471) (356) (6)
Decrease (increase) in other assets..... 141 (62) (31) (16) 2,093
Increase (decrease) in accounts
payable.............................. 72 439 1,907 (18) 3,442
Increase (decrease) in accounts
payable -- related party............. -- -- -- -- 925
Increase (decrease) in accrued
liabilities.......................... (252) 133 433 1,066 (1,210)
Increase (decrease) in deferred
revenue.............................. (15) 2,440 (1,031) (761) 690
Decrease in other liabilities........... -- (18) -- -- --
------- ------- -------- ------- --------
Net cash used in operating
activities......................... (2,534) (2,584) (11,693) (3,563) (17,017)
------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment........ (117) (506) (1,075) (254) (1,219)
Acquisition of Internethoroscope.com......... -- -- -- -- (237)
Cash received from HomeArts acquisition...... -- -- -- -- 13,916
------- ------- -------- ------- --------
Net cash provided by (used in)
investing activities............... (117) (506) (1,075) (254) 12,460
------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock
and warrants, and convertible units net of
issuance costs............................ 2,296 5,552 20,049 19,823 19,249
Proceeds from issuance of promissory note.... 1,517 -- -- -- --
Proceeds from exercise of common stock
warrants.................................. -- -- -- -- 3
Proceeds from exercise of stock options...... -- 6 15 6 248
Principal payments under capital lease
obligations............................... (61) (88) (50) (28) (15)
Principal payment under term loan............ -- -- (244) (16) (348)
Proceeds from notes payable.................. 95 744 348 118 --
------- ------- -------- ------- --------
Net cash provided by (used in)
financing activities............... 3,847 6,214 20,118 19,903 19,137
------- ------- -------- ------- --------
</TABLE>
F-6
<PAGE> 82
WOMEN.COM NETWORKS, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net increase in cash and cash equivalents...... 1,196 3,124 7,350 16,086 14,580
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 $20,971 $ 26,815
======= ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments for interest................ $ 16 $ 24 $ -- $ -- $ --
Revenue and advertising expense from
barter transactions..................... $ -- $ -- $ 656 $ 88 $ 182
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
INFORMATION:
Accretion of preferred stock.............. $ 682 $ 1,517 $ 570 $ 285 $ 245
Conversion of notes payable and accrued
interest to preferred stock............. $ -- $ 2,017 $ -- $ -- $ --
Unearned compensation related to stock
option grants........................... $ -- $ -- $ 3,149 $ 1,117 $ 4,381
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........... $ 75,256
Cash received........................... 13,916
Common stock issued..................... (85,000)
--------
Liabilities assumed..................... $ 4,172
========
</TABLE>
See accompanying notes.
F-7
<PAGE> 83
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
NOTE 1 -- FORMATION AND BUSINESS
Women.com Networks ("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 would merge and Women.com Networks LLC would be rolled up in connection
with such merger and Women.com Networks, Inc., a Delaware corporation, would be
the surviving entity. This roll-up and merger were completed in August 1999. The
corporation is 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 June 30, 1999 and for the six months ended
June 30, 1999 and June 30, 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.
F-8
<PAGE> 84
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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.
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
F-9
<PAGE> 85
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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
79% of total revenues for the years ended December 31, 1996, 1997 and 1998 and
the six months ended June 30, 1999, respectively.
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 1.9% of net revenues
for the six months ended June 30, 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 revenues 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 six months ended June 30,
1999 was $6,145,000.
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
F-10
<PAGE> 86
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
("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.
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 June 30, 1999 one
customer accounted for 18.1% of accounts receivable. For fiscal years 1997 and
1998, 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 and the six months ended June 30, 1999.
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> 87
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 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>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net loss......................... $(2,305) $(5,095) $(13,045) $(4,353) $(30,389)
Accretion of mandatorily
redeemable convertible
preferred stock to redemption
value......................... (682) (1,517) (570) (285) (245)
------- ------- -------- ------- --------
Net loss attributable to common
stockholders.................. $(2,987) $(6,612) $(13,615) $(4,638) $(30,634)
======= ======= ======== ======= ========
Denominator:
Shares used in computing basic
and diluted net loss per
share......................... 702 722 1,294 1,105 16,760
======= ======= ======== ======= ========
Basic and diluted net loss per
share attributable to common
stockholders.................. $ (4.26) $ (9.15) $ (10.52) $ (4.20) $ (1.83)
======= ======= ======== ======= ========
Antidilutive securities including
options, warrants, preferred
stock and convertible units not
included in net loss per share
calculation...................... 4,014 10,065 18,607 17,326 22,012
======= ======= ======== ======= ========
</TABLE>
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1998 and the
six months ended June 30, 1999, is computed using the weighted average number of
common shares outstanding, including the pro forma effects of the conversion of
convertible preferred stock and units into common stock effective upon the
consummation of the merger and the roll-up of Women.com Networks LLC completed
on August 4, 1999 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 pro forma diluted net loss per share as such shares are
anti-dilutive.
F-12
<PAGE> 88
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 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>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
<S> <C> <C>
Numerator:
Net loss............................................... $(13,045) $(30,389)
======== ========
Denominator:
Shares used in computing basic and diluted net loss per
share............................................... 1,294 16,760
Adjustment to reflect assumed conversion of all
preferred stock and convertible units from date of
issuance............................................ 10,254 14,026
-------- --------
Shares used in computing pro forma basic and diluted
net loss per share.................................. 11,548 30,786
======== ========
Basic and diluted pro forma net loss per share........... $ (1.13) $ (.99)
======== ========
Antidilutive securities including options and warrants
not included in pro forma net loss per share
calculation............................................ 5,169 6,574
======== ========
</TABLE>
PRO FORMA JUNE 30, 1999 (UNAUDITED)
Effective upon the closing of the offering, warrants to acquire 239,870
shares of common stock, which expire upon the closing of the offering, will be
net exercised for a total of 144,006 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.
F-13
<PAGE> 89
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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 the 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 the 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, 2000. 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. 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. Given these
F-14
<PAGE> 90
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
facts and that Women.com, on a fully diluted basis owned 53.6% of Women.com
Networks LLC, 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 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 six months
ended June 30, 1999 as if the acquisition of HomeArts, and HomeArts' acquisition
of Astronet, had occurred on January 1, 1998 and 1999, respectively, and after
giving effect to purchase accounting adjustments and the effects of the
automatic conversion of convertible preferred stock into common stock effective
upon the closing of Women.com's initial public offering on an as-if-converted
basis. 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
F-15
<PAGE> 91
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
<S> <C> <C>
Net revenues......................................... $ 11,650 $ 9,681
Loss from operations................................. (50,140) (33,868)
Net loss attributable to common stockholders......... (50,171) (33,659)
Pro forma basic and diluted net loss per share....... $ (1.71) $ (1.00)
</TABLE>
NOTE 4 -- BALANCE SHEET COMPONENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1997 1998 1999
----- ------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Prepaid and other current assets
Prepaid advertising.......................... $ -- $ -- $ 3,521
Other prepaid expenses and current assets.... 28 526 289
----- ------ -------
$ 28 $ 526 $ 3,810
===== ====== =======
Property and equipment, net
Computer equipment and software................. $ 709 $1,688 $ 4,512
Furniture and fixtures.......................... 98 195 581
Leasehold improvements.......................... 17 32 86
----- ------ -------
824 1,915 5,179
Less accumulated depreciation and
amortization................................. (331) (654) (1,245)
----- ------ -------
$ 493 $1,261 $ 3,934
===== ====== =======
Intangible assets
Advertising and viewership base................. $ -- $1,138 $13,681
Assembled workforce............................. -- 100 1,872
Covenant not to compete......................... -- 66 66
Goodwill........................................ -- 506 49,395
Tradename....................................... -- 212 212
----- ------ -------
-- 2,022 65,226
Less accumulated amortization................... -- (517) (9,463)
----- ------ -------
$ -- $1,505 $55,763
===== ====== =======
Other assets
Prepaid advertising............................. -- -- 3,567
Rent deposits and other assets.................. 62 93 423
----- ------ -------
$ 62 $ 93 $ 3,990
===== ====== =======
</TABLE>
Equipment under capital lease obligations totaled $250,580 with accumulated
amortization of $250,580 as of June 30, 1999.
F-16
<PAGE> 92
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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.
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 June 30, 1999, Women.com has recognized
approximately $1,987,000 and $2,480,000 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 $620,268 for the years
ended December 31, 1996, 1997 and 1998, and the six months ended June 30, 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.
F-17
<PAGE> 93
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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. The minimum
aggregate royalty payable under this agreement is $6 million with a maximum
amount payable in any year of $5 million. 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 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................... -- -- -- -- -- 245 -- -- 245
----- ------ --- ------ ----- ------ ----- ------- -------
Balance at June 30, 1999
(unaudited)................................... 2,685 $4,913 579 $1,644 3,627 $9,270 6,546 $19,838 $35,665
===== ====== === ====== ===== ====== ===== ======= =======
Authorized at June 30, 1999
(unaudited)................................... 2,707 579 7,000 8,000
===== === ===== =====
</TABLE>
F-18
<PAGE> 94
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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 automatically converts 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) is 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, and recapitalizations).
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 have liquidation preferences 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
F-19
<PAGE> 95
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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
December 2004. The fair value of these warrants is not material to the financial
statements.
In 1997, in conjunction with the issuance of Series C preferred stock,
Women.com issued fully exercisable nontransferable warrants to purchase
1,331,498 shares of Series C preferred stock at a price of $3.04 per share and
443,832 shares of Series C preferred stock at a price of $3.95 per share.
Warrants for 887,665 shares expire in August 2000 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.
F-20
<PAGE> 96
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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 an 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.
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. Warrant 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 $3.95 596
--- ----
Balance, December 31, 1998............................ 261 866
Warrants exercised.................................... (21) $ .13 (3)
--- ----
Balance, June 30, 1999 (unaudited).................... 240 $863
=== ====
</TABLE>
F-21
<PAGE> 97
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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
six months ended June 30, 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-22
<PAGE> 98
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 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 -- --
Restricted stock grant..................... (79) -- --
Options granted............................ (2,353) 2,353 5.73 13,488
Options canceled........................... 288 (288) 3.78 (1,090)
Options exercised.......................... -- (639) .39 (248)
------ ----- -------
Balance, June 30, 1999 (unaudited)........... 3,447 4,528 $3.51 $15,906
====== ===== =======
</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-23
<PAGE> 99
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 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. Women.com'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 $4,381,000 of unearned stock-based
compensation has been recorded for the six months ended June 30, 1999.
Amortization of the total stock-based compensation during the six months ended
June 30, 1999 totaled $1,540,000. If the stock-based compensation for the year
ended December 31, 1998 and the six months ended June 30, 1999 had been
F-24
<PAGE> 100
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
allocated across the relevant functional expense categories within operating
expenses, it would be allocated as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED JUNE 30,
DECEMBER 31, -------------------
1998 1998 1999
------------ ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Production, product and technology............. $ 396 $125 $ 500
Sales and marketing............................ 220 88 457
General and administrative..................... 554 112 583
------ ---- ------
$1,170 $325 $1,540
====== ==== ======
</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.
F-25
<PAGE> 101
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
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 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
REINCORPORATION
Pursuant to Note 1, the merger and roll-up of Women.com, HomeArts and
Women.com Networks LLC was completed on August 4, 1999. As a result of the
merger, all outstanding shares of preferred stock converted to common stock and
all outstanding warrants to purchase preferred stock became exercisable for an
equivalent number of shares of common stock.
ACQUISITIONS
During April 1999, Women.com paid an additional $938,000 to The Hearst
Corporation in connection with the acquisition of HomeArts. This purchase price
adjustment was recorded as additional goodwill.
On June 4, 1999, Women.com acquired all of the outstanding stock of
Internethoroscope.com International, Inc. The acquisition has been accounted for
using the purchase method of accounting. The purchase price of $237,000 has been
allocated to the intangible asset (viewership base) acquired.
OFFERING OF LLC UNITS
On May 7, 1999, 2,000,000 convertible units of Women.com Networks LLC were
issued at a price of $10.00 per unit. These units converted to 2,000,000 shares
of common stock upon the consummation of the merger and the roll-up of Women.com
Networks LLC. However, if the underwritten public offering is below $10.00 per
share, additional shares of common stock will be issued as if the per unit price
were equal to the per share price to the public.
OFFERING OF SHARES
Women.com agreed to sell and Hearst agreed to purchase that number of
shares of common stock which is equal to one-third of the aggregate number of
shares offered to the public, sold to Disney in the Disney concurrent private
placement and sold to Torstar in a private placement completed in September
1999, plus that number of shares of common stock which could be purchased for $5
million at the initial public offering price in a private placement concurrent
with the offering. On September 7, 1999, this agreement was amended and Hearst
acquired 1,250,000 shares of common stock at $11.00 per share. Hearst and
Women.com have entered into a separate purchase agreement under which Hearst has
agreed to purchase the remaining shares contemplated by the original purchase
agreement. In addition, Hearst has been granted an option to purchase up to
326,389 additional shares of common stock in the event that the underwriters'
over allotment option in the offering is exercised. If Women.com sells shares in
the public offering for a per share price less than $11.00, Women.com will issue
additional shares so that the total number of shares issued will be the same as
if the per share price in these private
F-26
<PAGE> 102
WOMEN.COM NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1998 AND 1999 IS UNAUDITED)
placements was the lower public offering price. The remaining shares will be
purchased concurrently with the offering.
On July 9, 1999, Women.com entered into an agreement with Torstar
Corporation whereby Women.com agreed to sell and Torstar Corporation agreed to
purchase the lesser of 1,250,000 shares of common stock or the number of shares
which could be purchased for $14.5 million at a per share price equal to the per
share price of the shares offered in the offering. On September 3, 1999, the
agreement was amended, and on September 7, 1999 Torstar acquired 1,250,000
shares of common stock at $11.00 per share. In addition, Torstar's chief
executive officer was appointed to the Board of Directors of Women.com. If
Women.com sells shares in the public offering for a per share price less than
$11.00, Women.com will issue additional shares so that the total number of
shares issued will be the same as if the per share price in the private
placement was the lower public offering price.
On July 9, 1999, Women.com entered into an agreement with The Walt Disney
Company whereby Women.com agreed to sell and The Walt Disney Company agreed to
purchase, in a concurrent private placement, the lesser of 1,250,000 shares of
common stock or the number of shares which could be purchased for $14.5 million
at a per share price equal to the per share price of the shares offered in the
offering. If the public offering does not occur by October 31, 1999, Women.com
has agreed to sell The Walt Disney Company up to $14.5 million worth of Series E
preferred stock of Women.com at $10 per share. Such option shall expire on
November 10, 1999.
ADVERTISING COMMITMENT
On July 6, 1999, Women.com entered into an agreement with The Walt Disney
Company whereby Women.com has agreed to purchase $16.5 million of advertising
and promotion on wholly owned broadcast properties of The Walt Disney Company
over the next six years with a minimum purchase of $2.4 million per year for the
first two years and $2.9 million thereafter.
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-27
<PAGE> 103
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-28
<PAGE> 104
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-29
<PAGE> 105
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-30
<PAGE> 106
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-31
<PAGE> 107
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 information on several aspects 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 and integrated advertising) to a variety of customers.
Astronet is one of the largest astrology sites 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).
F-32
<PAGE> 108
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 3 years. The 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
F-33
<PAGE> 109
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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........................... 21,236,224 15,042,511
------------ ------------
Net loss..................................... $(16,832,746) $(12,146,525)
============ ============
</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>
F-34
<PAGE> 110
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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. The allocations are not
necessarily indicative of the level of expenses that might have been incurred
had the Unit contracted directly with third parties. However, management
believes that the level of expenses would not have been materially different if
such services had been provided by 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.
F-35
<PAGE> 111
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. 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.
F-36
<PAGE> 112
CERTAIN OPERATIONS OF THE
NEW MEDIA & TECHNOLOGY DIVISION OF
THE HEARST CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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-37
<PAGE> 113
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. 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. Given these facts and that
Women.com, on a fully diluted basis owned 53.6% of Women.com Networks LLC,
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.
During April 1999, Women.com paid an additional $938,000 to The Hearst
Corporation in connection with the acquisition of HomeArts. This purchase price
adjustment was recorded as additional goodwill.
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 six months ended June
30, 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-38
<PAGE> 114
WOMEN.COM NETWORKS, INC.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE
PERIOD
JANUARY 1,
1998 THROUGH
DECEMBER 23, YEAR ENDED DECEMBER 31, 1998
1998 ------------------------------------------------------------------------
------------ HOMEARTS WOMEN.COM
ASTRONET HOMEARTS ADJUSTMENTS PRO FORMA WOMEN.COM ADJUSTMENTS PRO FORMA
-------- -------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $1,446 $ 2,957 $ -- $ 4,403 $ 7,247 $ -- $ 11,650
------ -------- ------- -------- -------- -------- --------
Operating expenses:
Production, product
and technology...... 1,192 8,095 -- 9,287 5,728 -- 15,015
Sales and marketing... 357 8,625 -- 8,982 12,042 -- 21,024
General and
administrative...... 410 970 -- 1,380 1,374 -- 2,754
Stock-based
compensation........ -- -- -- -- 1,170 -- 1,170
Amortization of
acquired
intangibles......... -- 1,587(A) 1,587 517 19,723(B) 21,827
------ -------- ------- -------- -------- -------- --------
Total operating
expenses............ 1,959 17,690 1,587 21,236 20,831 19,723 61,790
------ -------- ------- -------- -------- -------- --------
Loss from operations.... (513) (14,733) (1,587) (16,833) (13,584) (19,723) (50,140)
Other income, net....... -- -- -- -- 596 -- 596
Interest expense........ -- -- -- -- (57) -- (57)
------ -------- ------- -------- -------- -------- --------
Net loss................ (513) (14,733) (1,587) (16,833) (13,045) (19,723) (49,601)
Dividend accretion on
mandatorily redeemable
convertible preferred
stock................. -- -- -- -- (570) -- (570)
------ -------- ------- -------- -------- -------- --------
Net loss attributable to
common stockholders... $ (513) $(14,733) $(1,587) $(16,833) $(13,615) $(19,723) $(50,171)
====== ======== ======= ======== ======== ======== ========
Basic and diluted pro
forma net loss per
share................. $ (1.71)(C)
========
Shares used in computing
pro forma basic and
diluted net loss per
share................. 29,347
========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
----------------------------------------------
WOMEN.COM HOMEARTS ADJUSTMENTS PRO FORMA
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues.............................................. $ 9,431 $ 250 $ -- $ 9,681
-------- ------- ------- --------
Operating expenses:
Production, product and technology...................... 8,944 671 -- 9,615
Sales and marketing..................................... 17,299 752 -- 18,051
General and administrative.............................. 3,544 28 -- 3,572
Stock-based compensation................................ 1,540 -- -- 1,540
Amortization of acquired intangibles.................... 8,947 133 1,691(B) 10,771
-------- ------- ------- --------
Total operating expenses................................ 40,274 1,584 1,691 43,549
-------- ------- ------- --------
Loss from operations...................................... (30,843) (1,334) (1,691) (33,868)
Other income, net......................................... 480 -- -- 480
Interest expense.......................................... (26) -- -- (26)
-------- ------- ------- --------
Net loss.................................................. (30,389) (1,334) (1,691) (33,414)
Dividend accretion on mandatorily redeemable convertible
preferred stock......................................... (245) -- -- (245)
-------- ------- ------- --------
Net loss attributable to common stockholders.............. $(30,634) $(1,334) $(1,691) $(33,659)
======== ======= ======= ========
Basic and diluted pro forma net loss per share............ $ (1.00)(C)
========
Shares used in computing pro forma basic and diluted net
loss per share.......................................... 33,575
========
</TABLE>
F-39
<PAGE> 115
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 information for 1998
were adjusted to record the amortization of goodwill related to the
acquisition of Astronet as if the transaction occurred January 1,
1998. Goodwill recorded in relation to the acquisition was $4.8
million and is being amortized on a straight-line basis over three
years following the acquisition.
(B) The pro forma HomeArts and Women.com financial information 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 as follows (in
thousands).
<TABLE>
<CAPTION>
AMORTIZATION EXPENSE
----------------------------
SIX MONTHS
YEAR ENDED ENDED
AMORTIZATION DECEMBER 31, JUNE 30,
AMOUNT PERIOD 1998 1999
------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Advertiser base............... $ 4,041 2 years $ 2,021 $1,010
Viewership base............... 8,265 3 years 2,755 1,378
Assembled workforce........... 1,772 5 years 354 177
Goodwill...................... 48,889 3 years 16,296 8,148
</TABLE>
(C) Pro forma basic and diluted net loss per share for the year ended
December 31, 1998 and the six months ended June 30, 1999, is computed
using the weighted average number of common shares outstanding,
including the pro forma effects of the conversion of Women.com's
convertible preferred stock and units effective upon the consummation
of the merger and the roll-up of Women.com Networks LLC completed on
August 4, 1999 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 six months ended June 30, 1999.
F-40
<PAGE> 116
Women.com Networks logo
<PAGE> 117
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........................................ $ 14,387
NASD Filing fee............................................. 5,675
Nasdaq National Market listing fee.......................... 94,000
Printing and engraving expenses............................. 400,000
Legal fees and expenses..................................... 600,000
Accounting fees and expenses................................ 325,000
Blue sky fees and expenses.................................. 10,000
Transfer agent fees......................................... 10,000
Miscellaneous fees and expenses............................. 40,938
----------
Total....................................................... $1,500,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Delaware law, Article VI of our restated certificate of
incorporation provides that with 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 and 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 Agreement contained in Exhibit
1.1 hereto, which contains provisions indemnifying our officers and directors
against certain liabilities.
II-1
<PAGE> 118
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since May 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 became exercisable 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 were 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 were 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 became exercisable 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 became exercisable 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, subject to
adjustment, to HC Crown Corp. This warrant became exercisable 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 became exercisable 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 the shareholders of Wild Wild Web,
Incorporated in exchange for substantially all of the assets of Wild Wild
Web, Incorporated. Such shares of common stock were converted into
II-2
<PAGE> 119
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 became exercisable 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 6,546,369 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 $21,537,554. 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 were
converted into 6,546,369 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 were split into 18,825,171 shares of
common stock of the Registrant.
(12) From March through June 1999, Women.com Networks, a California
corporation issued an aggregate of 80,549 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 were converted into 80,549 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 were
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) In September 1999, the Registrant issued 1,250,000 shares of
common stock to each of the Torstar Corporation and Hearst Communications,
Inc. at a purchase price of $11.00 per share for an aggregate purchase
price of $27,500,000.
(15) During the period, the Registrant granted stock options and
restricted stock awards 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 6,346,199 shares of the
Company's common stock, at an average exercise price of $4.00. Options to
purchase 775,487 shares of common stock have been canceled or terminated.
The Registrant sold an aggregate of 863,705 shares of its common stock to
employees, directors and consultants of the Registrant for consideration in
the aggregate amount of $367,592 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> 120
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.
4.4** Investor Rights Agreement dated July 9, 1999 between the
Registrant and Torstar Corporation.
4.5** Investor Rights Agreement dated July 9, 1999 between the
Registrant and The Walt Disney Company.
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. (formerly known as US
West 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. (formerly known as
US West Interactive Services, Inc.) dated July 7, 1997.
10.10** Warrant Agreement by and between Women.com Networks and
MediaOne Interactive Services, Inc. (formerly known as US
West Interactive Services, Inc.) dated July 7, 1997.
</TABLE>
II-4
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
--------- -----------
<S> <C>
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.
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.
10.26** Stock Purchase Agreement by and between Hearst HomeArts,
Inc. and Hearst Communications, Inc. dated July 9, 1999.
10.27+** Letter Agreement between Women.com Networks LLC, Torstar
Corporation and Harlequin Enterprise Limited dated June 25,
1999, as amended July 9, 1999.
10.28** Amendment No. 1 to the Letter Agreement between Women.com
Networks LLC, Torstar Corporation and Harlequin Enterprise
Limited dated July 9, 1999.
10.29** Stock Purchase Agreement by and between Hearst HomeArts,
Inc., Women.com Networks, Women.com Networks LLC and Torstar
Corporation dated July 9, 1999.
10.30** Stock Purchase Agreement by and between Hearst HomeArts,
Inc., Women.com Networks LLC and The Walt Disney Company
dated July 9, 1999.
10.31* Amendment No. 1 to Stock Purchase Agreement by and between
Hearst HomeArts, Inc. and Hearst Communications Inc. dated
September 7, 1999.
</TABLE>
II-5
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
--------- -----------
<S> <C>
10.32* Amendment No. 1 to Stock Purchase Agreement by and between
Hearst HomeArts, Inc., Women.com Networks, Women.com
Networks LLC and Torstar Corporation dated September 3,
1999.
10.33* Form of Stock Purchase Agreement by and between Women.com
Networks, Inc. and Hearst Communications, Inc.
10.34* Warrant Agreement by and between Women.com Networks and HC
Crown Corp. dated August 19, 1997.
10.35* Fifth Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated May 25, 1999.
10.36* Agreement of Lease between Polestar Fifth Property
Associates LLC and Women.com Networks LLC dated July 31,
1999.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Deloitte & Touche LLP.
24.1** Power of attorney.
24.2*** Power of attorney for James Asher and David Galloway.
27.1** Financial Data Schedule.
99.1** Consent of David Galloway to be named as a director.
99.2** Consent of James Asher to be named as a director.
</TABLE>
- -------------------------
* Filed herewith
** Previously filed
*** See signature page
+ Confidential treatment requested on portions of this exhibit. Unredacted
versions of this exhibit have been filed separately with the Commission.
(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, 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
II-6
<PAGE> 123
expressed in the Securities Act and will be governed by the final adjudication
of such issue. The undersigned registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, 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-7
<PAGE> 124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 6 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of San Mateo, State of California, on October 4, 1999.
WOMEN.COM NETWORKS, INC.
By: *
------------------------------------
Marleen McDaniel
Chairperson, Chief Executive Officer
and President
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>
* Chairperson, Chief Executive October 4, 1999
- ------------------------------------------------ Officer and President (Principal
Marleen McDaniel Executive Officer)
/s/ MICHAEL PERRY Chief Financial Officer October 4, 1999
- ------------------------------------------------ (Principal Financial and
Michael Perry Accounting Officer)
* Director October 4, 1999
- ------------------------------------------------
Natalie Egleston
* Director October 4, 1999
- ------------------------------------------------
Barry Weinman
* Director October 4, 1999
- ------------------------------------------------
William Miller
* Director October 4, 1999
- ------------------------------------------------
Cathleen Black
* Director October 4, 1999
- ------------------------------------------------
Alfred Sikes
* Director October 4, 1999
- ------------------------------------------------
Nancy Lindemeyer
* Director October 4, 1999
- ------------------------------------------------
Mark Miller
*By: /s/ MICHAEL PERRY
---------------------------------------
Michael Perry
Attorney-in-fact
</TABLE>
II-8
<PAGE> 125
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 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/ JAMES ASHER Director October 4, 1999
- ------------------------------------------------
James Asher
/s/ DAVID GALLOWAY Director October 4, 1999
- ------------------------------------------------
David Galloway
</TABLE>
II-9
<PAGE> 126
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.
/s/ PricewaterhouseCoopers LLP
San Jose, California
May 7, 1999
S-1
<PAGE> 127
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> 128
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> 129
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.
4.4** Investor Rights Agreement dated July 9, 1999 between the
Registrant and Torstar Corporation.
4.5** Investor Rights Agreement dated July 9, 1999 between the
Registrant and The Walt Disney Company.
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. (formerly known as US
West 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. (formerly known as
US West Interactive Services, Inc.) dated July 7, 1997.
10.10** Warrant Agreement by and between Women.com Networks and
MediaOne Interactive Services, Inc. (formerly known as US
West 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.
</TABLE>
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
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.
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.
10.26** Stock Purchase Agreement by and between Hearst HomeArts,
Inc. and Hearst Communications, Inc. dated July 9, 1999.
10.27+** Letter Agreement between Women.com Networks LLC, Torstar
Corporation and Harlequin Enterprise Limited dated June 25,
1999, as amended July 9, 1999.
10.28** Amendment No. 1 to the Letter Agreement between Women.com
Networks LLC, Torstar Corporation and Harlequin Enterprise
Limited dated July 9, 1999.
10.29** Stock Purchase Agreement by and between Hearst HomeArts,
Inc., Women.com Networks, Women.com Networks LLC and Torstar
Corporation dated July 9, 1999.
10.30** Stock Purchase Agreement by and between Hearst HomeArts,
Inc., Women.com Networks LLC and The Walt Disney Company
dated July 9, 1999.
10.31* Amendment No. 1 to Stock Purchase Agreement by and between
Hearst HomeArts, Inc. and Hearst Communications Inc. dated
September 7, 1999.
10.32* Amendment No. 1 to Stock Purchase Agreement by and between
Hearst HomeArts, Inc., Women.com Networks, Women.com
Networks LLC and Torstar Corporation dated September 3,
1999.
10.33* Form of Stock Purchase Agreement by and between Women.com
Networks, Inc. and Hearst Communications, Inc.
10.34* Warrant Agreement by and between Women.com Networks and HC
Crown Corp. dated August 19, 1997.
</TABLE>
<PAGE> 131
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- -----------
<S> <C>
10.35* Fifth Amendment to Lease by and between Carramerica Realty
Corporation and Women.com Networks dated May 25, 1999.
10.36* Agreement of Lease between Polestar Fifth Property
Associates LLC and Women.com Networks LLC dated July 31,
1999.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Deloitte & Touche LLP.
24.1** Power of attorney.
24.2*** Power of attorney for James Asher and David Galloway.
27.1** Financial Data Schedule.
99.1** Consent of David Galloway to be named as a director.
99.2** Consent of James Asher to be named as a director.
</TABLE>
- -------------------------
* Filed herewith
** Previously filed
*** See signature page
+ Confidential treatment requested on portions of this exhibit. Unredacted
versions of this exhibit have been filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.31
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (the "AMENDMENT") is made as of September 7, 1999,
by and between WOMEN.COM NETWORKS, INC., a Delaware corporation (the "COMPANY")
and HEARST COMMUNICATIONS, INC., a Delaware corporation ("PURCHASER") to the
Stock Purchase Agreement dated July 9, 1999 by and between such parties.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Purchase Agreement (as defined below).
RECITALS
WHEREAS, The Company (formerly named Hearst HomeArts, Inc.) and
Purchaser entered into that certain Stock Purchase Agreement dated July 9, 1999
attached hereto as EXHIBIT A (the "PURCHASE AGREEMENT"); and
WHEREAS, in accordance with Section 9(g) of such Purchase Agreement, the
Company and Purchaser desire to amend such Purchase Agreement to provide for the
modifications as herein provided for.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
considerations contained herein, the undersigned hereby agree as follows:
AGREEMENT
1. Section 1 of the Purchase Agreement is amended and restated to read in full
as follows:
"1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase from
the Company, and the Company hereby agrees to sell to Purchaser
1,250,000 shares of the Company's Common Stock at a per share price
equal to $11.00 per share (the "STOCK"); provided, however, if the
Closing (as defined below) has not occurred prior to the effective date
of the registration statement relating to the Company's initial public
offering (the "INITIAL PUBLIC OFFERING") the Purchaser shall purchase
such Stock at a per share price equal to the per share price to the
public in the Initial Public Offering and the Closing (as defined below)
shall be concurrent with the closing of the Initial Public Offering.
Except as otherwise provided for herein, the closing hereunder (the
"CLOSING"), including payment for and delivery of the Stock shall occur
at 10:00 a.m P.D.T. at the offices of Cooley Godward LLP, counsel to the
Company, 3000 Sand Hill Road, Building Three, Suite 230, Menlo Park, CA
94025 on September 7, 1999.
2. Section 2 of the Purchase Agreement shall be amended and restated in its
entirety as follows:
"2. PRICE ADJUSTMENT. Notwithstanding the foregoing, if the Company
sells shares in its Initial Public Offering pursuant to an underwriting
agreement with its underwriters relating to the Company's Initial Public
Offering at a price to the public below $11.00 per share (the "PUBLIC
PRICE"), or if the Company sells shares in a private placement prior to
the Initial Public Offering at a price below $11.00 per share (the
"PRIVATE PRICE"), the Purchaser shall receive additional
1.
<PAGE> 2
shares of Stock for no additional consideration (the "ADDITIONAL
SHARES") based on the following formula: Additional Shares = (a)
1,250,000 shares of Stock subtracted from (b) $13,750,000 divided by the
Public Price or the Private Price, as applicable."
3. Section 7 of the Purchase Agreement shall be amended to eliminate Section
7(d) in its entirety.
4. Section 8 of the Purchase Agreement shall be amended to eliminate Section
8(e) in its entirety.
5. Section 9 of the Purchase Agreement shall be amended to eliminate Section
9(a) in its entirety.
6. Except as set forth in this Amendment, the Purchase Agreement shall remain in
full force and effect.
7. 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.
<PAGE> 3
IN WITNESS WHEREOF, the undersigned have executed this AMENDMENT as of
the day and year first set forth above.
WOMEN.COM NETWORKS, INC. HEARST COMMUNICATIONS, INC.
By: /s/ Marleen McDaniel /s/ Jim Asher
------------------------------ -------------------------------
(Signature)
Name: Marleen McDaniel By: Jim Asher
---------------------------- ----------------------------
Title: President and CEO Title:
--------------------------- -------------------------
<PAGE> 4
EXHIBIT A
STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.32
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 (the "AMENDMENT") is made as of September 3, 1999,
by and among WOMEN.COM NETWORKS, INC., a Delaware corporation (the "COMPANY"),
TORSTAR CORPORATION, an Ontario corporation ("TORSTAR") and HARLEQUIN
ENTERPRISES LIMITED, an Ontario corporation ("HARLEQUIN") to the Stock Purchase
Agreement dated July 9, 1999 by and between such parties. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Purchase Agreement (as defined below).
RECITALS
WHEREAS, Women.com Networks LLC, the Company (formerly named Hearst
HomeArts, Inc.), Torstar and Harlequin entered into that certain Stock Purchase
Agreement dated July 9, 1999 attached hereto as EXHIBIT A (the "PURCHASE
AGREEMENT");
WHEREAS, on August 4, 1999, Women.com Networks LLC dissolved and all of
its assets, contractual obligations and liabilities were assumed by the Company,
and, therefore, any modification to such Purchase Agreement shall be between the
Company, Torstar and Harlequin; and
WHEREAS, in accordance with Section 8(f) of such Purchase Agreement, the
Company, Torstar and Harlequin desire to amend such Purchase Agreement to
provide for the modifications as herein provided for.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
considerations contained herein, the undersigned hereby agree as follows:
AGREEMENT
1. Section 1 of the Purchase Agreement is amended and restated to read in full
as follows:
"1. PURCHASE AND SALE OF STOCK.
(a) PURCHASE AND SALE. Purchaser hereby agrees to purchase from the
Company, and the Company hereby agrees to sell to Purchaser 1,250,000
shares of the Company's Common Stock at a per share price equal to
$11.00 per share (the "STOCK"); provided, however, if the Closing (as
defined below) has not occurred prior to the effective date of the
registration statement relating to the Company's initial public offering
(the "INITIAL PUBLIC OFFERING") the Purchaser shall purchase such Stock
at a per share price equal to the per share price to the public in the
Initial Public Offering and the Closing (as defined below) shall be
concurrent with the closing of the Initial Public Offering.
(b) COMPANY COVENANT. The Company agrees not to enter into any agreement
with another party to sell shares of capital stock of the Company upon
more favorable terms than contained herein (excluding all outstanding
options, options reserved to be issued pursuant to the
1.
<PAGE> 2
Company's 1998 Equity Incentive Plan, warrants and other convertible
securities) in a private placement transaction under the Securities Act
of 1933, as amended, prior to the effectiveness of the Company's Initial
Public Offering (a "NEW TRANSACTION"). If the Company shall enter into
such a New Transaction, the Company shall sell the Stock to the
Purchaser on terms as favorable as those agreed to in such New
Transaction. Notwithstanding the foregoing, the Company may enter into
an investor rights agreement with The Walt Disney Company, a Delaware
corporation, or its affiliates providing for registration rights more
favorable to those provided Purchaser without providing such terms to
Purchaser.
(c) CLOSING. Except as otherwise provided for herein, the closing
hereunder (the "CLOSING"), including payment for and delivery of the
Stock shall occur at 10:00 a.m P.D.T. at the offices of Cooley Godward
LLP, counsel to the Company ("COMPANY COUNSEL"), 3000 Sand Hill Road,
Building Three, Suite 230, Menlo Park, CA 94025 on September 7, 1999."
2. Section 2 of the Purchase Agreement shall be amended and restated in its
entirety as follows:
"2. PRICE ADJUSTMENT. Notwithstanding the foregoing, if the Company
sells shares in its Initial Public Offering pursuant to an underwriting
agreement with its underwriters relating to the Company's Initial Public
Offering at a price to the public below $11.00 per share (the "PUBLIC
PRICE"), or if the Company sells shares in a private placement prior to
the Initial Public Offering at a price below $11.00 per share (the
"PRIVATE PRICE"), the Purchaser shall receive additional shares of Stock
for no additional consideration (the "ADDITIONAL SHARES") based on the
following formula: Additional Shares = (a) 1,250,000 shares of Stock
subtracted from (b) $13,750,000 divided by the Public Price or the
Private Price, as applicable."
3. Section 5 of the Purchase Agreement is hereby amended and to eliminate all
references to, and representations and warranties by, Women.com Networks, LLC.
The Company hereby affirms its obligations under the Purchase Agreement as
successor in interest to Women.com and acknowledges that all such
representations and warranties shall be deemed representations and warranties of
the Company, as applicable.
4. Sections 5(i), (j) and (k) of the Purchase Agreement are hereby amended and
restated in its entirety as follows:
(i) NO MATERIAL MISSTATEMENTS OR OMISSIONS. Except as may be affected by
this Agreement, as amended, and any similar agreement entered into with
Hearst Communications, Inc. or The Walt Disney Company, as amended, the
registration statement on Form S-1 (No. 333-78363) (the "REGISTRATION
STATEMENT") filed with the Securities Exchange Commission on May 13,
1999, complies in all material respects as of the filing date and the
date hereof, with the provisions of the Securities Act of 1933, as
amended, and the rules and regulations of the SEC promulgated
thereunder; as of the filing date and the date hereof, the Registration
Statement did not and does not contain any untrue statement of material
fact and did not and does not omit to state any material fact required
to be stated herein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(j) FINANCIAL STATEMENTS. The Registration Statement includes (i)
Women.com Network's audited balance sheet as of December 31, 1998, and
the related audited statements of operations, stockholders' equity and
cash flows for the twelve months ended December 31, 1998, (ii) the
unaudited balance sheet as of June 30, 1999, and the related unaudited
statements of operations, stockholders' equity and cash flows for the
six months ended June 30, 1999, and (iii) the Company's audited balance
sheet as of December 31, 1998, and the related audited statements
<PAGE> 3
of operations, stockholders' equity and cash flows for the twelve-month
period ended December 31, 1998 (collectively, the "COMPANY FINANCIALS").
The Company Financials have been prepared in accordance with U.S.
generally accepted accounting principles consistent with the reporting
practices and principles ("GAAP"), applied on a basis consistent
throughout the periods indicated and consistent with each other. The
Company Financials present fairly the financial condition, operating
results and cash flows of the Company as of the dates and during the
periods indicated therein.
(k) NO MATERIAL CHANGES. Since June 30, 1999, there has not been any
materially adverse change in the business, properties, financial
condition or results of operations of the Company, whether or not
arising from transactions in the ordinary course of business, other than
as set forth in the Registration Statement, and since such date, except
in the ordinary course of business, the Company has not entered into any
material transaction not referred to in the Registration Statement."
4. Section 6 of the Purchase Agreement shall be amended to eliminate Sections
6(e) and 6(i) in their entirety.
5. Section 7 of the Purchase Agreement shall be amended to eliminate Section
7(e) in its entirety.
6. Section 8 of the Purchase Agreement shall be amended to eliminate Section
8(a) in its entirety.
7. Except as set forth in this Amendment, the Purchase Agreement shall remain in
full force and effect.
8. 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.
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this AMENDMENT as of
the day and year first set forth above.
WOMEN.COM NETWORKS, INC. TORSTAR CORPORATION
By: /s/ Marleen McDaniel /s/ David Galloway
--------------------------------- ---------------------------------
(Signature)
Name: Marleen McDaniel By: David Galloway
--------------------------- ------------------------------
Title: President and CEO Title:
----------------------------- ---------------------------
HARLEQUIN ENTERPRISES LIMITED
David Galloway
--------------------------------
(Signature)
By: /s/ David Galloway
-----------------------------
Title:
--------------------------
SIGNATURE PAGE
<PAGE> 5
EXHIBIT A
STOCK PURCHASE AGREEMENT
<PAGE> 1
EXHIBIT 10.33
WOMEN.COM NETWORKS, INC.
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made as of the ___
day of _________, 1999, by and between WOMEN.COM NETWORKS, INC., a Delaware
corporation (the "COMPANY"), and HEARST COMMUNICATIONS, INC. ("PURCHASER").
WHEREAS, the Company desires to issue, and Purchaser desires to acquire,
stock of the Company as herein described, on the terms and conditions
hereinafter set forth;
WHEREAS, the issuances hereunder are intended to comply with the
provisions of Rule 506 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "ACT").
NOW THEREFORE, IT IS AGREED between the parties as follows:
1. PURCHASE AND SALE OF STOCK. Purchaser hereby agrees to purchase from
the Company, and the Company hereby agrees to sell to Purchaser, a whole number
of shares of common stock of the Company equal to (I) the sum of (a) one-third
(33.33%) of (i) the total number of shares of common stock of the Company
actually sold in the Company's initial public offering (the "INITIAL PUBLIC
OFFERING") (excluding any shares issuable upon exercise of any overallotment
option granted to the underwriters of the Initial Public Offering) under a
registration statement on Form S-1 (No. 333-78363) filed with the Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the
"ACT") plus (ii) the total number of shares of common stock sold in the Disney
private placement as described in the registration statement plus (iii) the
total number of shares of common stock sold to Torstar pursuant to that certain
Amendment No. 1 to Stock Purchase Agreement dated September 3, 1999 (such shares
as described in this subsection (a) are hereafter referred to as the "INITIAL
PURCHASER STOCK"), plus (b) that number of shares of the common stock of the
Company which could be purchased at the IPO Price (as defined in the next
sentence) for $5 million (such shares being referred to hereafter as the
"ADDITIONAL PURCHASER STOCK,") less (II) the total number of shares of common
stock sold to Purchaser pursuant to that certain Amendment No. 1 to Stock
Purchase Agreement dated September 3, 1999. The shares of common stock to be
sold to Purchaser as determined by the prior sentence shall be referred to
hereafter as the "STOCK." The term "IPO PRICE" means the initial price per share
to the public of the common stock being offered in the Initial Public Offering,
as reflected on the cover page of the final prospectus filed with the SEC
pursuant to Rule 424(b) filed under the Act. The total purchase price for the
Stock shall be the product of the total number of shares of Stock multiplied by
the IPO Price. The closing hereunder (the "CLOSING"), including payment for and
delivery of the Stock in cash shall occur at the offices of Cooley Godward LLP,
counsel to the Company ("COMPANY COUNSEL"), 3000 Sand Hill Road, Building 3,
Suite 230, Menlo Park, California 94025, concurrently with the closing of the
Initial Public Offering, or at such other time and place as the parties may
mutually agree.
2. OPTION TO PURCHASE STOCK. Purchaser shall have the option ("OPTION")
to purchase a number of shares equal to the product of (a) the ratio of (i) the
number of shares, if any, purchased by the underwriters in the Initial Public
Offering in connection with the exercise of any over-allotment option granted by
the Company to (ii) the total number of shares sold in the Initial Public
Offering and (b)
1.
<PAGE> 2
the number of shares of Initial Purchaser Stock, at a per share price equal to
the IPO Price (the "OPTION STOCK"). Upon exercise by the underwriters of their
over-allotment option or portion thereof, Purchaser may exercise such Option in
the same proportion exercised by the underwriters as determined above and in the
same period of time as exercised by the underwriters. Upon receipt of notice
from the underwriters that such entire over-allotment option or portion thereof
shall be exercised, the Company shall immediately give notice to the Purchaser
and the Purchaser shall then in the same period of time as the underwriters
exercise the Option (or portion thereof as determined by the proportion
exercised by the underwriters of their over-allotment option specified above)
upon written or telegraphic notice by Purchaser to the Company setting forth the
aggregate number of shares of the Option Stock as to which the Purchaser is
exercising its Option. Delivery of certificates for the shares of Option Stock,
and payment therefor, shall be made on the third business day after the exercise
of such option at the offices of Company Counsel. Purchaser shall have no rights
to exercise the foregoing Option except upon the last to occur of the (A)
closing of the Initial Public Offering; (B) closing of the sale of Stock
contemplated under Section 1, above; and (C) exercise of the underwriters'
over-allotment option as described above.
3. LIMITATIONS ON TRANSFER. Purchaser shall not assign, hypothecate,
donate, encumber or otherwise dispose of any interest in the Stock or Option
Stock except in compliance with the provisions herein and applicable securities
laws. The Company and its transfer agent shall not be required (a) to transfer
on its books any shares of Stock or Option Stock of the Company which shall have
been transferred in violation of any of the provisions set forth in this
Agreement or (b) to treat as owner of such shares or to accord the right to vote
as such owner or to pay dividends to any transferee to whom such shares shall
have been so transferred.
4. RESTRICTIVE LEGENDS. All certificates representing the Stock shall
have endorsed thereon legends in substantially the following forms (in addition
to any other legend which may be required by other agreements between the
parties hereto):
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Any legend required by appropriate blue sky officials.
5. PURCHASER REPRESENTATIONS. In connection with the purchase of the
Stock, Purchaser represents to the Company the following:
(a) Purchaser has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and to carry
out its provisions. All action on Purchaser's part required for the lawful
execution and delivery of this Agreement has been or will be effectively taken
prior to the Closing. Upon its execution and delivery, this Agreement will be a
valid and binding obligation of Purchaser, enforceable in accordance with its
terms.
(b) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Stock and the Option
Stock. Purchaser is purchasing the Stock and Option Stock, if any, for
investment for Purchaser's own account only and not with a view to, or for
resale in connection with, any "DISTRIBUTION" thereof within the meaning of the
Act.
2.
<PAGE> 3
(c) Purchaser understands that the Stock and Option Stock, if
any, have not been registered under the Act by reason of a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein.
(d) Purchaser further acknowledges and understands that the
Stock and Option Stock, if any, must be held indefinitely unless it is
subsequently registered under the Act or an exemption from such registration is
available. Purchaser further acknowledges and understands that the Company is
under no obligation to register the Stock or Option Stock. Purchaser understands
that the certificate evidencing the Stock and the Option Stock will be imprinted
with a legend which prohibits its transfer unless it is registered or such
registration is not required in the opinion of counsel for the Company.
(e) Purchaser is familiar with the provisions of Rule 144, under
the Act, as in effect from time to time, which, in substance, permits limited
public resale of "RESTRICTED SECURITIES" acquired, directly or indirectly, from
the issuer thereof (or from an affiliate of such issuer), in a non-public
offering subject to the satisfaction of certain conditions including, among
other things: (i) availability of certain public information about the Company
and (ii) the resale occurring following the required holding period under Rule
144 after the Purchaser has purchased, and made full payment of (within the
meaning of Rule 144), the securities to be sold.
(f) Purchaser further understands that at the time Purchaser
wishes to sell the Stock there may be no public market upon which to make such a
sale, and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, Purchaser would be precluded from selling the Stock under Rule 144
even if the minimum holding period requirement had been satisfied.
(g) Purchaser is a "QUALIFIED INSTITUTIONAL BUYER" as that term
is defined in Rule 144A under the Act.
6. COMPANY REPRESENTATIONS. The Company hereby represents and warrants
to the Purchaser as follows:
(a) The Company has all requisite corporate power and authority
to execute and deliver this Agreement, to issue and sell the Stock and the
Option Stock, and to carry out the provisions of this Agreement.
(b) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization of this
Agreement, the performance of all obligations of the Company hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Stock and Option Stock has been taken or will be taken prior to the Closing.
Upon its execution and delivery, this Agreement will be a valid and binding
obligation of the Company, enforceable in accordance with its terms.
(c) When issued in compliance with the provisions of this
Agreement, the Stock and the Option Stock will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Stock and the Option Stock 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.
7. CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligations to purchase the Stock at the Closing (or the Option Stock at any
subsequent closing) are subject to the satisfaction, or at prior to such
Closing, of the following conditions:
3.
<PAGE> 4
(a) REPRESENTATIONS AND WARRANTS TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 6
hereof shall be true and correct in all material respects as of the Closing (or
any subsequent closing as the case may be) with the same force and effect as if
they had been made as of the Closing, 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) LEGAL INVESTMENT. As of the Closing, the sale and issuance
of the Stock (or the Option Stock as the case may be) shall be legally permitted
by all laws and regulations to which Purchaser and the Company are subject.
(c) 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.
(d) EFFECTIVENESS OF REGISTRATION STATEMENT. A registration
statement relating to the Initial Public Offering shall have become effective
and no stop order suspending the effectiveness thereof shall have been issued
and no proceedings therefor shall be pending or threatened by the Securities and
Exchange Commission.
8. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation to
issue and sell the Stock at the Closing (or the Option Stock at any subsequent
closing) is subject to the satisfaction, on or prior to such Closing, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties in Section 5 made by Purchaser shall be true and correct in all
material respects at the date of the Closing (or any subsequent closing as the
case may be), with the same force and effect as if they had been made on and as
of said date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by Purchaser on or before the Closing.
(c) LEGAL INVESTMENT. As of the Closing, the sale and issuance
of the Stock (or the Option Stock as the case may be) shall be legally permitted
by all laws and regulations to which Purchaser and the Company are subject.
(d) 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.
(e) EFFECTIVENESS OF REGISTRATION STATEMENT. A registration
statement relating to the Initial Public Offering shall have become effective
and no stop order suspending the effectiveness thereof shall have been issued
and no proceedings therefor shall be pending or threatened by the Securities and
Exchange Commission.
9. MISCELLANEOUS.
(a) TERMINATION. This Agreement shall terminate in its entirety
and shall be of no further force and effect in the event that a registration
statement relating to the Initial Public Offering shall not have been declared
effective and the sale contemplated by Section 1 hereof completed on or prior to
December 31, 1999.
4.
<PAGE> 5
(b) NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
sent by telegram or fax or upon deposit in the United States Post Office, by
registered or certified mail with postage and fees prepaid, addressed to the
other party hereto at his address hereinafter shown below its signature or at
such other address as such party may designate by ten (10) days advance written
notice to the other party hereto.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer herein set forth, be binding upon Purchaser,
Purchaser's successors and assigns.
(d) ATTORNEYS' FEES, SPECIFIC PERFORMANCE. Purchaser shall
reimburse the Company for all costs incurred by the Company in enforcing the
performance of, or protecting its rights under, any part of this Agreement,
including reasonable costs of investigation and attorneys' fees.
(e) GOVERNING LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware. The parties
agree that any action brought by either party to interpret or enforce any
provision of this Agreement shall be brought in, and each party agrees to, and
does hereby, submit to the jurisdiction and venue of, the appropriate state or
federal court for the district encompassing the Company's principal place of
business.
(f) FURTHER EXECUTION. The parties agrees to take all such
further action(s) as may reasonably be necessary to carry out and consummate
this Agreement as soon as practicable, and to take whatever steps may be
necessary to obtain any governmental approval in connection with or otherwise
qualify the issuance of the securities that are the subject of this Agreement.
(g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes and merges all prior agreements or understandings, whether written or
oral. This Agreement may not be amended, modified or revoked, in whole or in
part, except by an agreement in writing signed by each of the parties hereto.
(h) SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WOMEN.COM NETWORKS, INC.
By:
--------------------------------------
Chief Executive Officer
Address: 1820 Gateway Drive
San Mateo, CA 94404
PURCHASER:
HEARST COMMUNICATIONS, INC.
By:
--------------------------------------
Title:
-----------------------------------
Address: 959 Eighth Avenue
New York, NY 10019
6.
<PAGE> 1
EXHIBIT 10.34
NO. PCW-2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE 887,665 SHARES
OF SERIES C PREFERRED STOCK OF WIRE NETWORKS, INC.
(VOID AFTER AUGUST 19, 2000)
This certifies that HC CROWN CORP. or its assigns (the "Holder"), for
value received, is entitled to purchase from WIRE NETWORKS, INC., a California
corporation (the "Company"), having a place of business at 1820 Gateway Drive,
Suite 150, San Mateo, California 94404, a maximum of eight hundred eighty-seven
thousand six hundred sixty-five (887,665) fully paid and nonassessable shares of
the Company's Series C Preferred Stock ("Series C Preferred Stock") for cash at
a price of three dollars and four cents ($3.04) per share (the "Stock Purchase
Price") at any time or from time to time up to and including 5:00 p.m. (Pacific
time) on August 19, 2000 (the "Expiration Date"), upon surrender to the Company
at its principal office (or at such other location as the Company may advise the
Holder in writing) of this Warrant properly endorsed with the Form of
Subscription attached hereto duly filled in and signed and, if applicable, upon
payment in cash or by check of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Company shall deliver notice of an Initial
Public Offering to the Holder at least 20 days prior to the closing thereof. The
Stock Purchase Price and the number of shares purchasable hereunder are subject
to adjustment as provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the
Holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Series C Preferred Stock (but not for
a fraction of a share) which may be purchased hereunder. The Company agrees that
the shares of Series C Preferred Stock purchased under this Warrant shall be and
are deemed to be issued to the Holder hereof as the record owner of such shares
as of
1.
<PAGE> 2
the close of business on the date on which this Warrant shall have been
surrendered, properly endorsed, the completed, executed Form of Subscription
delivered and payment made for such shares. Certificates for the shares of
Series C Preferred Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof within a reasonable time. Each stock certificate so delivered
shall be in such denominations of Series C Preferred Stock as may be requested
by the Holder hereof and shall be registered in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein
to the contrary, if the fair market value of one share of the Company's Series C
Preferred Stock is greater than the Stock Purchase Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Form of Subscription and notice of such election in which event the
Company shall issue to the Holder a number of shares of Series C Preferred Stock
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Series C
Preferred Stock to be issued to the
Holder
Y = the number of shares of Series C
Preferred Stock purchasable under
the Warrant or, if only a portion of
the Warrant is being exercised, the
portion of the Warrant being
canceled (at the date of such
calculation)
A = the fair market value of one share
of the Company's Series C Preferred
Stock (at the date of such
calculation)
B = Stock Purchase Price (as adjusted to
the date of such calculation)
For purposes of the above calculation, fair market value of one share of Series
C Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that in the event this Warrant is being exercised
upon the Initial Public Offering, the fair market value per share shall be the
product of (i) the per share offering price to the public of the Initial Public
Offering, and (ii) the number of shares of Common Stock into which each share of
Series C Preferred Stock is convertible at the time of such exercise.
2.
<PAGE> 3
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all shares of Series C Preferred Stock which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be duly authorized, validly issued, fully paid and nonassessable and
free from all preemptive rights of any shareholder and free of all taxes, liens
and charges with respect to the issue thereof. The Company further covenants and
agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved, for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of authorized
but unissued Series C Preferred Stock, or other securities and property, when
and as required to provide for the exercise of the rights represented by this
Warrant. The Company will take all such action as may be necessary to assure
that such shares of Series C Preferred Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
any domestic securities exchange upon which the Series C Preferred Stock may be
listed; provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) if the
total number of shares of Series C Preferred Stock issuable after such action
upon exercise of all outstanding warrants, together with all shares of Series C
Preferred Stock then outstanding and all shares of Series C Preferred Stock then
issuable upon exercise of all options and upon the conversion of all convertible
securities then outstanding, would exceed the total number of shares of Series C
Preferred Stock then authorized by the Company's Restated Articles of
Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Series C Preferred Stock
into a greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Series C Preferred Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
3.2 DIVIDENDS IN SERIES C PREFERRED STOCK, OTHER STOCK,
PROPERTY, RECLASSIFICATION. If at any time or from time to time the Holders of
Series C Preferred Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,
3.
<PAGE> 4
(a) Series C Preferred Stock or any shares of stock
or other securities which are at any time directly or indirectly convertible
into or exchangeable for Series C Preferred Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution;
(b) any cash paid or payable otherwise than as a cash
dividend; or
(c) Series C Preferred Stock or additional stock or
other securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Series C Preferred Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section 3.1
above);
then and in each such case, the Holder hereof shall, upon the exercise of this
Warrant, be entitled to receive, in addition to the number of shares of Series C
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefor, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Series C Preferred Stock as of the date on which holders of
Series C Preferred Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Series C Preferred
Stock shall be entitled to receive stock, securities, or other assets or
property (an "Organic Change"), then, as a condition of such Organic Change,
lawful and adequate provisions shall be made by the Company whereby the Holder
hereof shall thereafter have the right to purchase and receive (in lieu of the
shares of the Series C Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such shares of stock, securities or other assets or property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Series C Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby; provided, however, that in the event the value of the
stock, securities or other assets or property (determined in good faith by the
Board of Directors of the Company) issuable or payable with respect to one share
of the Series C Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby is
in excess of the Stock Purchase Price hereof effective at the time of a merger
and securities received in such reorganization, if any, are publicly traded,
then this Warrant shall expire unless exercised prior to such Organic Change. In
the event of any Organic Change, appropriate provision shall be made by the
Company with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof (including, without limitation, provisions
for adjustments of the Stock Purchase Price and of the number of shares
purchasable and receivable upon the exercise of this Warrant) shall
4.
<PAGE> 5
thereafter be applicable, in relation to any shares of stock, securities or
assets thereafter deliverable upon the exercise hereof.
3.4 CERTAIN EVENTS. If any change in the outstanding Series C
Preferred Stock of the Company or any other event occurs as to which the other
provisions of this Section 3 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the Holder of the
Warrant in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under the Warrant, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or
class of shares subject to this Warrant and of the Stock Purchase Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(b) The Company shall give written notice to the
Holder at least 10 business days prior to the date on which the Company closes
its books or takes a record for determining rights to receive any dividends or
distributions.
(c) The Company shall also give written notice to the
Holder at least 20 business days prior to the date on which an Organic Change
shall take place.
3.6 Notwithstanding this Section 3, the Stock Purchase Price
shall be adjusted as follows:
(a) During the period August 19, 1998 to August 19,
1999, the Stock Purchase Price shall be equal to three dollars and ninety-five
cents ($3.95) per share solely for the number of shares of Series C Preferred
Stock equal to (i) the number of shares of Series C Preferred Stock that US WEST
Interactive Services, Inc. ("US WEST") has exercised to date under that certain
Warrant Purchase Agreement dated as of July 7, 1997 (the "US WEST Warrant") plus
(ii) one-half of the remaining number of shares of Series C Preferred Stock
issuable upon exercise of this Warrant; and
(b) During the period August 19, 1999 to the
Expiration Date, the Stock Purchase Price shall be equal to five dollars and
fourteen cents ($5.14) per share solely for the number of shares of Series C
Preferred Stock equal to (i) the number of shares of Series C Preferred Stock
that US WEST has exercised to date under the US WEST Warrant plus (ii) one-half
of the remaining number of shares of Series C Preferred Stock issuable upon
exercise of this Warrant.
5.
<PAGE> 6
(c) Notwithstanding Sections 3.6(a) and (b) above, in
the event US WEST exercises the US WEST Warrant, the Company shall provide
Holder with prompt notice of such exercise by US WEST and the Holder shall have
twenty (20) days from such notice to exercise all or any part of this Warrant
for an exercise price equal to the initial Stock Purchase Price prior to any
increase in the Stock Purchase Price pursuant to Sections 3.6(a) and (b) above.
4. ISSUE TAX. The issuance of certificates for shares of Series C
Preferred Stock upon the exercise of the Warrant shall be made without charge to
the Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.
5. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Series C Preferred
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
6. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Series C Preferred Stock, and no mere enumeration
herein of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its creditors.
7. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the Holder hereof, when this Warrant shall have been so endorsed, may
be treated by the Company, at the Company's option, and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes.
8. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the Holder of this Warrant and of the holder of
shares of Series C Preferred Stock issued upon exercise of this Warrant, shall
survive the exercise of this Warrant.
6.
<PAGE> 7
9. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
10. NOTICES. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified mail, postage prepaid, to each such
Holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant or such
other address as either may from time to time provide to the other.
11. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets. All of the obligations of
the Company relating to the Series C Preferred Stock issuable upon the exercise
of this Warrant shall survive the exercise and termination of this Warrant. All
of the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the Holder hereof.
12. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
13. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
14. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 19th day of August,
1997.
WIRE NETWORKS, INC.
By: /s/ Marleen McDaniel
------------------------------------
Marleen McDaniel, President
ATTEST:
By: /s/ Ellen Pack
------------------------------------
Ellen Pack, Secretary
WARRANT
<PAGE> 9
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________, 19___
WIRE Networks, Inc.
___________________
___________________
Attn: President
Ladies and Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
WIRE Networks, Inc. (the "Company") and dated August _____, 1997
Warrant No. PCW-___ (the "Warrant") and to purchase thereunder
_________________ shares of the Series C Preferred Stock of the Company
(the "Shares") at a purchase price of _________________ Dollars
($__________) per Share or an aggregate purchase price of
_________________ Dollars ($__________) (the "Purchase Price").
[ ] The undersigned hereby elects to convert _______________________
percent (____%) of the value of the Warrant pursuant to the provisions
of Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
The undersigned also makes the representations set forth on the attached Exhibit
B of the Warrant.
Very truly yours,
________________________________________
By:_____________________________________
Title:__________________________________
WARRANT
<PAGE> 10
EXHIBIT B
INVESTMENT REPRESENTATION
THIS AGREEMENT MUST BE COMPLETED, SIGNED AND RETURNED ALONG WITH THE
SUBSCRIPTION FORM BEFORE THE SERIES C PREFERRED STOCK ISSUABLE UPON EXERCISE OF
THE WARRANT DATED AUGUST 19, 1997, WILL BE ISSUED.
_____________________, 19__
WIRE Networks, Inc.
___________________
___________________
Attn: President
Ladies and Gentlemen:
The undersigned, _________________________ ("Purchaser"), intends to
acquire up to ______________ shares of the Series C Preferred Stock (the "Series
C Preferred Stock") of WIRE NETWORKS, INC. (the "Company") from the Company
pursuant to the exercise or conversion of certain Warrants to purchase Series C
Preferred Stock held by Purchaser. The Series C Preferred Stock will be issued
to Purchaser in a transaction not involving a public offering and pursuant to an
exemption from registration under the Securities Act of 1933, as amended (the
"1933 Act") and applicable state securities laws. In connection with such
purchase and in order to comply with the exemptions from registration relied
upon by the Company, Purchaser represents, warrants and agrees as follows:
Purchaser is acquiring the Series C Preferred Stock for its own
account, to hold for investment, and Purchaser shall not make any sale, transfer
or other disposition of the Series C Preferred Stock in violation of the 1933
Act or the General Rules and Regulations promulgated thereunder by the
Securities and Exchange Commission (the "SEC") or in violation of any applicable
state securities law.
Purchaser has been advised that the Series C Preferred Stock has not
been registered under the 1933 Act or state securities laws on the ground that
this transaction is exempt from registration, and that reliance by the Company
on such exemptions is predicated in part on Purchaser's representations set
forth in this letter.
Purchaser has been informed that under the 1933 Act, the Series C
Preferred Stock must be held indefinitely unless it is subsequently registered
under the 1933 Act or unless an exemption from such registration (such as Rule
144) is available with respect to any proposed transfer or disposition by
Purchaser of the Series C Preferred Stock. Purchaser further agrees that the
Company may refuse to permit Purchaser to sell, transfer or dispose of the
Series C Preferred Stock (except as permitted under Rule 144) unless there is in
effect a registration statement under the 1933 Act and any applicable state
securities laws covering such transfer, or
<PAGE> 11
unless Purchaser furnishes an opinion of counsel reasonably satisfactory to
counsel for the Company, to the effect that such registration is not required.
Purchaser also understands and agrees that there will be placed on the
certificate(s) for the Series C Preferred Stock, or any substitutions therefor,
a legend stating in substance:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws. These shares have been
acquired for investment and may not be sold or otherwise transferred in
the absence of an effective registration statement for these shares
under the Securities Act and applicable state securities laws, or an
opinion of counsel satisfactory to the Company that registration is not
required and that an applicable exemption is available."
Purchaser has carefully read this letter and has discussed its
requirements and other applicable limitations upon Purchaser's resale of the
Series C Preferred Stock with Purchaser's counsel.
Very truly yours,
________________________________________
By:_____________________________________
Title:__________________________________
WARRANT
<PAGE> 1
EXHIBIT 10.35
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE (this "Amendment") is dated for reference
purposes only as May 25, 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. 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 Suite 105 (approximately
431 rentable square feet), Suite 106 (approximately 1,206 rentable square feet),
Suite 107 (approximately 729 rentable square feet) and Suite 108 (approximately
2,203 rentable square feet) in Building 3, 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 to include Suite 110
(approximately 3,376 76 rentable square feet), in that certain building commonly
known as 18 10 Gateway Drive in San Mateo, California ("Building 2") and the
Lease Term was extended.
E. Wire Networks assigned its interest under the Lease to Tenant.
F. Landlord and Tenant entered into that certain Fourth Amendment to
Lease dated March 24, 1999 (the "Fourth Amendment"), pursuant to which the size
of the Initial Premises was further expanded to include Suite 100 (approximately
1,207 rentable square feet), Suite 109 (approximately 3,550 rentable square
feet) and Suite 200 (approximately 9,959 rentable square feet) in Building 3 and
the Lease Term was further extended. Suites 150, 105, 106, 107 and 108 in
Building 3, Suite I 10 in Building 2 and (as of the respective commencement
dates for each space) Suites 100, 109 and 200 of Building 3 are collectively
referred to herein as the "Original Premises".
1.
<PAGE> 2
G. The Initial Lease as amended by the Addendum, Addendum II, the First
Amendment, Second Amendment, the Third Amendment the Fourth Amendment and this
Amendment shall be referred to herein as the Lease.
H. Landlord and Tenant desire to further modify the size of the Original
Premises by adding additional space in Building 3 and terminating space in
Building 2, 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:
1. INCORPORATION OF RECITALS AND DEFINITION. The Recitals are hereby
incorporated herein by this reference. In the event of any conflicts between the
Lease and this Amendment; the terms of this Amendment shall control. Capitalized
terms used in this Amendment not otherwise defined herein shall have the meaning
given such terms in the Lease.
2. EXPANSION OF THE ORIGINAL PREMISES/NEW DEFINITION OF PREMISES.
Effective on the Expansion Space Commencement Date (as defined in paragraph 3
below), Section I of the Lease shall be amended to include in the definition of
"Premises", approximately 15,564 rentable square feet identified as Suites 210,
230 and 250 in Building 3 (the "Expansion Space") and described in more detail
in Exhibit A, attached hereto.
3. EXPANSION SPACE TERM. Commencing on September 1, 1999 (the "Expansion
Space Commencement Date") and continuing through and including August 31, 2003,
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 August 1, 1999, for the sole
purpose of installing certain equipment, trade fixtures and furniture therein.
Any early occupancy of any 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.
4. PARTIAL TERMINATION OF THE ORIGINAL PREMISES. Effective August 31,
1999 (the "Suite 110 Termination Date") Section 1 of this Lease shall be amended
to exclude from the definition of "Premises", Suite 110 in Building 2 containing
approximately 3,376 rentable square feet, which is more particularly described
in Exhibit B, B, attached hereto (the "Suite 110 Termination Space"); subject to
the condition that on or prior to the Suite 110 Termination Date, Tenant
surrenders to Landlord the Suite 110 Termination Space in good condition and
repair, normal wear and tear casualty, excepted. Tenant shall contact Chet Socco
at (650) 655-6800 to schedule a walk-through and to coordinate Tenant's vacation
of the Suite 110 Termination Space.
2.
<PAGE> 3
]
5. BASE MONTHLY RENT. Commencing on the Expansion Space Commencement
Date, Tenant shall pay to Landlord (in addition to all other amounts due under
the Lease), Base Monthly Rent for the Original Premises and the Expansion
Premises in the following amounts:
<TABLE>
<CAPTION>
(a) Suite 150 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
<S> <C> <C> <C> <C> <C>
Through 8/31/1999: $26,046.93 per month $312,563.16 per year 2nd Amendment
9/1/1999- 8/31/2000: $26,523.98 per month $318,287.76 per year
9/l/2000- 8/31/2001: $27,001.03 per month $324,012.36 per year
(b) Suite 105 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Through 8/31/1999: $ 1,176.63 per month $ 14,119.56 per year 2nd Amendment
9/1/1999- 8/31/2000: $1,198.18 per month $ 14,378.16 per year
9/l/2000- 8/31/2001: $ 1,219.73 per month $ 14,636.76 per year
(c) Suite 106 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Through 8/31/1999: $3,292.38 per month $39,508.56 per year 2nd Amendment
9/1/1999- 8/31/2000: $3,352.68 per month $40,232.16 per year
9/l/2000- 8/31/2001: $3,412.98 per month $40,955.76 per year
(d) Suite 107 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Through 8/31/1999: $ 1,990.17 per month $23,882.04 per year 2nd Amendment
9/1/1999- 8/31/2000: $2,026.62 per month $24,319.44 per year
9/l/2000- 8/31/2001: $2,063.07 per month $24,756.84 per year
(e) Suite 108 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Through 8/31/1999: $6,014.19 per month $72,170.28 per year 2nd Amendment
9/1/1999- 8/31/2000: $6,124.34 per month $73,492.08 per year
9/l/2000- 8/31/2001: $6,234.49 per month $74,813.88 per year
(f) Suites 150, 105, 106, 107 and 108
Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
9/l/2001 - 12/3 1/2002: $47,974.00 per month $575,688.00 per year 3rd Amendment
4th Amendment
(Suite 110 rental
deleted)
(g) Suite 100 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Months 1-12: $3,68135 per month $44,176.20 per year 4th Amendment
Months 13 - 24: $3,802.05 per month $45,624.60 per year
Months 25 - 12/31/2002: $3,922.75 per month $47,073.00 per year
(h) Suite 109 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Months 1-12: $ 10,827.50 per month $129,930.00 per year 4th Amendment
Months 13 - 24: $11,182.50 per month $ 134,190.00 per year
Months 25 - 12/31/2002: $ 11,537.50 per month $138,450.00 per year
(i) Suite 200 Period Monthly Base Rent Annual Base Rent Source
------ ----------------- ---------------- ------
Months 1-12: $30,374.95 per month $364,499.40 per year 4th Amendment
Months 13 - 24: $31,370.85 per month $376,450.20 per year
Months 25 - 12/31/2002: $32,366.75 per month $388,401.00 per year
(j) Expansion Period Monthly Base Rent Annual Base Rent Source
Space ------ ----------------- ---------------- ------
9/01/99- 8/31/2000: $50,583.00 per month $606,996.00 per year 4th Amendment
9/l/2000- 8/31/2001: $52,139.40 per month $625,672.80 per year
9/1/2001- 8/31/2002: $53,695.80 per month $644,349.60 per year
9/l/2002- 8/31/2003: $55,252.20 per month $663,026.40 per year
</TABLE>
3.
<PAGE> 4
In addition, Tenant shall continue to pay Base Rent to Landlord for the Suite
110 Termination Space in the amount of $10,128.00 per month up to and including
the Suite 110 Termination Date.
6. BASE YEAR. As of the Expansion Space Commencement Date, Section 3(b)
of the Lease shall be amended to establish the "Base Year" for the Expansion
Space as the 1999 calendar year. The Base Year for the Original Premises shall
be unchanged.
7. TENANT'S PROPORTIONATE SHARE.
(a) EXPANSION SPACE. As of the Expansion Space Commencement
Date, the Tenant's Proportionate Share of Building 3 shall be increased by
22.23%.
(b) SUITE 110 TERMINATION SPACE. As of the Suite 110 Termination
Date, the Tenant's Proportionate Share of Building 2 shall be decreased to 0.0%.
8. SECURITY DEPOSIT. Section 4 of the Lease is amended to increase the
amount of the Security Deposit upon the Expansion Space Commencement Date by
$55,252.20 (the "Expansion Space Security Deposit"). Tenant shall deliver the
Expansion Space Security Deposit to Landlord concurrently with execution of this
Amendment, 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. Notwithstanding the foregoing, the amount of the Expansion Space Security
Deposit required to be delivered by Tenant to Landlord concurrently with the
execution of this Amendment may be offset by the amount of the security deposit
held by Landlord in connection with the Suite 110 Termination Space
($10,803.20), such that Tenant shall be required to deposit an additional
$44,449.00 with Landlord ($55,252.20 - $10,803.20 $ 44,449.00).
9. TENANT IMPROVEMENT. Tenant agrees and acknowledges that Landlord
shall provide the Expansion Space in its "as-is" condition with existing paint
and carpet. 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. Notwithstanding the
foregoing, in connection with the construction of such approved interior
improvements or alterations in the Expansion Space (the "Expansion Space Tenant
Improvements"), Landlord shall provide an amount not to exceed $93,384.00 (the
"Expansion Space Tenant Improvement Allowance"), on the terms and conditions set
forth below. The Expansion Space 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
Space (the "Expansion Space Tenant Improvement Costs"). None of the Expansion
Space 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 Space 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 Space Tenant Improvement Costs. Any portion of the Expansion Space
Tenant Improvement Allowance which is not requested by Tenant prior to February
29, 2000 shall be forfeited (i.e., the unused shall not be applied against rent
or other obligations of Tenant under the Lease).
4.
<PAGE> 5
10. BUILDING SIGN. In the event that existing tenant of Building 3,
Paging Network of San Francisco, does not renew its lease for space at Building
3 with Landlord, then Landlord shall grant Tenant the right to install its name
on the outside of Building 3; provided, however, that the installation and
location of such sign is subject to Landlord's prior written approval, 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 sole cost and expense. Tenant, at
its sole cost and expense, shall maintain the sign in good condition and repair.
Under no circumstances shall Landlord permit more than one (1) tenant name to be
installed on the outside of Building 3. Landlord's current Signage Standards are
attached hereto as Exhibit C.
11. PARKING SPACE. Tenant shall continue to be provided with 3.5 parking
spaces per 1,000 rentable square are feet of Premises on a non-exclusive and
unreserved basis.
12. REAL ESTATE BROKER. Tenant wan-ants 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 Cushman & Wakefield as Tenant's broker and CB Richard
Ellis as Landlord's broker, and Tenant agrees to indemnify, defend and hold
Landlord harmless from any claims made by any party other than Cushman &
Wakefield and CB Richard Ellis to the extent such third party's claims arise as
a result of or in connection with Tenant's activities.
13. GOVERNING LAW. This Amendment shall be governed by and be construed
under the laws of the State of California.
14. ATTORNEYS' FEE. 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.
15. 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.
16. CONFIRMATION OF LEASE. Except as amended by this Amendment, the
parties hereby agree and confirm that the Lease is full force and effect. In the
event of any conflict between the Lease and this Amendment, the terms of this
Amendment shall control.
IN WITNESS HEREOF, the parties hereto have executed this Amendment as of
the date first written above.
5.
<PAGE> 6
"Tenant"
WOMEN.COM NETWORKS, LLC,
By: /s/ Michael Perry
---------------------------------
Name: Michael Perry
---------------------------------
Its: CFO Date: 5/25/99
--------------------------------- ------------------------
"Landlord"
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By: /s/ Philip L. Hawkins
---------------------------------
Name: Philip L. Hawkins
---------------------------------
Its: Chief Operating Officer Date: 6/14/99
--------------------------------- ------------------------
6.
<PAGE> 1
Exhibit 10.36
-----------------------------------
AGREEMENT OF LEASE
Between
POLESTAR FIFTH PROPERTY ASSOCIATES LLC
Landlord,
AND
WOMEN.COM NETWORKS, LLC
Tenant.
Premises:
The entire Second (2nd) Floor and Mezzanine
417 Fifth Avenue
New York, New York
-----------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. BASIC LEASE TERMS...................................................................1
A. Definitions..................................................................1
B. Demise.......................................................................2
C. Term.........................................................................2
D. Rent.........................................................................2
E. Rent Credit..................................................................2
2. USE AND OCCUPANCY...................................................................2
A. Permitted Uses...............................................................2
B. Use Prohibitions.............................................................2
3. ALTERATIONS.........................................................................3
A. Alterations Within Premises..................................................3
B. Restoration of Premises......................................................3
C. Chlorofluorocarbons..........................................................4
D. Submission of Plans..........................................................4
E. Mechanics' Liens; Labor Conflicts............................................4
4. REPAIRS.............................................................................4
5. WINDOW CLEANING.....................................................................5
6. REQUIREMENTS OF LAW; FLOOR LOAD.....................................................5
A. Requirements of Law..........................................................5
B. Floor Load...................................................................6
7. SUBORDINATION.......................................................................6
A. Subordination................................................................6
B. Attornment...................................................................6
C. Subordination, Non-Disturbance Agreement.....................................6
8. RULES AND REGULATIONS...............................................................7
9. INSURANCE...........................................................................8
A. Liability Insurance..........................................................8
B. "All Risk" Insurance.........................................................8
C. Waiver of Subrogation........................................................8
10. DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE................................9
A. Repair of Damage.............................................................9
B. Landlord's Termination Option................................................9
C. Tenant's Termination Option..................................................9
D. Repair Delays................................................................9
E. Provision Controlling........................................................9
F. Property Loss or Damage.....................................................10
11. CONDEMNATION.......................................................................10
A. Condemnation................................................................10
B. Award.......................................................................10
12. ASSIGNMENT AND SUBLETTING..........................................................10
A. Prohibition Without Consent.................................................10
B. Notice of Proposed Transfer.................................................11
C. Landlord's Option...........................................................11
D. Termination by Landlord.....................................................11
E. Intentionally Deleted.......................................................11
F. Effect of Termination.......................................................11
G. Conditions for Landlord's Approval..........................................11
H. Future Requests.............................................................13
I. Sublease Provisions.........................................................13
J. Profits from Assignment or Subletting.......................................13
K. Other Transfers.............................................................13
L. Related Corporation.........................................................14
M. Assumption by Assignee......................................................14
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
N. Liability of Tenant.........................................................14
O. Listings....................................................................14
P. Exclusive Broker............................................................14
Q. Re-entry by Landlord........................................................15
R. Reimbursement...............................................................15
13. CONDITION OF THE PREMISES..........................................................15
A. Acceptance by Tenant........................................................15
B. Tenant's Initial Alteration.................................................16
14. ACCESS TO PREMISES.................................................................16
A. Access by Landlord..........................................................16
B. Other Landlord Privileges...................................................16
C. Courtyard Access............................................................17
15. CERTIFICATE OF OCCUPANCY...........................................................17
16. LANDLORD'S LIABILITY...............................................................17
17. DEFAULT............................................................................17
A. Events of Default; Conditions of Limitation.................................17
B. Effect of Bankruptcy........................................................18
C. Conditional Limitation......................................................18
18. REMEDIES AND DAMAGES...............................................................18
A. Landlord's Remedies.........................................................18
B. Damages.....................................................................19
C. Legal Fees..................................................................20
D. Additional Landlord Remedies................................................20
19. FEES AND EXPENSES..................................................................20
A. Curing Tenant's Defaults....................................................20
B. Late Charges................................................................20
20. NO REPRESENTATIONS BY LANDLORD.....................................................21
21. END OF TERM........................................................................21
A. Surrender of Premises.......................................................21
B. Holdover by Tenant..........................................................21
22. QUIET ENJOYMENT....................................................................21
23. FAILURE TO GIVE POSSESSION.........................................................21
24. NO WAIVER..........................................................................22
25. WAIVER OF TRIAL BY JURY............................................................22
26. INABILITY TO PERFORM...............................................................22
27. BILLS AND NOTICES..................................................................23
28. ESCALATION.........................................................................23
A. Defined Terms...............................................................23
B. Escalation..................................................................24
C. Payment of Escalations......................................................25
D. Adjustments.................................................................25
E. Intentionally Deleted.......................................................26
29. SERVICES...........................................................................26
A. Elevator....................................................................26
B. Heating.....................................................................26
C. Cooling/Window Units........................................................26
D. After Hours and Additional Services.........................................27
E. Cleaning/Provided by Landlord...............................................27
F. Sprinkler System............................................................27
G. Water.......................................................................27
H. Electricity Service.........................................................28
I. Interruption of Services....................................................29
</TABLE>
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<TABLE>
<S> <C> <C>
J. Life Safety Systems.........................................................29
K. Conduit Riser...............................................................29
30. PARTNERSHIP TENANT.................................................................29
A. Partnership Tenants.........................................................29
B. Limited Liability Entity....................................................30
31. VAULT SPACE........................................................................30
32. SECURITY DEPOSIT...................................................................30
33. CAPTIONS...........................................................................33
34. ADDITIONAL DEFINITIONS.............................................................33
35. PARTIES BOUND......................................................................33
36. BROKER.............................................................................33
37. INDEMNITY..........................................................................33
38. ADJACENT EXCAVATION SHORING........................................................34
39. MISCELLANEOUS......................................................................34
A. No Offer....................................................................34
B. Certificates................................................................34
C. Directory Listings..........................................................34
D. Authority...................................................................34
E. Signage.....................................................................34
F. Consents and Approvals......................................................35
G. Governing Law...............................................................35
H. Financial Statements........................................................35
I. Signatories.................................................................35
40. HAZARDOUS SUBSTANCES...............................................................35
41. INTENTIONALLY DELETED..............................................................36
42. INTENTIONALLY DELETED..............................................................36
43. RIGHT OF FIRST OFFER...............................................................36
</TABLE>
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<PAGE> 5
Exhibit 1 Floor Plan of Premises
Exhibit 2 Cleaning Specifications for Premises
Exhibit 3 Form of Letter of Credit
Schedule A Rules and Regulations
Schedule B Landlord's Pre-Commencement Core Work and
Landlord's Post-Commencement Core Work
Schedule C Requirements for Certificates of Final Approval
Schedule D Tenant's Initial Alteration
Schedule E Tenant Alteration Work and New Construction
Conditions and Requirements
-iv-
<PAGE> 6
THIS AGREEMENT OF LEASE (this "Lease"), made as of this 31st day of
July, 1999 by and between POLESTAR FIFTH PROPERTY ASSOCIATES LLC, having an
office c/o New Rock Realty Management LLC, 420 Lexington Avenue, New York, New
York 10017 ("Landlord") and WOMEN.COM, LLC, a Delaware limited liability company
having an office at 4 Columbus Circle, New York, New York 10019 ("Tenant").
1. BASIC LEASE TERMS.
A. Definitions. The following definitions contained in this subsection A
of this Article 1 shall have the meanings hereinafter set forth used throughout
this Lease and the Exhibits and Schedules (if any) annexed hereto and made a
part hereof.
(i) "Base Labor Year" shall mean the calendar year 1999.
(ii) "Base Tax Year" shall mean the Tax Year (as defined in
Article 28 hereof) 1999/2000.
(iii) "Broker" shall mean collectively, Cushman & Wakefield,
Inc. and Insignia/Edward S. Gordon Company.
(iv) "Building" the building known as 417 Fifth Avenue, County,
City and State of New York, together with all appurtenant rights granted to
Landlord, as lessee under the Master Lease (as hereinafter defined).
(v) "Commencement Date" shall mean the earlier of (i) the date
that Tenant takes possession of the Premises, or (ii) the date that is five (5)
days after the date that Landlord substantially completes Landlord's
Pre-Commencement Core Work (as hereinafter defined), Landlord shall use
reasonable efforts so that the Commencement Date shall be no later than
September 30, 1999, subject to the terms and conditions contained in Article 26.
(vi) "Expiration Date" shall mean December 31, 2009.
(vii) Intentionally Deleted.
(viii) "Labor Rate Factor" shall mean 47,193.
(ix) "Labor Rate Multiple" shall mean one (1).
(x) "Landlord's Contribution" shall mean $1,529,440.00.
(xi) "Landlord's Pre-Commencement Core Work" shall mean the work
and installations at the Premises performed prior to the Commencement Date and
"Landlord's Post Commencement Core Work" shall mean the work and installation at
the Premises performed after the Commencement Date each as set forth in Schedule
B annexed hereto and made a part hereof ("Landlord's Pre-Commencement Core Work
and Landlord's Post Commencement Core Work are from time to time collectively
referred to herein as "Landlord's Core Work").
(xii) "Master Lease" shall mean that certain lease dated
February 9, 1998 between 417 FS REALTY LLC, as lessor and Landlord, as lessee,
as such lease has been and may be modified and amended from time to time.
(xiii) "Permitted Uses" shall mean executive and general office
use.
(xiv) "Plans Submission Date" shall mean the date sixty (60)
days after the date of execution of this Lease.
(xv) "Premises" shall mean the entire second (2nd) floor and the
mezzanine in the Building, as more particularly shown hatched on Exhibit 1
annexed hereto and made a part hereof.
(xvi) "Real Property" shall mean the Building together with the
plot of land upon which such building stands.
(xvii) "Rent" shall mean:
(a) for the period commencing on the Rent Commencement
Date through and including December 31, 2004, $1,349,816.00 Dollars per annum,
payable in equal monthly installments of $112,484.66 Dollars each;
<PAGE> 7
(b) for the period commencing on January 1, 2005 through
and including the Expiration Date, $1,489,752.00 Dollars per annum, payable in
equal monthly installments of $124,146.00 Dollars each.
(xviii) "Rent Commencement Date" shall mean January 1, 2000.
(xix) "Security Deposit" shall mean the sum of $ 1,419,784.00 in
accordance with Article 32.
(xx) Intentionally Deleted.
(xxi) "Tenant's Initial Alteration" shall mean the work and
installations at the Premises to prepare the same for Tenant's initial occupancy
in accordance with Schedule D annexed hereto and made a part hereof.
(xxii) "Tenant's Proportionate Share" shall mean fourteen and
three one hundredths percent (14.30%).
Notwithstanding anything to the contrary contained in this subsection A
of this Article 1, Articles 1 through 43 of this Lease shall control the rights
and obligations of the parties hereto.
B. Demise. Subject to and upon the terms and conditions of this Lease,
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the
Premises, together with the non exclusive right in common with other tenants and
occupants of the Building to use the common areas of the Building, which
Landlord may vary from time to time, for the duration of the term of this Lease.
C. Term. This Lease shall be for a term (the "Term") which commences on
the Commencement Date and ends on the Expiration Date, unless sooner terminated
pursuant to any of the terms, covenants or conditions of this Lease or pursuant
to law. Within ten (10) business days of Landlord's or Tenant's request, Tenant
and Landlord shall join in the execution of an agreement stipulating the
Commencement Date, the Rent Commencement Date and the Expiration Date of this
Lease.
D. Rent. Commencing as of the Rent Commencement Date, and continuing
throughout the Term, Tenant shall pay Landlord the annual Rent set forth in
subsection A of this Article 1, payable without demand, on or in advance of the
first day of each month in equal monthly installments, in lawful money (legal
tender for public or private debts) of the United States of America, at the
office of Landlord or such other place as Landlord may designate from time to
time without any set-off, offset, abatement or deduction whatsoever, except as
otherwise expressly provided for in this Lease, except that Tenant shall pay the
first (1st) monthly installment upon Tenant's execution of this Lease. If the
Rent Commencement Date occurs on a date other than the first day of a calendar
month, Tenant shall pay to Landlord on or before the first day of the next month
the monthly installment of Rent for such partial month on a pro rata basis
(based on the actual number of days in the commencement month), and the first
month's rent paid by Tenant as described above shall be applied to the first
full calendar month of the Term for which Rent shall be due and payable. Such
payment, together with the sum paid by Tenant as first month's Rent upon the
execution of this Lease, shall constitute payment of the Rent for the period
from the Rent Commencement Date to and including the last day of the next
succeeding calendar month.
E. Rent Credit. Notwithstanding anything to the contrary hereinabove set
forth, provided this Lease is in full force and effect and Tenant is not in
default under this Lease, Tenant shall be entitled to a credit against the Rent
for the period commencing on the Commencement Date and ending on the day
immediately preceding the Rent Commencement Date in the monthly amount of
$112,484.66. The foregoing rent credit shall be null and void "ab initio" if
Landlord at any time terminates this Lease or re-enters or repossesses the
Premises on account of any default beyond any applicable notice and cure period
of Tenant under this Lease, and Landlord shall be entitled to recover from
Tenant, in addition to all other amounts Landlord is entitled to recover, the
aggregate amount of the rent credit herein provided for.
2. USE AND OCCUPANCY.
A. Permitted Uses. Tenant shall use and occupy the Premises for the
Permitted Uses, and for no other purpose.
B. Use Prohibitions. Anything contained herein to the contrary
notwithstanding, Tenant shall not use the Premises or any part thereof, or
permit the Premises or any part thereof to be used, (i) for the business of
photographic, multilith or multigraph reproductions or offset printing, (ii) as
an employment agency, labor union office, physician's or dentist's office or for
the rendition of any other diagnostic or therapeutic services, dance or music
studio, school (except for the training of employees of Tenant), (iii) for a
public stenographer or typist, (iv) for a telephone or telegraph agency,
telephone or secretarial service for the public at large, (v) for a messenger
service for the public at large, (vi) gambling or gaming
2
<PAGE> 8
activities, obscene or pornographic purposes or any sort of commercial sex
establishment, (vii) for the possession, storage, manufacture or sale of
alcohol, drugs or narcotics, (viii) for the offices or business of any federal,
state or municipal agency or any agency of any foreign government or (ix) for a
security or guard service, or any other business for which landlords of
comparable avenue buildings would not normally rent space for. If any provision
of this Lease permits, in whole or in part, use involving fabrication of any
product or assembly of components of any product or the sale of any product or
service, such use is only permitted to the extent lawful under the present
certificate of occupancy for the Building and under laws, ordinances,
regulations, rules and orders of any governmental body having jurisdiction over
the Premises, from time to time in effect. The provisions of this Article shall
be binding upon Tenant's successors, assigns, subtenants and licensees and shall
not be waived by any consent to an assignment or subletting or otherwise except
by written instrument expressly referring to this Article. Nothing in this
subsection B shall preclude Tenant from using any part of the Premises for
photographic, multilith or multigraph reproductions in connection with, either
directly or indirectly, its own business and/or activities.
3. ALTERATIONS.
A. Alterations Within Premises. Tenant shall not make or perform or
permit the making or performance of, any alterations, installations,
improvements, additions or other physical changes in or about the Premises
("Alterations") without Landlord's prior consent (except for painting, carpeting
and wallcovering, in an amount which does not exceed Fifty Thousand ($50,000)
Dollars in the aggregate ["Decorative Changes"], which may be made without
Landlord's consent). Notwithstanding the foregoing, subject to obtaining the
prior written consent of Landlord, which consent Landlord agrees not to
unreasonably withhold or delay, and subject to the provisions of this Article,
Tenant, at Tenant's expense, may make Alterations in or to the interior of the
Premises which are nonstructural, do not affect the Building's mechanical,
electrical, plumbing, Class E or other Building systems or the structural
integrity of the Building, do not affect any part of the Building other than the
Premises, do not affect any service required to be furnished by Landlord to
Tenant or to any other tenant or occupant of the Building, do not reduce the
value or utility of the Building and which are performed only by contractors and
mechanics first approved by Landlord and in compliance with all applicable laws.
Tenant shall not perform work, without the prior written consent of Landlord,
which may be granted or withheld in Landlord's sole discretion, which would (i)
require changes to the structural components of the Building or the exterior
design of the Building, (ii) require any material modification to the Building's
mechanical, electrical, plumbing installations or other Building installations
outside the Premises, (iii) not be in compliance with all applicable laws,
rules, regulations and requirements of any governmental department having
jurisdiction over the Building and/or the construction of the Premises,
including but not limited to, the Americans with Disabilities Act of 1990, or
(iv) be incompatible with the Certificate of Occupancy for the Building. Any
changes required by any governmental department affecting the construction of
the Premises shall be performed at Tenant's sole cost. All Alterations shall be
done at Tenant's expense and at such times and in such manner as Landlord may
from time to time reasonably designate pursuant to the conditions for
Alterations prescribed by Landlord for the Premises. A copy of the current
construction conditions and requirements for tenant alteration work and new
construction is annexed hereto as Schedule E and made a part hereof.
B. Restoration of Premises. All furniture, furnishings and movable
fixtures and removable partitions installed by Tenant must be removed from the
Premises by Tenant, at Tenant's expense, on or prior to the Expiration Date. All
Alterations in and to the Premises which may be made by Landlord or Tenant prior
to and during the Term, or any renewal thereof, shall become the property of
Landlord upon the Expiration Date or earlier end of the Term or any renewal
thereof, and shall not be removed from the Premises by Tenant unless Landlord,
at Landlord's option, by notice to Tenant, prior to the Expiration Date, elects
to have them removed from the Premises by Tenant, in which event the same shall
be removed from the Premises by Tenant, at Tenant's expense, on or prior to the
Expiration Date, but Tenant shall not be obligated to remove (a) typical office
installations only (no raised floor(s), vault(s), etc.), and (b) any Alterations
installed unless Tenant requests in writing from Landlord whether the same shall
be required to be removed from the Premises and Landlord notifies Tenant, at the
time Landlord reviews the plans and specifications therefore, that such
Alterations will have to be removed upon the expiration of the Term, or (c)
Tenant's Initial Alteration (except for non-typical office installations [i.e.,
safes, pantries and raised flooring], provided, however, Tenant shall be
required to pay for the cost of removal of such raised flooring provided
Landlord, within six (6) months from the Expiration Date determines, in its
reasonable discretion, that such raised flooring be removed for the occupancy of
a future tenant of the Premises and Landlord so notifies Tenant of its intention
to do so and Landlord commences such removal within sixty (60) days from the
date of Landlord's notice to Tenant.) In the event Landlord elects to have
Tenant remove such Alterations, Tenant shall repair and restore in a good and
workmanlike manner to Building standard original condition (reasonable wear and
tear excepted) any damage to the Premises or the Building caused by such
removal. Any of such Alterations or other property not so removed by Tenant at
or prior to the Expiration Date or earlier termination of the Term shall become
the property of Landlord, but nothing herein shall be deemed to relieve Tenant
of responsibility for the cost of removal of any such Alterations or other
property which Tenant is obligated to remove hereunder. Notwithstanding
3
<PAGE> 9
the foregoing, Tenant shall request from Landlord, in writing, at the time that
Tenant submits its plans and specifications for any Alterations to Landlord for
Landlord's review and approval, whether the Landlord will require Tenant to
remove such Alterations at the end of the Term.
C. Chlorofluorocarbons. Anything contained herein to the contrary
notwithstanding, in the event Tenant repairs or removes any mechanical or other
equipment within the Premises, installed by Tenant or Tenant's contractors,
containing chlorofluorocarbons ("CFC's"), the repair or removal of such
equipment, as the case may be, shall conform with all requirements of law and
industry practices. Additionally, any such repair or removal shall be done by
contractors reasonably approved by Landlord and subject to the procedures to
which Landlord's consent shall have previously been obtained. Tenant shall
indemnify and hold Landlord harmless from any liability or damages resulting
from any contamination within the Building, as a result of the repair or removal
of any of the aforesaid equipment containing CFC's by Tenant.
D. Submission of Plans. Prior to making any Alterations (except for
Decorative Changes), Tenant (i) shall submit to Landlord or to a consultant
appointed by Landlord ("Landlord's Consultant") detailed plans and
specifications (including layout, architectural, mechanical, electrical,
plumbing, Class E sprinkler and structural drawings stamped by a professional
engineer or architect licensed in the State of New York) for each proposed
Alteration and shall not commence any such Alteration without first obtaining
Landlord's approval of such plans and specifications, (ii) shall pay to Landlord
all reasonable costs and expenses incurred by Landlord (including the cost of
Landlord's Consultant) in connection with Landlord's review of Tenant's plans
and specifications, which amount shall not exceed $3,500.00, (iii) shall, at its
expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies, and (iv) shall furnish to Landlord
evidence that Tenant, and Tenant's contractors and subcontractors engaged in
connection with such Alterations, are carrying such insurance as Landlord may
require, as more particularly set forth in Schedule E annexed hereto and made a
part hereof. Landlord shall approve or disapprove Tenant's plans and
specifications for such Alterations within ten (10) business days. Upon
completion of such Alteration, Tenant, at Tenant's expense, shall obtain
certificates of final approval of such Alteration, including the "as-built"
drawings showing such Alterations, required by any governmental or
quasi-governmental bodies and shall furnish Landlord with copies thereof. All
Alterations shall be made and performed in accordance with the Rules and
Regulations (hereinafter defined) and in accordance with the Americans with
Disabilities Act of 1990, including but not limited to the accessibility
provisions thereof; all materials and equipment to be incorporated in the
Premises as a result of all Alterations shall be new and first quality; no such
materials or equipment shall be subject to any lien, encumbrance, chattel
mortgage or title retention or security agreement. Tenant agrees to allow
Landlord's designated contractor to bid on any Alterations to be performed by or
on behalf of Tenant. Landlord's approval of Tenant's plans, specifications and
working drawings for Alterations shall create no responsibility or liability on
the part of Landlord with respect to their completeness, design, sufficiency or
compliance with all applicable laws, rules or regulations of governmental
agencies or authorities.
E. Mechanics' Liens; Labor Conflicts. Any mechanic's lien filed against
the Premises, or the Real Property, for work claimed to have been done for, or
materials claimed to have been furnished to, Tenant, shall be discharged by
Tenant within ten (10) days after Tenant has notice of the same, at Tenant's
expense, by payment or filing the bond required by law. Tenant shall not, at any
time prior to or during the Term, directly or indirectly employ, or permit the
employment of, any contractor, service provider, mechanic or laborer in the
Premises, whether in connection with any Alterations, cleaning services or
otherwise, if, in Landlord's sole discretion, such employment will interfere or
cause any conflict with other contractors, service providers, mechanics, or
laborers engaged in the construction, cleaning, maintenance or operation of the
Building by Landlord, Tenant or others. In the event of any such interference or
conflict, Tenant, upon demand of Landlord, shall cause all contractors, service
providers, mechanics or laborers causing such interference or conflict to leave
the Building immediately. Landlord hereby approves Anchor Construction as
Tenant's contractor and construction manager for Tenant's Initial Alteration.
4. REPAIRS. Landlord shall maintain and repair the public portions of
the Building, both exterior and interior and the Building systems up to the
respective points of entry to the Premises, in a manner consistent with
comparable avenue office buildings in Manhattan in the vicinity of the Building.
Tenant shall, throughout the Term, take good care of the Premises and the
fixtures and appurtenances therein and at Tenant's sole cost and expense, make
all nonstructural repairs thereto as and when needed to preserve them in good
working order and condition, reasonable wear and tear and damage for which
Tenant is not responsible under the terms of this Lease excepted. Tenant shall
pay Landlord the reasonable cost for all replacements to the lamps, tubes,
ballasts and starters in the lighting fixtures installed in the Premises.
Notwithstanding the foregoing, all damage or injury to the Premises or to any
other part of the Building, or to its fixtures, equipment and appurtenances,
whether requiring structural or nonstructural repairs, caused by or resulting
from the carelessness, omission, neglect or improper conduct of, or Alterations
made by, or any work, labor, service or equipment done for or supplied to,
Tenant or any subtenant, or the installation, use or operation of any property
or equipment by Tenant or any of Tenant's subtenants,
4
<PAGE> 10
agents, employees, invitees or licensees, shall be repaired promptly by Tenant,
at its sole cost and expense, to the satisfaction of Landlord, to the extent
such damage was caused by Tenant or any of Tenant's subtenants, agents,
employees, contractors, invitees or licensees. Tenant also shall repair all
damage to the Building and the Premises caused by the moving of Tenant's
fixtures, furniture or equipment, to the extent such damage was caused by Tenant
or any of Tenant's subtenants, agents, contractors, employees, invitees or
licensees. All the aforesaid repairs shall be of quality and class equal to the
original work or construction and shall be made in accordance with the
provisions of Article 3 hereof. If Tenant fails after ten (10) days notice to
proceed with due diligence to make repairs required to be made by Tenant
hereunder, or if Landlord, following ten (10) days notice to Tenant, except in
the case of an emergency, elects to make any repairs in or to the Building or
the facilities and systems thereof for which Tenant is responsible, the same may
be made by Landlord, at the expense of Tenant, and the expenses thereof incurred
by Landlord shall be collectible by Landlord as additional rent promptly after
rendition of a bill or statement therefor. Tenant shall give Landlord prompt
notice of any defective condition in the Premises for which Landlord may be
responsible hereunder. Except as expressly provided in this Lease, there shall
be no allowance to Tenant for a diminution of rental value and no liability on
the part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord, Tenant or others making, or failing to make, any repairs,
alterations, additions or improvements in or to any portion of the Building, or
the Premises, or in or to fixtures, appurtenances, or equipment thereof. If the
Premises become infested with vermin, Tenant, at Tenant's expense, shall cause
the same to be exterminated from time to time to the satisfaction of Landlord
and shall employ such exterminators and such exterminating company or companies
as shall be approved by Landlord. Landlord shall endeavor to deliver the
Premises to Tenant on the Commencement Date substantially free of vermin and of
food smells caused by other tenants located in the Building. The water and wash
closets and other plumbing fixtures shall not be used for any purposes other
than those for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other substances shall be deposited therein. If at any
time any windows of the Premises are temporarily closed, darkened or bricked up
for any reason whatsoever including, but not limited to, Landlord's own acts, or
any of such windows are permanently closed, darkened or bricked up if required
by law or related to any construction upon property adjacent to the Real
Property by Landlord or others, Landlord shall not be liable for any damage
Tenant may sustain thereby and Tenant shall not be entitled to any compensation
therefor nor abatement of Rent nor shall the same release Tenant from its
obligations hereunder nor constitute an eviction.
5. WINDOW CLEANING. Tenant shall not clean, nor require, permit, suffer or allow
any window in the Premises to be cleaned, from the outside in violation of
Section 202 of the Labor Law, or any other applicable law, or of the rules of
the Board of Standards and Appeals, or of any other board or body having or
asserting jurisdiction. Landlord shall, at Landlord's sole cost and expense,
clean the exterior of the windows of the Premises in accordance with the
provisions Exhibit 2.
6. REQUIREMENTS OF LAW; FLOOR LOAD.
A. Requirements of Law. Tenant, at Tenant's sole expense, shall promptly
comply with all present and future laws, statutes, orders, directives and
regulations of federal, state, county, city and municipal authorities,
departments, bureaus, boards, agencies, commissions and other sub-divisions
thereof, and of any official thereof and any other governmental and quasi-public
authority and all rules, orders, regulations or requirements of the New York
Board of Fire Underwriters, or any other similar body which shall now or
hereafter impose any violation, order or duty upon Landlord or Tenant with
respect to the Premises as a result of the use, occupation or alteration thereof
by Tenant, unless such compliance requires structural alterations to the
Premises (except if such structural alterations are required as a result of
Tenant's manner of use of the Premises (as opposed to Tenant's use of the
Premises for office purposes) or as a result of Alterations made by or on behalf
of Tenant). Tenant shall not do or permit to be done any act or thing upon the
Premises which is contrary to and will invalidate or be in conflict with any
public liability, fire or other policies of insurance at any time carried by or
for the benefit of Landlord with respect to the Building and fixtures and
property therein, or which shall or might subject Landlord to any liability or
responsibility to any person or for property damage. Tenant shall not do, or
permit anything to be done in or upon the Premises, or bring or keep anything
therein, except as now or hereafter permitted by the New York City Fire
Department, New York Board of Fire Underwriters, New York Fire Insurance Rating
Organization or other authority having jurisdiction and then only in such
quantity and manner as not to increase the insurance rate applicable to the
Building, or use the Premises in a manner which shall increase the rate of fire
insurance on the Building or on property located therein, over that in similar
type buildings or in effect prior to this Lease. If by reason of Tenant's
failure to comply with the provisions of this Article, the fire insurance rate
shall at the beginning of this Lease or at any time thereafter be higher than it
otherwise would be, then Tenant shall reimburse Landlord, as additional rent
hereunder, for that part of all fire insurance premiums thereafter paid by
Landlord which shall have been charged because of such failure of use by Tenant,
and shall make such reimbursement upon the first day of the month following such
outlay by Landlord. In any action or proceeding wherein Landlord and Tenant are
parties, a schedule or "make up" of rates for the Building or the Premises
issued by the New York Fire Insurance Rating Organization, or other body fixing
such fire insurance rates, shall be conclusive evidence of the facts therein
stated and of the several items and
5
<PAGE> 11
charges in the fire insurance rates then applicable to the Premises. Any work or
installations made or performed by or on behalf of Tenant or any person claiming
through or under Tenant pursuant to this Article shall be made in conformity
with, and subject to the provisions of, Article 3 hereof.
B. Floor Load. Tenant shall not place a load upon any floor of the
Premises exceeding the floor load per square foot area which such floor was
designed to carry and which is allowed by law. Landlord reserves the right to
prescribe the weight and position of all safes, business machines and heavy
equipment and installations such that the same are placed and maintained by
Tenant, at Tenant's expense, in settings sufficient in Landlord's judgment to
absorb and prevent vibration, noise and annoyance. Tenant shall not move any
safe, heavy machinery, heavy equipment, freight, bulky matter or fixtures into
or out of the Building without Landlord's prior consent and payment to Landlord
of Landlord's reasonable costs in connection therewith. If such safe, machinery,
equipment, freight, bulky matter or fixtures requires special handling, Tenant
agrees to employ only persons holding a Master Rigger's License to do said work,
and that all work in connection therewith shall comply with the Administrative
Code of the City of New York and all other laws and regulations applicable
thereto, and shall be done during such hours as Landlord may designate.
7. SUBORDINATION.
A. Subordination. This Lease is subject and subordinate to the Master
Lease and to each and every ground or underlying lease of the Real Property or
the Building hereafter made by Landlord (collectively, the "Superior Leases")
and to each and every trust indenture and mortgage (each a "Mortgage" and
collectively the "Mortgages") which may now or hereafter affect the Real
Property, the Building or any such Superior Lease and the leasehold interest
created thereby, and to all renewals, extensions, supplements, amendments,
modifications, consolidations, and replacements thereof or thereto,
substitutions therefor and advances made thereunder. This clause shall be
self-operative and no further instrument of subordination shall be required to
make the interest of any lessor under a Superior Lease, or trustee or mortgagee
of a Mortgage superior to the interest of Tenant hereunder. In confirmation of
such subordination, however, Tenant shall execute promptly any certificate that
Landlord may request. If the date of expiration of any Superior Lease shall be
the same day as the Expiration Date, the Term shall end and expire twelve (12)
hours prior to the expiration of the Superior Lease. Tenant covenants and agrees
that, except as expressly provided herein and to the extent that Tenant has
knowledge of same, Tenant shall not do anything that would constitute a default
under any Superior Lease or Mortgage, or omit to do anything that Tenant is
obligated to do under the terms of this Lease so as to cause Landlord to be in
default under any of the foregoing. If, at any time Landlord's obligations as
lessee under the Master Lease require Landlord to modify any of its obligations
under, or any of the terms of, this Lease or if, in connection with the
financing of the Real Property, the Building or the interest of the lessee under
any Superior Lease, any lending institution shall request reasonable
modifications of this Lease, provided such modifications do not increase the
obligations or adversely affect the rights of Tenant under this Lease, Tenant
covenants to make such modifications.
B. Attornment. If at any time prior to the expiration of the Term, any
Mortgage shall be foreclosed or any Superior Lease shall terminate or be
terminated for any reason, Tenant agrees, at the election and upon demand of any
owner of the Real Property or the Building, or the lessor under any such
Superior Lease, or of any mortgagee in possession of the Real Property or the
Building, to attorn, from time to time, to any such owner, lessor or mortgagee,
upon the then executory terms and conditions of this Lease, for the remainder of
the term originally demised in this Lease, provided that such owner, lessor or
mortgagee, as the case may be, or receiver caused to be appointed by any of the
foregoing, shall not then be entitled to possession of the Premises. The
provisions of this subsection B shall inure to the benefit of any such owner,
lessor or mortgagee, shall apply notwithstanding that, as a matter of law, this
Lease may terminate upon the termination of any such Superior Lease, and shall
be self-operative upon any such demand, and no further instrument shall be
required to give effect to said provisions. Tenant, however, upon demand of any
such owner, lessor or mortgagee, agrees to execute, from time to time,
instruments in confirmation of the foregoing provisions of this subsection B,
satisfactory to any such owner, lessor or mortgagee, acknowledging such
attornment and setting forth the terms and conditions of its tenancy. Nothing
contained in this subsection B shall be construed to impair any right otherwise
exercisable by any such owner, lessor or mortgagee.
C. Subordination, Non-Disturbance Agreement. As a condition precedent to
Tenant's agreement to be bound by Section 7A and B, Landlord agrees within
thirty (30) days after the execution and delivery of this Lease to deliver from
the then holder or holders of the existing Mortgage an agreement on such
holder's or holders' form of agreement substantially to the effect that in the
event of any foreclosure of the existing Mortgage, such holder or holders will
not make Tenant a party-defendant to such foreclosure (unless required by law in
order to obtain jurisdiction, but in such event, no judgment foreclosing this
Lease will be sought) nor disturb its possession under this Lease so long as
there shall be no default by Tenant under this Lease beyond applicable notice
and grace periods (any such agreement, or any agreement of similar import, is
referred to as a "Non-Disturbance Agreement" and any provisions in any Mortgage
substantially to the same effect as those contained in a Non-Disturbance
Agreement are
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referred to as "Non-Disturbance Provisions"). As a condition precedent to
Tenant's agreement to be bound by Section 7A and B, Landlord agrees within
thirty (30) days after execution and delivery of this Lease to deliver from the
holder ("Master Lessor") of the Master Lease an agreement on such Master
Lessor's form of agreement substantially to the effect that in the event of any
default of the Master Lease by reason of the default or insolvency of Landlord,
the Master Lessor will permit Tenant to attorn to Master Lessor and will not
disturb Tenant's possession under this Lease, so long as there shall be no
default by Tenant under this Lease beyond applicable notice and grace periods.
At or about the time that Landlord executes any future Mortgages, Landlord
agrees to use its best efforts to obtain from the then holder or holders of such
future Mortgages a Non-Disturbance Agreement on such holder's or holders' form
of Non-Disturbance Agreement (a "Future Non-Disturbance Agreement" and any
provisions in such future Mortgage substantially to the same effect as those
contained in a Future Non-Disturbance Agreement are referred to as "Future
Non-Disturbance Provisions"). At or about the time that Landlord executes any
future Superior Lease of the Real Property or the Building, Landlord shall use
its best efforts to obtain from the lessor thereof an agreement on such lessor's
form of agreement substantially to the effect that in the event of the
termination of such Superior Lease by reason of the default or insolvency of the
lessee thereunder, such lessor will permit Tenant to attorn to such lessor and
will not disturb Tenant's possession under this Lease so long as there shall be
no default by Tenant under this Lease beyond applicable notice and grace periods
(any such agreement, or any agreement of similar import is referred to as a
"Future Tenant Recognition Agreement" and any provisions in such future Superior
Lease substantially to the same effect as those contained in a Future Tenant
Recognition Agreement are referred to as "Future Recognition Provisions"). If
Landlord is unable in good faith after using its best efforts to obtain any such
Future Non-Disturbance Agreement or Future Non-Disturbance Provisions or Future
Tenant Recognition Agreement or Future Tenant Recognition Provisions, neither
the validity of this Lease nor the obligations of Tenant under this Lease shall
be affected thereby (except that Tenant shall not be required to subordinate
this Lease to such future Mortgage(s) or Superior Lease(s)) and Landlord shall
not be liable to Tenant for Landlord's failure to obtain any such Future
Non-Disturbance Agreement or Future Non-Disturbance Provisions or Future Tenant
Recognition Agreement or Future Tenant Recognition Provisions, it being intended
that Landlord's sole obligation with respect to any Future Non-Disturbance
Agreement or Future Non-Disturbance Provisions or Future Tenant Recognition
Agreement or Future Tenant Recognition Provisions shall be to request, in good
faith, at or about the date of execution of any future Mortgages or Superior
Lease (with respect to any future Mortgages or Superior Lease) the then holders
of any Mortgages or the then lessor under the Superior Lease, as the case may
be, to enter into such Future Non-Disturbance Agreement or include Future
Non-Disturbance Provisions in any future Mortgages or enter into such Future
Tenant Recognition Agreement or include Future Tenant Recognition Provisions in
any future Superior Lease as the case may be, if required by the holder of any
Mortgage or by the lessor under any Superior Lease, Tenant shall promptly join
in any commercially reasonable Future Non-Disturbance Agreement or Future Tenant
Recognition Agreement to indicate its concurrence with the provisions thereof.
If Tenant does not execute and deliver such Future Non-Disturbance Agreement or
Future Tenant Recognition Agreement within ten (10) days from the date of
delivery of same, Landlord may execute such Future Non-Disturbance Agreement
and/or Future Tenant Recognition Agreement, as the case may be, on behalf of
Tenant, as Tenant's attorney-in-fact. Tenant hereby agrees to pay all reasonable
fees including without limitation, reasonable attorney's fees and disbursements,
of any holder or lessor for preparing such Future Non-Disturbance Agreement or
Future Tenant Recognition Agreement or Future Non-Disturbance Provisions or
Future Tenant Recognition Provisions (providing, however, Tenant shall only be
responsible for the payment of such fees in connection with three (3) Future
Non-Disturbance Agreements, in the aggregate, and three (3) Future Tenant
Recognition Agreements, in the aggregate, during the Term). The existing
Mortgage is held by PW Real Estate Investments, Inc. Notwithstanding the
foregoing, Landlord shall have no obligation to decline any financing under any
Mortgage or not enter into any Superior Lease if any holder of any Mortgage or
any lessor of any Superior Lease fails to provide a Non-Disturbance Agreement or
Tenant Recognition Agreement or Non-Disturbance Provisions or Tenant Recognition
Provisions, as the case may be.
8. RULES AND REGULATIONS. Tenant and Tenant's employees, agents, visitors and
licensees shall observe faithfully, and comply strictly with, the Rules and
Regulations annexed hereto and made a part hereof as Schedule A and such other
and further reasonable Rules and Regulations as Landlord or Landlord's agents
may from time to time adopt, so long as the same do not materially and adversely
impair Tenant's access to and use of the Premises (collectively, the "Rules and
Regulations") on such notice to be given as Landlord may elect. Nothing in this
Lease contained shall be construed to impose upon Landlord any duty or
obligation to enforce the Rules and Regulations or terms, covenants or
conditions in any other lease, against any other tenant and Landlord shall not
be liable to Tenant for violation of the same by any other tenant, its
employees, agents, visitors or licensees; provided, however, Landlord shall not
enforce the Rules and Regulations in a manner which discriminates against
Tenant.
9. INSURANCE.
A. Liability Insurance. Tenant shall obtain at its own expense and keep
in full force and effect during the Term, a policy of commercial general
liability insurance (including, without limitation,
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insurance covering Tenant's contractual liability under this Lease), under which
Tenant is named as the insured, and Landlord, Landlord's managing agent, the
present and any future mortgagee of the Real Property or the Building and/or
such other designees specified by Landlord from time to time, are named as
additional insureds. Such policy shall contain a provision that no act or
omission of Tenant shall affect or limit the obligation of the insurance company
to pay the amount of any loss sustained. Such policy shall also contain a
provision which provides the insurance company will not cancel or refuse to
renew the policy, or change in any material way the nature or extent of the
coverage provided by such policy, without first giving Landlord at least thirty
(30) days written notice by certified mail, return receipt requested, which
notice shall contain the policy number and the names of the insureds and policy
holder. The minimum limits of liability shall be a combined single limit with
respect to each occurrence in an amount of not less than $5,000,000 for injury
(or death) and damage to property or such greater amount as Landlord may, from
time to time, reasonably require. Tenant shall also maintain at its own expense
during the Term a policy of workers' compensation insurance providing statutory
benefits for Tenant's employees and employer's liability. Tenant shall provide
to Landlord upon execution of this Lease and at least thirty (30) days prior to
the termination of any existing policy, a certificate evidencing the
effectiveness of the insurance policies required to be maintained hereunder
which shall include the named insured, additional insured, carrier, policy
number, limits of liability, effective date, the name of the insurance agent and
its telephone number. Tenant shall provide Landlord with a complete copy of any
such policy upon written request of Landlord. Tenant shall have no right to
obtain any of the insurance required hereunder pursuant to a blanket policy
covering other properties unless the blanket policy contains an endorsement that
names Landlord, Landlord's managing agent and/or designees specified by Landlord
from time to time, as additional insureds, references the Premises, and
guarantees a minimum limit available for the Premises equal to the amount of
insurance required to be maintained hereunder. Each policy required hereunder
shall contain a clause that the policy and the coverage evidenced thereby shall
be primary with respect to any policies carried by Landlord, and that any
coverage carried by Landlord shall be excess insurance. The limits of the
insurance required under this subsection shall not limit the liability of Tenant
under this Lease. All insurance required to be carried by Tenant pursuant to the
terms of this Lease shall be effected under valid and enforceable policies
issued by reputable and independent insurers permitted to do business in the
State of New York, and rated in Best's Insurance Guide, or any successor thereto
(or if there be none, an organization having a national reputation) as having a
general policyholder rating of "A-" and a financial rating of at least "10". In
the event that Tenant fails to continuously maintain insurance as required by
this subsection, Landlord may, at its option and without relieving Tenant of any
obligation hereunder, order such insurance and pay for the same at the expense
of Tenant. In such event, Tenant shall repay the amount expended by Landlord,
with interest thereon, immediately upon Landlord's written demand therefor.
B. "All Risk" Insurance. Tenant shall also maintain at its own expense
during the Term a policy against fire and other casualty on an "all risk" form
covering all Alterations, construction and other improvements installed within
the Premises, whether existing in the Premises on the date hereof or hereinafter
installed by or on behalf of Landlord or Tenant, and on all furniture, fixtures,
equipment, personal property and inventory of Tenant located in the Premises and
any property in the care, custody and control of Tenant (fixed or otherwise)
sufficient to provide 100% full replacement value of such items, which policy
shall otherwise comply with the provisions of subsections A and C of this
Article 9. On any such policy, Tenant shall name Landlord as a loss payee, as
its interest may appear.
C. Waiver of Subrogation. The parties hereto shall procure an
appropriate clause in, or endorsement on, any "all-risk" property insurance
covering the Premises and the Building, including its respective Alterations,
construction and other improvements as well as personal property, fixtures,
furniture, inventory and equipment located thereon or therein, pursuant to which
the insurance companies waive subrogation or consent to a waiver of right of
recovery, and each party hereby agrees that it will not make any claim against
or seek to recover from the other or the partners, directors, officers,
shareholders or employees of such party for any loss or damage to its property
or the property of others resulting from fire or other hazards covered by such
"all-risk" property insurance policies to the extent that such loss or damage is
actually recoverable under such policies exclusive of any deductibles. Such
waiver will not apply should any loss or damage result from one of the parties'
gross negligence or willful misconduct. If the payment of an additional premium
is required for the inclusion of such waiver of subrogation provision, each
party shall advise the other of the amount of any such additional premiums and
the other party shall pay the same. It is expressly understood and agreed that
Landlord will not carry insurance on the Alterations, construction and other
improvements presently existing or hereafter installed within the Premises or on
Tenant's fixtures, furnishings, equipment, personal property or inventory
located in the Premises or insurance against interruption of Tenant's business.
10. DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE.
A. Repair of Damage. If the Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give immediate notice thereof to
Owner and this Lease shall continue in full force and effect except as
hereinafter set forth. If the Premises shall be damaged by fire or other
casualty, then the Premises shall be repaired and restored to its condition
preceding the damage in accordance with the
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provisions of this Article 10. Whenever in this Article 10 reference is made to
restoration of the Premises, (i) Tenant's obligation shall be as to all property
within the Premises including Tenant's furniture, fixtures, equipment and other
personal property, any and all Alterations, construction or other improvements
made to the Premises by or on behalf of Tenant and any other leasehold
improvements existing in the Premises on the date hereof, all of which shall be
restored and replaced at Tenant's sole cost and expense and (ii) Landlord's
obligation, if any, shall be as to the shell, which constitutes the structure of
the Building and the mechanical, electrical, plumbing, air-conditioning and
other building-wide systems up to the point of connection into the Premises.
Landlord shall have no liability to Tenant, and Tenant shall not be entitled to
terminate this Lease, if such repairs and restoration are not in fact completed
within Landlord's estimated time period, so long as Landlord shall have
proceeded with reasonable due diligence. The Rent until such repairs shall be
made shall be reduced in the proportion which the area of the part of the
Premises which is not usable by Tenant bears to the total area of the Premises;
provided, however, should Tenant reoccupy a portion of the Premises for the
conduct of its business prior to the date such repairs are made, the Rent shall
be reinstated with respect to such reoccupied portion of the Premises and shall
be payable by Tenant from the date of such occupancy. Notwithstanding the
foregoing to the contrary, in no event shall the Rent be reduced for a period in
excess of three (3) months following the date Landlord substantially completes
its repair and restoration obligations hereunder.
B. Landlord's Termination Option. Anything in subsection A of this
Article 10 to the contrary notwithstanding, if the Premises are totally damaged
or are rendered wholly untenantable, or if the Building shall be so damaged by
fire or other casualty that, in Landlord's opinion, either substantial
alteration, demolition or reconstruction of the Building shall be required
(whether or not the Premises shall have been damaged or rendered untenantable),
or if the Building, after its proposed repair, alteration or restoration, shall
not be economically viable as an office building, then in any of such events,
Landlord, at Landlord's option, may, not later than ninety (90) days following
the damage, give Tenant a notice in writing terminating this Lease. In addition,
(i) if any damage shall occur to the Premises or the Building during the last
two (2) years of the Term, Landlord shall have the option to terminate this
Lease by thirty (30) days prior written notice to Tenant and (ii) Landlord shall
not be obligated to repair or restore the Premises or the Building if a holder
of a mortgage or underlying leasehold applies proceeds of insurance to the loan
or lease payment balance, and the remaining proceeds, if any, available to
Landlord are insufficient to pay for such repair or restoration. If Landlord
elects to terminate this Lease, the Term shall expire upon the date set forth in
such notice, and Tenant shall vacate the Premises and surrender the same to
Landlord without prejudice however, to Landlord's rights and remedies against
Tenant under this Lease in effect prior to such termination and any Rent owing
shall be paid up to such date and any payments of Rent made by Tenant which were
on account of any period subsequent to such date shall be returned to Tenant.
Upon the termination of this Lease under the conditions provided for in the next
preceding sentence, Tenant's liability for Rent thereafter accruing shall cease
as of the day following such damage.
C. Tenant's Termination Option. Notwithstanding anything contained in
this Article 10 to the contrary, in the event Landlord elects not to terminate
this Lease as provided in subsection B above, Landlord shall, within ninety (90)
days of the date of any casualty described in subsection B above, send Tenant a
notice, which notice shall set forth the time period which Landlord, in its sole
discretion, determines is necessary to repair the Premises. If the foregoing
time period exceeds twelve (12) months, Tenant shall have the option to
terminate this Lease upon thirty (30) days notice to Landlord. If the foregoing
time period is twelve (12) months or less, and Landlord commences such repair
work and such repair work is not completed on or before the date that is twelve
(12) months after the date that Landlord commences such repair work, Tenant
shall have the right to send Landlord a notice ("Tenant's Termination Notice")
of its intention to cancel this Lease and if Landlord does not substantially
complete such repair work within thirty (30) days from the date of Landlord's
receipt of Tenant's Termination Notice, then this Lease shall be terminated
effective the date that is thirty (30) days after the date that Landlord
receives Tenant's Termination Notice.
D. Repair Delays. Landlord shall not be liable for reasonable delays
which may arise by reason of the claim adjustment with any insurance company on
the part of Landlord and/or Tenant, and for reasonable delays on account of
"labor troubles" or any other cause beyond Landlord's control.
E. Provision Controlling. The parties agree that this Article 10
constitutes an express agreement governing any case of damage or destruction of
the Premises or the Building by fire or other casualty, and that Section 227 of
the Real Property Law of the State of New York, which provides for such
contingency in the absence of an express agreement, and any other law of like
import now or hereafter in force shall have no application in any such case.
F. Property Loss or Damage. Any Building employee to whom any property
shall be entrusted by or on behalf of Tenant shall be deemed to be acting as
Tenant's agent with respect to such property and neither Landlord nor its agents
shall be liable for any damage to property of Tenant or of others entrusted to
employees of the Building, nor for the loss of or damage to any property of
Tenant by theft or
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otherwise. Neither Landlord nor its agents shall be liable for any injury or
damage to persons or property or interruption of Tenant's business resulting
from fire, explosion, falling plaster, steam, gas, electricity, water, rain or
snow or leaks from any part of the Building or from the pipes, appliances or
plumbing works or from the roof, street or subsurface or from any other place or
by dampness or by any other cause of whatsoever nature, unless caused by the
gross negligence of Landlord; nor shall Landlord or its agents be liable for any
such damage caused by other tenants or persons in the Building or caused by
construction of any private, public or quasi-public work nor shall Landlord be
liable for any latent defect in the Premises or in the Building. Anything in
this Article 10 to the contrary notwithstanding, nothing in this Lease shall be
construed to relieve Landlord from responsibility directly to Tenant for any
loss or damage caused directly to Tenant wholly or in part by the gross
negligence or willful misconduct of Landlord. Nothing in the foregoing sentence
shall affect any right of Landlord to the indemnity from Tenant to which
Landlord may be entitled under Article 37 hereof in order to recoup for payments
made to compensate for losses of third parties.
11. CONDEMNATION.
A. Condemnation. If the whole of the Real Property, the Building or the
Premises shall be acquired or condemned for any public or quasi-public use or
purpose, this Lease and the Term shall end as of the date of the vesting of
title with the same effect as if said date were the Expiration Date. If only a
part of the Real Property shall be so acquired or condemned then, (i) except as
hereinafter provided in this subsection A, this Lease and the Term shall
continue in force and effect but, if a part of the Premises is included in the
part of the Real Property so acquired or condemned, from and after the date of
the vesting of title, the Rent shall be reduced in the proportion which the area
of the part of the Premises so acquired or condemned bears to the total area of
the Premises immediately prior to such acquisition or condemnation; (ii) whether
or not the Premises shall be affected thereby, Landlord, at Landlord's option,
may give to Tenant, within sixty (60) days next following the date upon which
Landlord shall have received notice of vesting of title, a five (5) days notice
of termination of this Lease; and (iii) if the part of the Real Property so
acquired or condemned shall contain more than twenty percent (20%) of the total
area of the Premises immediately prior to such acquisition or condemnation, or
if, by reason of such acquisition or condemnation, Tenant no longer has
reasonable means of access to the Premises, Tenant, at Tenant's option, may give
to Landlord, within sixty (60) days next following the date upon which Tenant
shall have received notice of vesting of title, a five (5) days notice of
termination of this Lease. If any such five (5) days notice of termination is
given by Landlord or Tenant, this Lease and the Term shall come to an end and
expire upon the expiration of said five (5) days with the same effect as if the
date of expiration of said five (5) days were the Expiration Date. If a part of
the Premises shall be so acquired or condemned and this Lease and the Term shall
not be terminated pursuant to the foregoing provisions of this subsection A,
Landlord, at Landlord's expense, shall restore that part of the Premises not so
acquired or condemned to a self-contained rental unit. In the event of any
termination of this Lease and the Term pursuant to the provisions of this
subsection A, the Rent shall be apportioned as of the date of sooner termination
and any prepaid portion of Rent for any period after such date shall be refunded
by Landlord to Tenant.
B. Award. In the event of any such acquisition or condemnation of all or
any part of the Real Property, Landlord shall be entitled to receive the entire
award for any such acquisition or condemnation, Tenant shall have no claim
against Landlord or the condemning authority for the value of any unexpired
portion of the Term and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this subsection B shall be
deemed to prevent Tenant from making a claim in any condemnation proceedings for
the then value of any furniture, furnishings and fixtures installed by and at
the sole expense of Tenant and included in such taking, provided that such award
shall not reduce the amount of the award otherwise payable to Landlord.
12. ASSIGNMENT AND SUBLETTING.
A. Prohibition Without Consent. Tenant expressly covenants that it shall
not (i) assign or otherwise transfer this Lease or the term and estate hereby
granted, (ii) mortgage, pledge or encumber this Lease or the Premises or any
part thereof in any manner by reason of any act or omission on the part of
Tenant, (iii) sublet the Premises or any part thereof or permit the Premises or
any part thereof to be used or occupied by others (whether for desk space,
mailing privileges or otherwise) or (iv) advertise, or authorize a broker to
advertise the Premises for assignment or subletting, without obtaining the prior
written consent of Landlord in each instance. If this Lease be assigned, or if
the Premises or any part thereof be sublet or occupied by anybody other than
Tenant, Landlord may, after default by Tenant, collect rent from the assignee,
subtenant or occupant, and apply the net amount collected to the Rent herein
reserved, but no assignment, underletting, occupancy or collection shall be
deemed a waiver of the provisions hereof, the acceptance of the assignee,
undertenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of covenants on the part of Tenant herein contained. The
consent by Landlord to an assignment or underletting shall not in any way be
construed to relieve Tenant from obtaining the express consent in writing of
Landlord to any further assignment or underletting. In no event shall any
permitted subtenant assign or encumber its sublease or further sublet all or any
portion
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of its sublet space, or otherwise suffer or permit the sublet space or any part
thereof to be used or occupied by others, without Landlord's prior written
consent in each instance. Any assignment, sublease, mortgage, pledge,
encumbrance or transfer in contravention of the provisions of this Article 12
shall be void.
B. Notice of Proposed Transfer. If Tenant shall at any time or times
during the Term desire to assign this Lease or sublet all or part of the
Premises, Tenant shall give notice thereof to Landlord, which notice shall be
accompanied by (i) a fully-executed letter of intent which sets forth the
proposed business terms of the proposed assignment or sublease, the effective or
commencement date of which shall be not less than thirty (30) nor more than one
hundred and eighty (180) days after the giving of such notice, (ii) a statement
setting forth in reasonable detail the identity of the proposed assignee or
subtenant, the nature of its business and its proposed use of the Premises,
(iii) current financial information with respect to the proposed assignee or
subtenant, including, without limitation, its most recent financial report, (iv)
an agreement by Tenant to indemnify Landlord against liability resulting from
any claims that may be made against Landlord by the proposed assignee or
subtenant or by any brokers or other persons claiming a commission or similar
compensation in connection with the proposed assignment or sublease and (v) in
the case of a sublease, such additional information related to the proposed
subtenant as Landlord shall reasonably request, if any.
C. Landlord's Option. The notice containing all of the information set
forth in subsection B of this Article 12 above shall be deemed an offer from
Tenant to Landlord whereby Landlord may, at its option, terminate this Lease (if
the proposed transaction is an assignment or a sublease of all or substantially
all of the Premises for substantially the remainder of the Term). Said option
may be exercised by Landlord by notice to Tenant at any time within thirty (30)
days after the aforesaid notice has been given by Tenant to Landlord; and during
such thirty (30) day period Tenant shall not assign this Lease nor sublet such
space to any person or entity.
D. Termination by Landlord. If Landlord exercises its option to
terminate this Lease in the case where Tenant desires either to assign this
Lease or sublet all or substantially all of the Premises for substantially the
remainder of the Term, then this Lease shall end and expire on the date that
such assignment or sublet was to be effective or commence, as the case may be,
and the Rent and additional rent due hereunder shall be paid and apportioned to
such date. Furthermore, if Landlord exercises its option to terminate this Lease
pursuant to subsection C of this Article 12, Landlord shall be free to and shall
have no liability to Tenant if Landlord should lease the Premises (or any part
thereof) to Tenant's prospective assignee or subtenant.
E. Intentionally Deleted.
F. Effect of Termination. If Landlord exercises its option to terminate
this Lease as provided in subsection C above, if required by applicable law in
connection with any termination of this Lease, Tenant shall complete, swear to
and file any questionnaires, tax returns, affidavits or other documentation
which may be required to be filed with the appropriate governmental agency in
connection with any other tax which may now or hereafter be in effect. Tenant
further agrees to pay any amounts which may be assessed in connection with any
of such taxes and to indemnify Landlord against and to hold Landlord harmless
from any claims for payment of such taxes as a result of such transactions.
G. Conditions for Landlord's Approval. In the event Landlord does not
exercise its option provided to it pursuant to subsection C of this Article 12
and provided that Tenant is not in default of any of Tenant's obligations under
this Lease (after notice and the expiration of any applicable grace period) as
of the time of Landlord's consent, and as of the effective date of the proposed
assignment or commencement date of the proposed sublease, Landlord's consent
(which must be in writing and form reasonably satisfactory to Landlord) to the
proposed assignment or sublease shall not be unreasonably withheld or delayed,
provided and upon condition that:
(i) Tenant shall have complied with the provisions of subsection
B of this Article 12 and Landlord shall not have exercised its option under
subsection C of this Article 12 within the time permitted therefor;
(ii) In Landlord's reasonable judgment the proposed assignee or
subtenant is engaged in a business or activity, and the Premises, or the
relevant part thereof, will be used in a manner which (a) intentionally deleted,
(b) is limited to the use of the Premises as provided in Article 2, and (c) and
is not otherwise used in a manner prohibited by this Lease;
(iii) The proposed assignee or subtenant is a reputable party of
good character and with sufficient financial worth considering the
responsibility involved, and Landlord has been furnished with reasonable proof
thereof;
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(iv) Neither (a) the proposed assignee or subtenant nor (b) any person which,
directly or indirectly, controls, is controlled by or is under common control
with, the proposed assignee or subtenant, is then an occupant of any part of the
Building, and there is comparable space in the Building for a comparable term;
(v) The proposed assignee or subtenant is not a person with whom
Landlord is or has been, within the preceding six (6) month period, negotiating
to lease space in the Building;
(vi) The form of the proposed sublease or instrument of
assignment (a) shall be in form reasonably satisfactory to Landlord, and (b)
shall comply with the applicable provisions of this Article 12;
(vii) There shall not be more than three (3) subtenants of the
Premises;
(viii) The amount of the aggregate rent to be paid by the
proposed subtenant is not less than ninety-five (95%) percent of the then
current market rent per rentable square foot for the Premises (provided there is
comparable space in the Building at the time that Tenant submits to Landlord a
notice of its desire to assign or sublet in accordance with subsection B above)
as though the Premises were vacant, and the rental and other terms and
conditions of the sublease are substantially and materially the same as those
contained in the proposed sublease furnished to Landlord pursuant to subsection
B of this Article 12;
(ix) Intentionally Deleted;
(x) Tenant shall not have listed the Premises for subletting or
assignment, with a broker, agent or representative other than the then managing
agent of the Building or other agent designated by Landlord for a period of
ninety (90) days from the date that Tenant submits to Landlord a notice of its
desire to assign or sublet in accordance with subsection B above;
(xi) The proposed occupancy shall not, in Landlord's reasonable
opinion, increase the office cleaning requirements or the Building's operating
or other expenses or impose an extra unreasonable burden upon services to be
supplied by Landlord to Tenant;
(xii) The proposed assignee or subtenant or its business shall
not be subject to compliance with additional requirements of law (including
related regulations) beyond those requirements which are applicable to the named
Tenant herein which shall impose compliance of any additional requirements of
law upon the Landlord; and
(xiii) The proposed subtenant or assignee shall not be entitled,
directly or indirectly, to diplomatic or sovereign immunity and shall be subject
to the service of process in, and the jurisdiction of the courts of New York
State.
Landlord shall grant or deny its consent to any proposed subleasing or
assignment within twenty (20) days of Tenant's request therefore. Each
subletting pursuant to this subsection G of this Article 12 shall be subject to
all of the covenants, agreements, terms, provisions and conditions contained in
this Lease. Notwithstanding any such subletting to any subtenant and/or
acceptance of Rent or additional rent by Landlord from any subtenant, Tenant
shall and will remain fully liable for the payment of the Rent and additional
rent due and to become due hereunder and for the performance of all the
covenants, agreements, terms, provisions and conditions contained in this Lease
on the part of Tenant to be performed and all acts and omissions of any licensee
or subtenant or anyone claiming under or through any subtenant which shall be in
violation of any of the obligations of this Lease shall be deemed to be a
violation by Tenant. Tenant further agrees that notwithstanding any such
subletting, no other and further subletting of the Premises by Tenant or any
person claiming through or under Tenant shall or will be made except upon
compliance with and subject to the provisions of this Article 12. If Landlord
shall decline to give its consent to any proposed assignment or sublease, or if
Landlord shall exercise its option under subsection C of this Article 12, Tenant
shall indemnify, defend and hold harmless Landlord against and from any and all
loss, liability, damages, costs, and expenses (including reasonable counsel
fees) resulting from any claims that may be made against Landlord by the
proposed assignee or subtenant or by any brokers or other persons claiming a
commission or similar compensation in connection with the proposed assignment or
sublease.
H. Future Requests. In the event that (i) Landlord fails to exercise its
option under subsection C of this Article 12 and consents to a proposed
assignment or sublease, and (ii) Tenant fails to execute and deliver the
assignment or sublease to which Landlord consented within ninety (90) days after
the giving of such consent, then, Tenant shall again comply with all of the
provisions and conditions of subsection B of this Article 12 before assigning
this Lease or subletting all or part of the Premises.
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I. Sublease Provisions. With respect to each and every sublease or
subletting authorized by Landlord under the provisions of this Lease, it is
further agreed that:
(i) No subletting shall be for a term ending later than one (1)
day prior to the Expiration Date of this Lease;
(ii) No sublease shall be delivered, and no subtenant shall take
possession of the Premises or any part thereof, until an executed counterpart of
such sublease has been delivered to Landlord;
(iii) Each sublease shall provide that it is subject and
subordinate to this Lease and to the matters to which this Lease is or shall be
subordinate, and that in the event of termination, re-entry or dispossession by
Landlord under this Lease Landlord may, at its option, take over all of the
right, title and interest of Tenant, as sublessor, under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of such sublease, except that Landlord shall not (a) be
liable for any previous act or omission of Tenant under such sublease, (b) be
subject to any counterclaim, offset or defense, not expressly provided in such
sublease, which theretofore accrued to such subtenant against Tenant, or (c) be
bound by any previous modification of such sublease or by any previous
prepayment of more than one (1) month's Rent. The provisions of this Article 12
shall be self-operative and no further instrument shall be required to give
effect to this provision; and
(iv) If any laws, orders, rules or regulations of any applicable
governmental authority require that any Hazardous Substances, including, without
limitation, asbestos, contained in or about the Premises to be sublet (the
"Sublet Space") be dealt with in any particular manner in connection with any
alteration of the Sublet Space, then it shall be either the Tenant's or the
subtenant's obligation, at such party's expense, to deal with such Hazardous
Substances in accordance with all such laws, orders, rules and regulations
(unless Landlord elects to deal with such Hazardous Substances itself, in which
event, the Tenant or the subtenant shall reimburse Landlord for all of
Landlord's costs and expenses in connection therewith within ten (10) days next
following the rendition of a statement therefor).
J. Profits from Assignment or Subletting. Landlord shall give its
consent to any assignment of this Lease or to any sublease or if Tenant shall
enter into any other assignment or sublease permitted hereunder, Tenant shall in
consideration therefor, pay to Landlord, as additional rent:
(i) in the case of an assignment, an amount equal to sixty (60%)
percent of all sums and other considerations paid to Tenant by the assignee for
or by reason of such assignment (including, but not limited to, sums paid for
the sale of Tenant's fixtures, leasehold improvements, equipment, furniture,
furnishings or other personal property, less, in the case of a sale thereof, the
then net unamortized or undepreciated cost thereof determined on the basis of
Tenant's federal income tax returns) less all expenses reasonably and actually
incurred by Tenant on account of brokerage commissions, legal fees, marketing
and advertising costs or reasonable alteration expenses incurred in connection
with such assignment, provided that Tenant shall submit to Landlord a receipt
evidencing the payment of such expenses (or other proof of payment as Landlord
shall reasonably require); and
(ii) in the case of a sublease, sixty (60%) percent of any
rents, additional charges or other consideration payable under the sublease on a
per square foot basis to Tenant by the subtenant which is in excess of the Rent
and additional rent accruing during the term of the sublease in respect of the
subleased space (at the rate per square foot payable by Tenant hereunder)
pursuant to the terms hereof (including, but not limited to, sums paid for the
sale or rental of Tenant's fixtures, leasehold improvements, equipment,
furniture or other personal property, less, in the case of the sale thereof, the
then net unamortized or undepreciated cost thereof determined on the basis of
Tenant's federal income tax returns), less all expenses reasonably and actually
incurred by Tenant on account of brokerage commissions, legal fees, marketing
and advertising costs or reasonable alteration expenses incurred; and the cost
of demising the premises so sublet in connection with such sublease, provided
that Tenant shall submit to Landlord a receipt evidencing the payment of such
expenses (or other proof of payment as Landlord shall require). The sums payable
under this subsection J(ii) of this Article 12 shall be paid to Landlord as and
when payable by the subtenant to Tenant.
K. Other Transfers. (i) If Tenant is a corporation other than a
corporation whose stock is listed and traded on a nationally recognized stock
exchange (hereinafter referred to as a "public corporation"), the provisions of
subsection A of this Article 12 shall apply to a transfer (by one or more
transfers) of a majority of the stock of Tenant as if such transfer of a
majority of the stock of Tenant were an assignment of this Lease; but said
provisions shall not apply to transactions with a corporation into or with which
Tenant is merged or consolidated or to which substantially all of Tenant's
assets are transferred, provided that such merger, consolidation or transfer of
assets is for a valid business purpose and not principally for the purpose of
transferring the leasehold estate created hereby, and provided further, that in
any of such events (a) the successor to Tenant has a net worth computed in
accordance with generally accepted accounting principles at least equal to the
greater of (1) the net worth of Tenant immediately prior to such
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merger, consolidation or transfer, or (2) the net worth of Tenant herein named
on the date of this Lease and (b) proof satisfactory to Landlord of such net
worth shall have been delivered to Landlord at least ten (10) days prior to the
effective date of any such transaction. An initial public offering of the stock
of Tenant shall not be deemed to be an assignment under this Lease.
(i) If Tenant is a partnership, the provisions of subsection A
of this Article 12 shall apply to a transfer (by one or more transfers) of a
majority interest in the partnership, as if such transfer were an assignment of
this Lease.
(ii) If Tenant is a subdivision, authority, body, agency,
instrumentality or other entity created and/or controlled pursuant to the laws
of the State of New York or any city, town or village of such state or of
federal government ("Governmental Entity"), the provisions of subsection A of
this Article 12 shall apply to a transfer (by one or more transfers) of any of
Tenant's rights to use and occupy the Premises, to any other Governmental
Entity, as if such transfer of the right of use and occupancy were an assignment
of this Lease; but said provisions shall not apply to a transfer of any of
Tenant's rights in and to the Premises to any Governmental Entity which shall
replace or succeed to substantially similar public functions, responsibilities
and areas of authority as Tenant, provided that in any of such events the
successor Governmental Entity (a) shall utilize the Premises in a manner
substantially similar to Tenant, and (b) shall not utilize the Premises in any
manner which, in Landlord's judgment, would impair the reputation of the
Building as a first-class office building.
L. Related Corporation. Tenant may, without Landlord's consent, but upon
prior notice to Landlord, permit any corporations or other business entities
(but not including Governmental Entities) which control, are controlled by, or
are under common control with Tenant (herein referred to as "related
corporation") to sublet all or part of the Premises for any of the purposes
permitted to Tenant, subject however to compliance with Tenant's obligations
under this Lease. Such subletting shall not be deemed to vest in any such
related corporation any right or interest in this Lease or the Premises nor
shall it relieve, release, impair or discharge any of Tenant's obligations
hereunder. For the purposes hereof, "control" shall be deemed to mean ownership
of not less than fifty percent (50%) of all of the voting stock of such
corporation or not less than fifty percent (50%) of all of the legal and
equitable interest in any other business entities.
M. Assumption by Assignee. Any assignment or transfer, whether made with
Landlord's consent pursuant to subsection A of this Article 12 or without
Landlord's consent pursuant to subsection K or L of this Article 12, shall be
made only if, and shall not be effective until, the assignee shall execute,
acknowledge and deliver to Landlord an agreement in form and substance
satisfactory to Landlord whereby the assignee shall assume the obligations of
this Lease and agree to be bound by all of the terms, conditions, covenants and
provisions hereof on the part of Tenant to be performed or observed and whereby
the assignee shall agree that the provisions in subsection A of this Article 12
shall, notwithstanding such assignment or transfer, continue to be binding upon
it in respect of all future assignments and transfers. The original named Tenant
covenants that, notwithstanding any assignment or transfer, whether or not in
violation of the provisions of this Lease, and notwithstanding the acceptance of
Rent and/or additional rent by Landlord from an assignee, transferee or any
other party, the original named Tenant shall remain fully liable for the payment
of the Rent and additional rent and for the other obligations of this Lease on
the part of Tenant to be performed or observed.
N. Liability of Tenant. The joint and several liability of Tenant and
any immediate or remote successor in interest of Tenant and the due performance
of the obligations of this Lease on Tenant's part to be performed or observed
shall not be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord extending the time, or modifying any of the
obligations, of this Lease, or by any waiver or failure of Landlord to enforce
any of the obligations of this Lease.
O. Listings. The listing of any name other than that of Tenant, whether
on the doors of the Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Premises, nor
shall it be deemed to be the consent of Landlord to any assignment or transfer
of this Lease or to any sublease of the Premises or to the use or occupancy
thereof by others. Any such listing shall constitute a privilege extended by
Landlord, revocable at Landlord's will by notice to Tenant.
P. Exclusive Broker. In the event Tenant desires to sublet the Premises
or assign this Lease, at Landlord's option, Tenant shall designate Landlord, the
then managing agent of the Building or other agent designated by Landlord for a
period of ninety (90) days from the date that Tenant submits a notice to
Landlord of its desire to sublet or assign in accordance with subsection B
above, as Tenant's exclusive agent to effect such sublease or assignment and
shall pay Landlord, the managing agent or such other agent, as the case may be,
a reasonable brokerage commission computed in accordance with the usual rates
charged by Landlord, the managing agent or such other agent.
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Q. Re-entry by Landlord. If Landlord shall recover or come into
possession of the Premises before the date herein fixed for the termination of
this Lease, pursuant to the terms of this Lease, Landlord shall have the right,
at its option, to take over any and all subleases or sublettings of the Premises
or any part thereof made by Tenant and to succeed to all the rights of said
subleases and sublettings or such of them as it may elect to take over. Tenant
hereby expressly assigns and transfers to Landlord such of the subleases and
sublettings as Landlord may elect to take over at the time of such recovery of
possession, such assignment and transfer not to be effective until the
termination of this Lease or re-entry by Landlord hereunder, pursuant to the
terms of this Lease, or if Landlord shall otherwise succeed to Tenant's estate
in the Premises, at which time Tenant shall upon request of Landlord, execute,
acknowledge and deliver to Landlord such further instruments of assignment and
transfer as may be necessary to vest in Landlord the then existing subleases and
sublettings. Every subletting hereunder is subject to the condition and by its
acceptance of and entry into a sublease, each subtenant thereunder shall be
deemed conclusively to have thereby agreed from and after the termination of
this Lease or re-entry by Landlord hereunder, pursuant to the terms of this
Lease, of or if Landlord shall otherwise succeed to Tenant's estate in the
Premises that such subtenant shall waive any right to surrender possession or to
terminate the sublease and, at Landlord's election, such subtenant shall be
bound to Landlord for the balance of the term of such sublease and shall attorn
to and recognize Landlord, as its landlord, under all of the then executory
terms of such sublease, except that Landlord shall not (i) be liable for any
previous act, omission or negligence of Tenant under such sublease, (ii) be
subject to any counterclaim, defense or offset not expressly provided for in
such sublease, which theretofore accrued to such subtenant against Tenant, (iii)
be bound by any previous modification or amendment of such sublease or by any
previous prepayment of more than one (1) month's rent and additional rent which
shall be payable as provided in the sublease, (iv) be obligated to repair the
subleased space or the Building or any part thereof, in the event of total or
substantial total damage beyond such repair as can reasonably be accomplished
from the net proceeds of insurance actually made available to Landlord (unless
the subleased space is all or substantially all of the Premises), (v) be
obligated to repair the subleased space or the Building or any part thereof, in
the event of partial condemnation beyond such repair as can reasonably be
accomplished from the net proceeds of any award actually made available to
Landlord as consequential damages allocable to the part of the subleased space
or the Building not taken (unless the subleased space is all or substantially
all of the Premises) or (vi) be obligated to perform any work in the subleased
space of the Building or to prepare them for occupancy beyond Landlord's
obligations under this Lease, and the subtenant shall execute and deliver to
Landlord any instruments Landlord may reasonably request to evidence and confirm
such attornment. Each subtenant or licensee of Tenant shall be deemed
automatically upon and as a condition of occupying or using the Premises or any
part thereof, to have given a waiver of the type described in and to the extent
and upon the conditions set forth in this Article 12.
R. Reimbursement. Within ten (10) business days after receipt of a bill
therefor, Tenant shall reimburse Landlord for the reasonable costs that may be
incurred by Landlord in connection with any assignment or sublease, including,
without limitation, the costs of making investigations as to the acceptability
of the proposed assignee or subtenant, and reasonable legal costs incurred by
Landlord in connection with the granting of any requested consent.
13. CONDITION OF THE PREMISES.
A. Acceptance by Tenant. Tenant has examined the Premises and agrees to
accept possession of the Premises in the condition and state of repair which
shall exist on the date hereof "as is." Tenant agrees that except for
performance of Landlord's Post-Commencement Core Work, Landlord shall have no
other obligation to perform any work or make any installations in order to
prepare the Premises for Tenant's occupancy. Landlord shall substantially
complete that portion of Landlord's Post- Commencement Core Work consisting of
installation of certain windows located on the second (2nd) floor portion of the
Premises (the "Window Work") by September 30, 1999, as set forth on Schedule B
(with respect to the mezzanine portion of the Premises, Landlord shall clean,
scrape and make such windows fully operable and appear substantially similar to
the new windows that are installed on the second (2nd) floor of the Premises in
the reasonable judgment of Tenant). In the event Landlord fails to substantially
complete the Window Work by November 1, 1999, subject to the terms and
conditions contained in Article 26, Tenant shall be entitled to receive an
abatement of Rent, in the amount equal to one half (_) of one (1) day of Rent
for each day commencing on November 1, 1999 that the Window Work is not
substantially completed until the date that the Window Work is substantially
completed. The taking of possession of the Premises by Tenant shall be
conclusive evidence as against Tenant that, at the time such possession was so
taken, the Premises and the Building were in good and satisfactory condition
(except for latent defects which Tenant must provide notice thereof to Landlord
within twelve (12) months from the Rent Commencement Date) and that Landlord's
Pre-Commencement Core Wor k was substantially completed.
B. Tenant's Initial Alteration. Tenant agrees to perform, or to cause
contractors approved by Landlord to perform, Tenant's Initial Alteration in
accordance with the terms, conditions and provisions contained in this Lease,
including, without limitation, Schedules C, D and E annexed hereto. All of the
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terms, covenants and conditions of Schedules C, D and E are incorporated in this
Lease as if fully set forth at length herein.
14. ACCESS TO PREMISES.
A. Access by Landlord. Tenant shall permit Landlord, Landlord's agents
and public utilities servicing the Building to erect, use, maintain and replace,
concealed ducts, pipes and conduits in and through the Premises. Landlord,
Landlord's agents and/or affiliates, and the holder of any Mortgage shall each
have the right to enter the Premises at all reasonable times upon reasonable
prior notice to Tenant, except in the case of an emergency, to (i) examine the
same, (ii) to show them to prospective purchasers, mortgagees or lessees (during
the last six (6) months of the Term) of the Building or space therein, (iii) to
make such decorations, repairs, replacements, alterations, improvements or
additions as Landlord may deem necessary or desirable to the Premises or to any
other portion of the Building or which Landlord may elect to perform following
Tenant's failure to make repairs or perform any work which Tenant is obligated
to perform under this Lease, (iv) for the purpose of complying with laws,
regulations or other requirements of government authorities and (v) to perform
"Remedial Work" (as defined in Article 40 hereof) after the failure of Tenant to
perform the same in accordance with the terms of this Lease. Landlord shall be
allowed, during the progress of any work in and about the Premises, to take all
necessary material and equipment into and upon the Premises and to store them
within the Premises without the same constituting an eviction or constructive
eviction of Tenant in whole or in part and the Rent shall in nowise abate while
any decorations, repairs, replacements, alterations, improvements or additions
are being made, by reason of loss or interruption of business of Tenant, or
otherwise, provided that Landlord shall endeavor to minimize the adverse effects
on Tenant of any such entry or storage of materials by Landlord in or about the
Premises for any reason, provided, however, Landlord shall have no obligation to
use overtime personnel or pay premium rates in connection with any such work.
During the six (6) months prior to the Expiration Date or the expiration of any
renewal or extended term, Landlord may exhibit the Premises to prospective
tenants thereof. If Tenant shall not be personally present to open and permit an
entry into the Premises, in the event of an emergency, when for any reason an
entry therein shall be necessary, Landlord or Landlord's agents may enter the
same by a master key, or, in the event of an emergency, may forcibly enter the
same, without rendering Landlord or such agents liable therefor (if during such
entry Landlord or Landlord's agents shall accord reasonable care to Tenant's
property), and without in any manner affecting the obligations and covenants of
this Lease. Nothing herein contained, however, shall be deemed or construed to
impose upon Landlord any obligation, responsibility or liability whatsoever, for
the care, supervision or repair of the Building or any part thereof, other than
as herein provided. Notwithstanding anything to the contrary contained herein,
and subject to the imposition of any legal requirements which may be imposed at
the Building, Landlord agrees that the Premises shall not be used as a point of
re-entry from any external fire staircases in the Building.
B. Other Landlord Privileges. Landlord shall have the right at any time,
without the same constituting an actual or constructive eviction and without
incurring any liability to Tenant therefor, to change the arrangement and/or
location of entrances or passageways, doors and doorways, corridors, elevators,
stairs, toilets or other public parts of the Building and to change the name,
number or designation by which the Building is commonly known, provided that (a)
any such change does not deprive Tenant of reasonable access to the Premises,
(b) such change does not materially interfere with Tenant's use and occupancy of
the Premises, and (c) Landlord shall endeavor to minimize the extent and
duration of any interference with the use of the Premises. Landlord shall have
no obligation to use overtime personnel or pay any premium rates in connection
with such work. Tenant acknowledges that Landlord may (but shall have no
obligation to) perform repairs, improvements, alterations and/or substantial
renovation work in and to the public parts of the Building and the mechanical
and other systems serving the Building (which work may include improvements to
the lobby and facade of the Building, which may require that scaffolding and/or
a sidewalk bridge be placed in front of the Building, and the replacement of
window glass, requiring access to the same from within the Premises), provided
that (a) any such change does not deprive Tenant of reasonable access to the
Premises, (b) such change does not materially interfere with Tenant's use and
occupancy of the Premises, and (c) Landlord shall endeavor to minimize the
extent and duration of any interference with the use of the Premises. Landlord
shall have no obligation to use overtime personnel or pay any premium rates in
connection with such work. Landlord shall incur no liability to Tenant, nor
shall Tenant be entitled to any abatement of Rent on account of any noise,
vibration or other disturbance to Tenant's business at the Premises (provided
that Tenant is not denied access thereto) which shall arise out of the
performance by Landlord or other tenants of the aforesaid repairs, alterations,
additions, improvements, alterations and renovations of the Building or any part
thereof and Tenant hereby agrees to release Landlord of and from any claims
(including without limitation, claims arising by reason of loss or interruption
of business) of every kind and nature whatsoever arising under or in connection
therewith. Tenant understands and agrees that all parts (except surfaces facing
the interior of the Premises) of all walls, windows and doors bounding the
Premises (including exterior Building walls, core corridor walls, doors and
entrances), all balconies, terraces and roofs adjacent to the Premises, all
space in or adjacent to the Premises used for shafts, stacks, stairways, chutes,
pipes, conduits, ducts, fan rooms, heating, air cooling, plumbing and other
mechanical facilities, service closets and other Building facilities are not
part of the Premises, and Landlord shall have the use
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thereof, as well as access thereto through the Premises for the purposes of
operation, maintenance, alteration and repair. Landlord, throughout the Term,
shall have free access to any and all mechanical installations of Landlord,
including but not limited to air-cooling, fan, ventilating, machine rooms and
electrical closets.
C. Courtyard Access. Tenant shall permit Landlord and/or certain
maintenance personnel (the "Maintenance Personnel") to enter the Premises in
order to maintain, repair and/or replace certain equipment located in the
courtyard of the Building adjacent to the Premises (the "Courtyard Space").
Tenant hereby agrees that Landlord and the Maintenance Personnel shall be
permitted to enter the Premises in order to access the Courtyard Space and
(except in the case of an emergency where such access shall be permitted in
accordance with the provisions of subsection A above) such access shall be
subject to the following: (i) Landlord shall provide Tenant with reasonable
notice of such access, (ii) such access shall be at reasonable times, (iii) a
Building representative shall accompany the Maintenance Personnel, (iv) a Tenant
representative shall accompany the Maintenance Personnel and Building
representative, (v) entry to the Premises for such purpose shall be made through
the elevator servicing the Premises which is located in the northeast portion of
the Premises, and (vi) Landlord shall use reasonable efforts not to transport
heavy machinery through the Premises during business hours when entering the
Premises for the purposes set forth in this subsection C.
15. CERTIFICATE OF OCCUPANCY . Tenant shall not at any time use or occupy the
Premises in violation of the certificate of occupancy issued or which may be
issued for the Premises or for the Building (providing such certificate of
occupancy does not prohibit Tenant's Permitted Use of the Premises as set forth
in Section IA[xiii]) and in the event that any department of the City or State
of New York shall hereafter at any time contend and/or declare by notice,
violation, order or in any other manner whatsoever that the Premises are used
for a purpose which is a violation of such certificate of occupancy, Tenant
shall, upon five (5) days written notice from Landlord, immediately discontinue
such use of the Premises. Failure by Tenant to discontinue such use after such
notice shall be considered a default in the fulfillment of a covenant of this
Lease and Landlord shall have the right to terminate this Lease immediately, and
in addition thereto shall have the right to exercise any and all rights and
privileges and remedies given to Landlord by and pursuant to the provisions of
Articles 17 and 18 hereof.
16. LANDLORD'S LIABILITY. The obligations of Landlord under this Lease shall not
be binding upon Landlord named herein after the sale, conveyance, assignment or
transfer by such Landlord (or upon any subsequent landlord after the sale,
conveyance, assignment or transfer by such subsequent landlord) of its interest
in the Building or the Real Property, as the case may be, and in the event of
any such sale, conveyance, assignment or transfer, Landlord shall be and hereby
is entirely freed and relieved of all covenants and obligations of Landlord
hereunder, and it shall be deemed and construed without further agreement
between the parties or their successors in interest, or between the parties and
the purchaser, grantee, assignee or other transferee that such purchaser,
grantee, assignee or other transferee has assumed and agreed to carry out any
and all covenants and obligations of Landlord hereunder. Neither the
shareholders, members, directors or officers of Landlord, if Landlord is a
corporation, nor the partners comprising Landlord (nor any of the shareholders,
members, directors or officers of such partners), if Landlord is a partnership
(collectively, the "Parties"), shall be liable for the performance of Landlord's
obligations under this Lease. Tenant shall look solely to Landlord to enforce
Landlord's obligations hereunder and shall not seek any damages against any of
the Parties. The liability of Landlord for Landlord's obligations under this
Lease shall not exceed and shall be limited to Landlord's interest in the
Building and the Real Property (and any refinancing or any sale proceeds) and
Tenant shall not look to or attach any other property or assets of Landlord or
the property or assets of any of the Parties in seeking either to enforce
Landlord's obligations under this Lease or to satisfy a judgment for Landlord's
failure to perform such obligations. In no event shall Landlord (or any of the
officers, trustees, directors, partners, beneficiaries, joint ventures, members,
stockholders or other principals or representatives and the like, disclosed or
undisclosed, thereof) ever be liable for incidental or consequential damages.
17. DEFAULT.
A. Events of Default; Conditions of Limitation. This Lease and the term
and estate hereby granted are subject to the limitations that upon the
occurrence, at any time prior to or during the Term, of any one or more of the
following events (referred to as "Events of Default"):
(i) if Tenant shall default in the payment when due of any
installment of Rent or in the payment when due of any additional rent, and any
such default shall continue for a period of ten (10) days after notice by
Landlord to Tenant of such default; or
(ii) if Tenant shall default in the observance or performance of
any term, covenant or condition of this Lease on Tenant's part to be observed or
performed (other than the covenants for the payment of Rent and additional rent)
and Tenant shall fail to remedy such default within twenty (20) days after
notice by Landlord to Tenant of such default, or if such default is of such a
nature that it cannot be completely remedied within said period of twenty (20)
days and Tenant shall not commence within said
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period of twenty (20) days, or shall not thereafter diligently prosecute to
completion all steps necessary to remedy such default; or
(iii) Intentionally Deleted; or
(iv) if the Premises shall become abandoned; or
(v) if Tenant's interest in this Lease shall devolve upon or
pass to any person, whether by operation of law or otherwise, except as may be
expressly permitted under Article 12 hereof; or
(vi) if this Lease shall be rejected under Section 235 of Title
11 of the U.S. Bankruptcy Code; or
(vii) if any execution or attachment shall be issued against
Tenant or any of Tenant's property pursuant to which the Premises shall be taken
or occupied; then, in any of said cases, at any time prior to or during the
Term, of any one or more of such Events of Default, Landlord, at any time
thereafter, at Landlord's option, may give to Tenant a five (5) days notice of
termination of this Lease and, in the event such notice is given, this Lease and
the Term shall come to an end and expire (whether or not the Term shall have
commenced) upon the expiration of said five (5) days with the same effect as if
the date of expiration of said five (5) days were the Expiration Date, but
Tenant shall remain liable for damages as provided in Article 18 hereof.
B. Effect of Bankruptcy. Anything elsewhere in this Lease to the
contrary notwithstanding, this Lease may be canceled by Landlord by sending of a
written notice to Tenant within a reasonable time after the happening of any one
or more of the following events: (i) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor, provided such case is
not dismissed within ninety (90) days following its commencement; or (ii) the
making by Tenant of any assignment or any other arrangement for the benefit of
creditors under any state statute. Neither Tenant nor any person claiming
through or under Tenant, or by reason of any statute or order of court, shall
thereafter be entitled to possession of the Premises but shall forthwith quit
and surrender the Premises. If this Lease shall have been assigned in accordance
with its terms, the provisions of this Article 17 shall be applicable to any of
the persons or entities primarily or secondarily liable for Tenant's obligations
under this Lease. It is stipulated and agreed that in the event of the
termination of this Lease pursuant to this subsection, Landlord shall forthwith,
notwithstanding any other provisions of this Lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount determined in
accordance with subsection B(i)(c) of Article 18 of this Lease.
C. Conditional Limitation. Nothing contained in this Article 17 shall be
deemed to require Landlord to give the notices herein provided for prior to the
commencement of a summary proceeding for non-payment of rent or a plenary action
for recovery of rent on account of any default in the payment of the same, it
being intended that such notices are for the sole purpose of creating a
conditional limitation hereunder pursuant to which this Lease shall terminate
and if Tenant thereafter remains in possession after such termination, Tenant
shall do so as a holdover tenant.
18. REMEDIES AND DAMAGES.
A. Landlord's Remedies. (i) If Tenant shall default, beyond any
applicable notice and cure periods, in the payment when due of any installment
of Rent or in the payment when due of any additional rent, or if any execution
or attachment shall be issued against Tenant or any of Tenant's property
whereupon the Premises shall be taken or occupied or attempted to be taken or
occupied by someone other than Tenant, or if this Lease and the Term shall
expire and come to an end as provided in Article 17:
(a) Landlord and its agents and servants may immediately, or at
any time after such default, beyond any applicable notice and cure periods, or
after the date upon which this Lease and the Term shall expire and come to an
end, re-enter the Premises or any part thereof, either by summary proceedings,
or by any other applicable action or proceeding, (without being liable to
indictment, prosecution or damages therefor), and may repossess the Premises and
dispossess Tenant and any other persons from the Premises and remove any and all
of their property and effects from the Premises; and
(b) Landlord, at Landlord's option, may relet the whole or any
part or parts of the Premises from time to time, either in the name of Landlord
or otherwise, to such tenant or tenants, for such term or terms ending before,
on or after the Expiration Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as Landlord, in
its sole discretion, may determine. Landlord shall have no obligation to relet
the Premises or any part thereof and shall in no event be liable for refusal or
failure to relet the Premises or any part thereof, or, in the event of any such
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reletting, for refusal or failure to collect any rent due upon any such
reletting, and no such refusal or failure shall operate to relieve Tenant of any
liability under this Lease or otherwise to affect any such liability; Landlord,
at Landlord's option, may make such repairs, replacements, alterations,
additions, improvements, decorations and other physical changes in and to the
Premises as Landlord, in its sole discretion, considers advisable or necessary
in connection with any such reletting or proposed reletting, without relieving
Tenant of any liability under this Lease or otherwise affecting any such
liability. Notwithstanding the foregoing, Landlord shall use commercially
reasonable efforts to collect rent due and payable from such immediately
successive tenant of the Premises, or any portion of the Premises, provided,
however, such reasonable commercial efforts shall not require Landlord to expend
more than Ten Thousand and 00/100 ($10,000.00) Dollars in attorney's fees in
connection with its efforts to collect such rent.
(ii) Tenant hereby waives the service of any notice of intention
to re-enter or to institute legal proceedings to that end which may otherwise be
required to be given under any present or future law. Tenant, on its own behalf
and on behalf of all persons claiming through or under Tenant, including all
creditors, does further hereby waive any and all rights which Tenant and all
such persons might otherwise have under any present or future law to redeem the
Premises, or to re-enter or repossess the Premises, or to restore the operation
of this Lease, after (a) Tenant shall have been dispossessed by a judgment or by
warrant of any court or judge, or (b) any re-entry by Landlord, or (c) any
expiration or termination of this Lease and the Term, whether such dispossess,
re-entry, expiration or termination shall be by operation of law or pursuant to
the provisions of this Lease. The words "re-enter", "re-entry" and "re-entered"
as used in this Lease shall not be deemed to be restricted to their technical
legal meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease on Tenant's part to be observed or performed, Landlord shall have the
right to enjoin such breach and the right to invoke any other remedy allowed by
law or in equity as if re-entry, summary proceedings and other special remedies
were not provided in this Lease for such breach. The right to invoke the
remedies hereinbefore set forth are cumulative and shall not preclude Landlord
from invoking any other remedy allowed at law or in equity.
B. Damages. (i) If this Lease and the Term shall expire and come to an
end as provided in Article 17, or by or under any summary proceeding or any
other action or proceeding, or if Landlord shall re-enter the Premises as
provided in subsection A of this Article 18, or by or under any summary
proceeding or any other action or proceeding, then, in any of said events:
(a) Tenant shall pay to Landlord all Rent, additional rent and
other charges payable under this Lease by Tenant to Landlord to the date upon
which this Lease and the Term shall have expired and come to an end or to the
date of re-entry upon the Premises by Landlord, as the case may be;
(b) Tenant also shall be liable for and shall pay to Landlord,
as damages, any deficiency (referred to as "Deficiency") between the Rent
reserved in this Lease for the period which otherwise would have constituted the
unexpired portion of the Term and the net amount, if any, of rents collected
under any reletting effected pursuant to the provisions of subsection (A)(i) of
this Article 18 for any part of such period (first deducting from the rents
collected under any such reletting all of Landlord's reasonable expenses in
connection with the termination of this Lease, or Landlord's reentry upon the
Premises and with such reletting including, but not limited to, all repossession
costs, brokerage commissions, advertising, legal expenses, attorneys' fees and
disbursements, alteration costs and other expenses of preparing the Premises for
such reletting); any such Deficiency shall be paid in monthly installments by
Tenant on the days specified in this Lease for payment of installments of Rent,
Landlord shall be entitled to recover from Tenant each monthly Deficiency as the
same shall arise, and no suit to collect the amount of the Deficiency for any
month shall prejudice Landlord's right to collect the Deficiency for any
subsequent month by a similar proceeding; and
(c) whether or not Landlord shall have collected any monthly
Deficiencies as aforesaid, Landlord shall be entitled to recover from Tenant,
and Tenant shall pay to Landlord, on demand, in lieu of any further Deficiencies
as and for liquidated and agreed final damages, a sum equal to the amount by
which the Rent reserved in this Lease for the period which otherwise would have
constituted the unexpired portion of the Term exceeds the then fair and
reasonable rental value of the Premises for the same period, less the aggregate
amount of Deficiencies theretofore collected by Landlord pursuant to the
provisions of subsection B(l)(b) of this Article 18 for the same period; if,
before presentation of proof of such liquidated damages to any court, commission
or tribunal, the Premises, or any part thereof, shall have been relet by
Landlord for the period which otherwise would have constituted the unexpired
portion of the Term, or any part thereof, the amount of rent reserved upon such
reletting shall be deemed, prima facie, to be the fair and reasonable rental
value for the part or the whole of the Premises so relet during the term of the
reletting.
(ii) If the Premises, or any part thereof, shall be
relet together with other space in the Building, the rents collected or reserved
under any such reletting and the expenses of any such reletting
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shall be equitably apportioned for the purposes of this subsection B. Tenant
shall in no event be entitled to any rents collected or payable under any
reletting, whether or not such rents shall exceed the Rent reserved in this
Lease. Solely for the purposes of this Article, the term "Rent" as used in
subsection B(i) of this Article 18 shall mean the Rent in effect immediately
prior to the date upon which this Lease and the Term shall have expired and come
to an end, or the date of re-entry upon the Premises by Landlord, as the case
may be, adjusted to reflect any increase or decrease pursuant to the provisions
of Article 28 hereof for the Comparison Year (as defined in said Article 28)
immediately preceding such event. Nothing contained in Article 17 or this
Article 18 shall be deemed to limit or preclude the recovery by Landlord from
Tenant of the maximum amount allowed to be obtained as damages by any statute or
rule of law, or of any sums or damages to which Landlord may be entitled in
addition to the damages set forth in subsection B(i) of this Article 18.
C. Legal Fees. (i) Tenant hereby agrees to pay, as additional rent, all
reasonable attorneys' fees and disbursements (and all other court costs or
expenses of legal proceedings) which Landlord may incur or pay out by reason of,
or in connection with the exercise by Landlord in good faith to bring:
(a) any action or proceeding by Landlord to terminate
this Lease;
(b) any other action or proceeding by Landlord against
Tenant (including, but not limited to, any arbitration proceeding);
(c) any default beyond notice and any cure period by
Tenant in the observance or performance of any obligation under this Lease
(including, but not limited to, matters involving payment of rent and additional
rent, computation of escalations, alterations or other Tenant's work and
subletting or assignment), provided Landlord commences any action or proceeding
against Tenant;
(d) any action or proceeding brought by Tenant not in
good faith against Landlord (or any officer, partner or employee of Landlord) in
which Tenant fails to secure a final unappealable judgment against Landlord; and
(e) any other appearance by Landlord (or any officer,
partner or employee of Landlord) as a witness or otherwise in any action or
proceeding whatsoever involving or affecting Landlord and Tenant (either
directly or indirectly) or this Lease.
(ii) Tenant's obligations under this subsection C of Article 18
shall survive the expiration of the Term hereof or any earlier termination of
this Lease. This provision is intended to supplement (and not to limit) other
provisions of this Lease pertaining to indemnities and/or attorneys' fees.
D. Additional Landlord Remedies. Tenant hereby acknowledges and agrees
that in the event this Lease and the Term hereof shall expire and come to an end
as provided in Article 17, Tenant shall be liable for an amount equal to the sum
of the unamortized portion of (i) the cost of Landlord's Core Work, and (ii) any
brokerage commissions or fees paid by Landlord in connection with this Lease and
(iii) the amount of Landlord's Contribution (which sum shall be amortized on a
straight-line basis over the Term of this Lease), which sum shall be immediately
due and payable by Tenant on demand by Landlord and deemed to be additional rent
hereunder.
19. FEES AND EXPENSES.
A. Curing Tenant's Defaults. If Tenant shall default in the observance
or performance of any term or covenant on Tenant's part to be observed or
performed under or by virtue of any of the terms or provisions in any Article of
this Lease, after the giving of notice (if required) and upon the expiration of
any applicable grace period (except in an emergency), Landlord may immediately
or at any time thereafter and without notice perform the same for the account of
Tenant. If Landlord makes any expenditures or incurs any obligations for the
payment of money in connection with any such default by Tenant or the cure
thereof including, but not limited to, any damages or fines or any reasonable
attorneys' fees and disbursements in instituting, prosecuting or defending any
action or proceeding, such sums paid or obligations incurred with interest and
costs shall be deemed to be additional rent hereunder and shall be paid by
Tenant to Landlord within ten (10) days of rendition of any bill or statement to
Tenant therefor. If the Term hereof shall have expired at the time Landlord
sustains or incurs such expenditures, such sums shall be recoverable by
Landlord, as damages.
B. Late Charges. If Tenant shall fail to make payment of any installment
of Rent or any additional rent within ten (10) days after the date when such
payment is due, Tenant shall pay to Landlord, in addition to such installment of
Rent or such additional rent, as the case may be, as a late charge and as
additional rent, a sum based on a rate equal to the lesser of (i) five percent
(5%) per annum above the then current prime rate charged by Citibank, N.A. or
its successor and (ii) the maximum rate permitted by applicable law, of the
amount unpaid computed from the date such payment was due to and
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including the date of payment. Tenant acknowledges and agrees that, except as
otherwise expressly provided herein, if Tenant fails to dispute any item of
additional rent within thirty (30) days of receipt of a bill or notice therefor,
Tenant shall be deemed to have waived its right to dispute the same.
20. NO REPRESENTATIONS BY LANDLORD. Landlord or Landlord's agents have made no
representations or promises with respect to the Building, the Real Property, the
Premises, Taxes (as defined in Article 28 hereof) or any other matter or thing
affecting or related to the Premises, except as herein expressly set forth and
no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth herein.
21. END OF TERM.
A. Surrender of Premises. Upon the expiration or other termination of
the Term, pursuant to the terms of this Lease, Tenant shall quit and surrender
to Landlord the Premises, broom clean, in good order and condition, ordinary
wear and tear and damage for which Tenant is not responsible under the terms of
this Lease excepted, and Tenant shall remove all Alterations and property
pursuant to Article 3 hereof. Tenant's obligation to observe or perform this
covenant shall survive the expiration or sooner termination of the Term. If the
last day of the Term or any renewal thereof falls on Saturday or Sunday this
Lease shall expire on the business day immediately preceding.
B. Holdover by Tenant. The parties recognize and agree that the damage
to Landlord resulting from any failure by Tenant to timely surrender possession
of the Premises as aforesaid will be substantial, will exceed the amount of the
monthly installments of the Rent theretofore payable hereunder, and will be
impossible to accurately measure. Tenant therefore agrees that if possession of
the Premises is not surrendered to Landlord within twenty-four (24) hours after
the Expiration Date or sooner termination of the Term, in addition to any other
rights or remedy Landlord may have hereunder or at law, Tenant shall pay to
Landlord for each month and for each portion of any month during which Tenant
holds over in the Premises after the Expiration Date or sooner termination of
this Lease, a sum equal to two (2) times the aggregate of that portion of the
Rent and the additional rent which was payable under this Lease during the last
month of the Term for each successive month thereafter that Tenant holds-over.
Nothing herein contained shall be deemed to permit Tenant to retain possession
of the Premises after the Expiration Date or sooner termination of this Lease
and no acceptance by Landlord of payments from Tenant after the Expiration Date
or sooner termination of the Term shall be deemed to be other than on account of
the amount to be paid by Tenant in accordance with the provisions of this
Article 21, which provisions shall survive the Expiration Date or sooner
termination of this Lease. If Tenant shall hold-over or remain in possession of
any portion of the Premises beyond the date which is two (2) months after the
Expiration Date of this Lease, notwithstanding the acceptance of any Rent and
additional rent paid by Tenant pursuant to the preceding provisions, Tenant
shall be subject not only to summary proceeding and all damages related thereto,
but also to any damages arising out of lost opportunities (and/or new leases) by
Landlord to re-let the Premises (or any part thereof). All damages to Landlord
by reason of such holding over by Tenant may be the subject of a separate action
and need not be asserted by Landlord in any summary proceedings against Tenant.
22. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that providing
Tenant is not in default, after notice and beyond any applicable grace period,
in observing and performing all the terms, covenants and conditions on Tenant's
part to be observed and performed including, without limitation, the obligation
to pay Rent, additional rent and any other charges due and owing under this
Lease, Tenant may peaceably and quietly enjoy the Premises, subject,
nevertheless, to the terms and conditions of this Lease including, but not
limited to, Article 16 hereof and to all Superior Leases and Mortgages.
23. FAILURE TO GIVE POSSESSION. Tenant waives any right to rescind this Lease
under Section 223-a of the New York Real Property Law or any successor statute
of similar import then in force and further waives the right to recover any
damages which may result from Landlord's failure to deliver possession of the
Premises on the date set forth in Article 1 hereof for the commencement of the
Term for any reason whatsoever, including, but not limited to, the failure of
the present tenant of the Premises to vacate and surrender the Premises to
Landlord. If Landlord shall be unable to give possession of the Premises on such
date, and provided Tenant is not responsible for such inability to give
possession, the Rent reserved and covenanted to be paid herein shall not
commence until the possession of the Premises is given or the Premises are
available for occupancy by Tenant, and no such failure to give possession on
such date shall in any way affect the validity of this Lease or the obligations
of Tenant hereunder or give rise to any claim for damages by Tenant or claim for
rescission of this Lease, nor shall same be construed in anyway to extend the
Term. If permission is given to Tenant to enter into the possession of the
Premises or to occupy premises other than the Premises prior to the Commencement
Date, Tenant covenants and agrees that such occupancy shall be deemed to be
under all the terms, covenants, conditions and provisions of this Lease,
including the covenant to pay Rent as expressly provided herein.
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24. NO WAIVER.
A. If there be any agreement between Landlord and Tenant providing for
the cancellation of this Lease upon certain provisions or contingencies and/or
an agreement for the renewal hereof at the expiration of the Term, the right to
such renewal or the execution of a renewal agreement between Landlord and Tenant
prior to the expiration of the Term shall not be considered an extension thereof
or a vested right in Tenant to such further term, so as to prevent Landlord from
canceling this Lease and any such extension thereof during the remainder of the
original Term; such privilege, if and when so exercised by Landlord, shall
cancel and terminate this Lease and any such renewal or extension previously
entered into between Landlord and Tenant or the right of Tenant to any such
renewal or extension; any right herein contained on the part of Landlord to
cancel this Lease shall continue during any extension or renewal hereof; any
option on the part of Tenant herein contained for an extension or renewal hereof
shall not be deemed to give Tenant any option for a further extension beyond the
first renewal or extended term.
B. No act or thing done by Landlord or Landlord's agents during the Term
shall be deemed an acceptance of a surrender of the Premises, and no agreement
to accept such surrender shall be valid unless in writing signed by Landlord. No
employee of Landlord or of Landlord's agents shall have any power to accept the
keys of the Premises prior to the termination of this Lease. The delivery of
keys to any employee of Landlord or of Landlord's agents shall not operate as a
termination of this Lease or a surrender of the Premises. In the event Tenant at
any time desires to have Landlord sublet the Premises for Tenant's account,
Landlord or Landlord's agents are authorized to receive said keys for such
purpose without releasing Tenant from any of the obligations under this Lease,
and Tenant hereby relieves Landlord of any liability for loss of or damage to
any of Tenant's effects in connection with such subletting.
C. The failure of Landlord to seek redress for violation of, or to
insist upon the strict performance of, any covenant or condition of this Lease
or any of the Rules and Regulations set forth or hereafter adopted by Landlord,
shall not prevent a subsequent act which would have originally constituted a
violation from having all force and effect of an original violation. The receipt
by Landlord of Rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. The failure of Landlord to enforce
any of the Rules and Regulations set forth, or hereafter adopted, against Tenant
and/or any other tenant in the Building shall not be deemed a waiver of any such
Rules and Regulations. No provision of this Lease shall be deemed to have been
waived by Landlord unless such waiver be in writing signed by Landlord.
D. No payment by Tenant or receipt by Landlord of a lesser amount than
the monthly Rent herein stipulated shall be deemed to be other than on account
of the earliest stipulated Rent, or as Landlord may elect to apply same, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment as Rent be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the balance of such Rent or pursue any other remedy in this Lease provided.
E. This Lease contains the entire agreement between the parties and all
prior negotiations and agreements are merged in this Lease. Any executory
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of it in whole or in part unless such executory agreement
is in writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.
25. WAIVER OF TRIAL BY JURY. It is mutually agreed by and between Landlord and
Tenant that the respective parties hereto shall and they hereby do waive trial
by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other on any matters whatsoever arising out of or in
any way connected with this Lease, the relationship of Landlord and Tenant,
Tenant's use or occupancy of the Premises, any claim of injury or damage, or for
the enforcement of any remedy under any statute, emergency or otherwise. It is
further mutually agreed that in the event Landlord commences any summary
proceeding (whether for nonpayment of rent or because Tenant continues in
possession of the Premises after the expiration or termination of the Term),
Tenant will not interpose any counterclaim (except for mandatory or compulsory
counterclaims) of whatever nature or description in any such proceeding.
26. INABILITY TO PERFORM. Except as otherwise provided in this Lease, this Lease
and the obligation of Tenant to pay Rent and additional rent hereunder and
perform all of the other covenants and agreements hereunder on the part of
Tenant to be performed shall in nowise be affected, impaired or excused because
Landlord is unable to fulfill any of its obligations under this Lease expressly
or impliedly to be performed by Landlord or because Landlord is unable to make,
or is delayed in making any repairs, additions, alterations, improvements or
decorations or is unable to supply or is delayed in supplying any equipment or
fixtures if Landlord is prevented or delayed from so doing by reason of strikes
or labor troubles or by accident or by any cause whatsoever reasonably beyond
Landlord's control,
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including but not limited to, laws, governmental preemption in connection with a
National Emergency or by reason of any rule, order or regulation of any federal,
state, county or municipal authority or any department or subdivision thereof or
any government agency or by reason of the conditions of supply and demand which
have been or are affected by war or other emergency.
27. BILLS AND NOTICES. Except as otherwise expressly provided in this Lease, any
bills, statements, notices, demands, requests or other communications given or
required to be given under this Lease shall be deemed sufficiently given or
rendered if in writing, personally delivered with receipt acknowledged or sent
by a nationally recognized courier service or mailed by registered or certified
mail (return receipt requested) addressed as follows or to such other address as
either Landlord or Tenant may designate as its new address for such purpose by
notice given to the others in accordance with the provisions of this Article 27:
If to Landlord: Polestar Fifth Property Associates LLC
c/o New Rock Realty Management LLC
420 Lexington Avenue
New York, New York 10170
with a copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Donald J. Bezahler, Esq.
Prior to Tenant taking occupancy of the Premises the address for notice shall
be:
If to Tenant: Women.com, LLC
4 Columbus Circle
New York, New York 10019
Attention: Ms. Antonia G. Trigiani
With a copy to: Paul Hastings Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Katherine B. Lipton, Esq.
After Tenant takes occupancy of the Premises the address for notice shall be at
the Premises or at any place where Tenant or any agent or employee of Tenant may
be found if mailed subsequent to Tenant's vacating, deserting, abandoning or
surrendering the Premises. Tenant hereby acknowledges and agrees that any such
bill, statement, demand, notice, request or other communication may be given by
Landlord's agent on behalf of Landlord. Any such bill, statement, demand,
notice, request or other communication shall be deemed to have been rendered or
given when personally delivered or upon receipt (or refusal of receipt) if
mailed or sent by courier service. Notwithstanding anything contained in this
Article 27 to the contrary, bills and statements issued by Landlord may be sent
by the method(s) set forth hereinabove, without copies to any other party. This
notice provision has been specifically negotiated between the parties hereto.
28. ESCALATION.
A. Defined Terms. In a determination of any increase in the Rent under
the provisions of this Article 28, Landlord and Tenant agree as follows:
(i) "Taxes" shall mean the aggregate amount of real estate taxes
and any special or other assessments (exclusive of penalties and interest
thereon) imposed upon the Real Property and real estate taxes or assessments
imposed in connection with the receipt of income or rents from the Building to
the extent that same shall be in lieu of all or a portion of the aforesaid taxes
or assessments, or additions or increases thereof (including, without
limitation, (i) assessments made upon or with respect to any "air rights", (ii)
assessments made in connection with any business improvement district and (iii)
any assessments levied after the date of this Lease for public benefits to the
Real Property or the Building (excluding an amount equal to the assessments
payable in whole or in part during or for the Base Tax Year (as defined in
Article 1 of this Lease)) which assessments, if payable in installments, shall
be deemed payable in the maximum number of permissible installments and there
shall be included in real estate taxes for each Comparison Year in which such
installments may be paid, the installments of such assessment so becoming
payable during such Comparison Year (in the manner in which such taxes and
assessments are imposed as of the date hereof); provided, that if because of any
change in the taxation of real estate, any other tax or assessment (including,
without limitation, any occupancy, gross receipts, rental, income, franchise,
transit or other tax) is imposed upon Landlord or the owner of the Real Property
or the Building, or the occupancy, rents or income therefrom, in substitution
for or in addition to, any of the foregoing Taxes, such other tax or assessment
shall be deemed part of the Taxes. Notwithstanding the
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foregoing, Taxes shall not include any interest or penalties incurred by
Landlord as a result of Landlord's late payment of such Taxes, except for
interest payable in connection with installment payments referenced above, taxes
of Landlord's income or franchise taxes (except as provided above), estate or
inheritance taxes, or transfer, gains, mortgage recording or similar taxes
imposed on Landlord. With respect to any Comparison Year (hereinafter defined)
all expenses, including reasonable attorneys' fees and disbursements, experts'
and other witnesses' reasonable fees, incurred in contesting the validity or
amount of any Taxes or in obtaining a refund of Taxes shall be considered as
part of the Taxes for such year.
(ii) "Assessed Valuation" shall mean the amount for which the
Real Property is assessed pursuant to applicable provisions of the New York City
Charter and of the Administrative Code of the City of New York for the purpose
of imposition of Taxes.
(iii) "Tax Year" shall mean the period July 1 through June 30
(or such other period as hereinafter may be duly adopted by the City of New York
as its fiscal year for real estate tax purposes).
(iv) "Base Taxes" shall mean the Taxes payable for the Base Tax
Year.
(v) "Comparison Year" shall mean (a) with respect to Taxes, any
Tax Year subsequent to the Base Tax Year and (b) with respect to Labor Rates
(hereinafter defined) any calendar year subsequent to the Base Labor Year
(hereinafter defined) for any part or all of which there is an increase in the
Rent pursuant to subsection B of this Article 28.
(vi) "R.A.B." shall mean the Realty Advisory Board On Labor
Relations, Incorporated, or its successor.
(vii) "Local 32B-32J" shall mean Local 32B-32J of the Building
Service Employees International Union, AFL-CIO, or its successor.
(viii) "Class A Office Buildings" shall mean office buildings in
the same class or category as the Building under any agreement between R.A.B.
and Local 32B-32J, regardless of the designation given to such office buildings
in any such agreement.
(ix) "Labor Rates" shall mean a sum equal to the regular hourly
wage rate required to be paid to Others (hereinafter defined) employed in Class
A Office Buildings pursuant to any agreement between R.A.B. and Local 32B-32J;
provided, however, that if, as of October 1st of any Comparison Year, any such
agreement shall require Others in Class A Office Buildings to be regularly
employed on days or during hours when overtime or other premium pay rates are in
effect pursuant to such agreement, then the term "regular hourly wage rate", as
used in this subsection A(ix) shall mean the average hourly wage rate for the
hours in a calendar week during which Others are required to be regularly
employed; and provided, further, that if no such agreement is in effect as of
October 1st of any Comparison Year with respect to Others, then the term
"regular hourly wage rate", as used in this subsection A(ix) shall mean the
regular hourly wage rate actually paid to Others employed in the Building by
Landlord or by an independent contractor engaged by Landlord; and provided,
further, the term "regular hourly wage rate" in all events shall include the
monetary value or cost of all payments and benefits of any kind, both mandatory
and optional (including, but not limited to, those payable directly to taxing
authorities or others on account of the employment) and all welfare and pension
benefits and payments of any kind paid or given pursuant to such agreement but
shall specifically exclude any fringe employee benefits.
(x) "Others" shall mean that classification of employee engaged
in the general maintenance and operation of Class A Office Buildings most nearly
comparable to the classification now applicable to "others" in the current
agreement between R.A.B. and Local 32B-32J.
(xi) "Base Labor Rates" shall mean the Labor Rates in effect for
the Base Labor Year.
(xii) "Landlord's Statement" shall mean an instrument or
instruments containing a comparison of any increase or decrease in the Rent for
the preceding Comparison Year pursuant to the provisions of this Article 28.
B. Escalation . (i) If the Taxes payable for any Comparison Year (any
part or all of which falls within the Term) shall represent an increase above
the Base Taxes, then the Rent for such Comparison Year and continuing thereafter
until a new Landlord's Statement is rendered to Tenant, shall be increased by
Tenant's Proportionate Share of such increase. The Taxes shall be initially
computed on the basis of the Assessed Valuation in effect at the time Landlord's
Statement is rendered (as the Taxes may have been settled or finally adjudicated
prior to such time) regardless of any then pending application, proceeding or
appeal respecting the reduction of any such Assessed Valuation, but shall be
subject to subsequent adjustment as provided in subsection D(i)(a) of this
Article 28.
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(ii) If the Labor Rates in effect for any Comparison Year (any
part or all of which falls within the Term) shall be greater than the Base Labor
Rates, then the Rent for such Comparison Year, and continuing thereafter until a
new Landlord's Statement is rendered to Tenant, shall be increased by a sum
equal to the Labor Rate Factor multiplied by the Labor Rate Multiple multiplied
by the number of cents (inclusive of any fractions of a cent) of such increase.
C. Payment of Escalations. (i) At any time prior to, during or after any
Comparison Year Landlord shall render to Tenant, in accordance with the
provisions of Article 27 hereof, a Landlord's Statement or Statements showing
separately or together (a) a comparison of the Taxes payable for the Comparison
Year with the Base Taxes, (b) a comparison of the Labor Rates for the Comparison
Year with the Base Labor Rates, and (c) the amount of the increase in the Rent
resulting from each of such comparisons. Landlord's failure to render a
Landlord's Statement and/or receive payments with respect thereto during or with
respect to any Comparison Year shall not prejudice Landlord's right to render a
Landlord's Statement and/or receive payments with respect thereto during or with
respect to any subsequent Comparison Year, and shall not eliminate or reduce
Tenant's obligation to pay increases in the Rent pursuant to this Article 28 for
such Comparison Year. Landlord may also at any time and from time to time,
furnish to Tenant a revised Landlord's Statement or Statements showing
separately or together (a) a comparison of the Taxes payable for the Comparison
Year with the Base Taxes and (b) a comparison of the Labor Rates for the
Comparison Year with the Base Labor Rates.
(i) Tenant's obligations with respect to increases in Labor
Rates shall be payable by Tenant on the first day of the month following the
furnishing to Tenant of a Landlord's Statement with respect to Labor Rates in an
amount equal to one-twelfth (1/12th) of such increase in the Rent multiplied by
the number of months (and any fraction thereof) of the Term then elapsed since
the commencement of the Comparison Year for which the increase is applicable,
together with a sum equal to one-twelfth (1/12th) of such increase with respect
to the month following the furnishing to Tenant of a Landlord's Statement; and
thereafter, commencing with the next succeeding monthly installment of Rent and
continuing monthly thereafter until rendition of the next succeeding Landlord's
Statement, the monthly installments of Rent shall be increased by an amount
equal to one-twelfth (1/12th) of such increase. Any increase in the Rent shall
be collectible by Landlord in the same manner as Rent.
(a) With respect to an increase in the Rent resulting
from an increase in the Taxes for any Comparison Year above the Base Taxes,
Tenant shall pay to Landlord a sum equal to one-half (1/2) of such increase on
the first day of June and a sum equal to one-half (1/2) of such increase on the
first day of December of each calendar year. If Landlord's Statement shall be
furnished to Tenant after the commencement of the Comparison Year to which it
relates, then (1) until Landlord's Statement is rendered for such Comparison
Year, Tenant shall pay Tenant's Proportionate Share of Taxes for such Comparison
Year in semi-annual installments, as described above, based upon the last prior
Landlord's Statement rendered to Tenant with respect to Taxes, and (2) Tenant
shall, within twenty (20) days after Landlord's Statement is furnished to
Tenant, pay to Landlord an amount equal to any underpayment of the installments
of Taxes theretofore paid by Tenant for such Comparison Year and, in the event
of an overpayment by Tenant, Landlord shall permit Tenant to credit against
subsequent payments under this subsection (C)(ii)(b) of this Article 28 the
amount of such overpayment. If during the Term of this Lease, Taxes are required
to be paid (either to the appropriate taxing authorities or as tax escrow
payments to a mortgagee or ground lessor) in full or in monthly, quarterly, or
other installments, on any other date or dates than as presently required, then,
at Landlord's option, Tenant's Proportionate Share with respect to Taxes shall
be correspondingly accelerated or revised so that Tenant's Proportionate Share
is due at least thirty (30) days prior to the date payments are due to the
taxing authorities or the superior mortgagee or ground lessor, as the case may
be. The benefit of any discount for any early payment or prepayment of Taxes
shall accrue solely to the benefit of Landlord, and such discount shall not be
subtracted from Tenant's Proportionate Share of such Taxes.
(b) Following each Landlord's Statement, a
reconciliation shall be made as follows: Tenant shall be debited with any
increase in the Rent shown on such Landlord's Statement and credited with the
aggregate, if any, paid by Tenant on account in accordance with the provisions
of subsection C(ii)(a) or C(ii)(b) for the Comparison Year in question; Tenant
shall pay any net debit balance to Landlord within fifteen (15) days next
following rendition by Landlord, in accordance with the provisions of Article 27
hereof, of an invoice for such net debit balance; any net credit balance shall
be applied against the next accruing monthly installment of Rent.
D. Adjustments. (i) (a) In the event that, after a Landlord's Statement
has been sent to Tenant, an Assessed Valuation which had been utilized in
computing the Taxes for a Comparison Year is reduced (as a result of settlement,
final determination of legal proceedings or otherwise), and as a result thereof
a refund of Taxes is actually received by or on behalf of Landlord, then,
promptly after receipt of such refund, Landlord shall send Tenant a statement
adjusting the Taxes for such Comparison Year (taking into account the expenses
mentioned in the last sentence of subsection A(i) of this Article 28) and
setting forth Tenant's Proportionate Share of such refund and Tenant shall be
entitled to receive such Share by way of a credit against the Rent next becoming
due after the sending of such Statement; provided, however, that
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Tenant's Share of such refund shall be limited to the amount, if any, which
Tenant had theretofore paid to Landlord as increased Rent for such Comparison
Year on the basis of the Assessed Valuation before it had been reduced.
(a) In the event that, after a Landlord's Statement has
been sent to Tenant, the Assessed Valuation which had been utilized in computing
the Base Taxes is reduced (as a result of settlement, final determination of
legal proceedings or otherwise) then, and in such event: (1) the Base Taxes
shall be retroactively adjusted to reflect such reduction, (2) the monthly
installment of Rent shall be increased accordingly and (3) all retroactive
additional rent resulting from such retroactive adjustment shall be forthwith
payable when billed by Landlord. Landlord promptly shall send to Tenant a
statement setting forth the basis for such retroactive adjustment and additional
rent payments.
(ii) Any Landlord's Statement sent to Tenant shall be
conclusively binding upon Tenant unless, within sixty (60) days after such
statement is sent, Tenant shall (a) pay to Landlord the amount set forth in such
statement, without prejudice to Tenant's right to dispute the same, and (b) send
a notice to Landlord objecting to such statement and specifying the particular
respects in which such statement is claimed to be incorrect and a specific
request for back-up material reasonably sufficient to determine Landlord's
calculation as set forth in such statement (which request for back-up material
shall not be made more than two (2) times per annum). The parties recognize the
unavailability of Landlord's books and records because of the confidential
nature thereof.
(iii) Anything in this Article 28 to the contrary
notwithstanding, under no circumstances shall the rent payable under this Lease
be less than the then annual base Rent set forth in Article 1 hereof.
(iv) The expiration or termination of this Lease during any
Comparison Year for any part or all of which there is an increase or decrease in
the Rent under this Article shall not affect the rights or obligations of the
parties hereto respecting such increase or decrease and any Landlord's Statement
relating to such increase or decrease may, on a pro rata basis, be sent to
Tenant subsequent to, and all such rights and obligations shall survive, any
such expiration or termination. Any payments due under such Landlord's Statement
shall be payable within twenty (20) days after such statement is sent to Tenant.
E. Intentionally Deleted.
29. SERVICES.
A. Elevator. Landlord shall provide passenger elevator facilities on
business days from 8:00 A.M. to 6:00 P.M. and shall have one passenger elevator
in the bank of elevators servicing the Premises available at all other times.
Landlord shall provide freight elevator services on an "as available" basis for
incidental use by Tenant from 8:00 A.M. through 12:00 Noon and from 1:00 P.M.
through 5:00 P.M. on business days only ("Regular Freight Hours"). Any extended
use may be arranged with Landlord's prior consent and Tenant shall pay as
additional rent all reasonable building standard charges therefor.
Notwithstanding the foregoing, there shall be no charge to Tenant for the first
seventy-five (75) hours of freight elevator use by Tenant which usage shall be
in increments of no less than four (4) hours at any given time for hours not
contiguous to Regular Freight Hours. There shall be one (1) passenger elevator
available for Tenant's use twenty four (24) hours a day, seven (7) days a week.
B. Heating. Landlord shall furnish heat to the Premises when and as
required by law, on business days from 8:00 A.M. to 6:00 P.M. The heating system
serving the Premises is designed, subject to occurrences outside the reasonable
control of Landlord, to maintain an average temperature in the Premises between
sixty-seven (67~F) and seventy-three (73~F) degrees. Landlord shall not be
responsible for the adequacy, design or capacity of the heating distribution
system if the normal operation of the heat distribution system serving the
Building shall fail to provide heat at reasonable temperatures or any reasonable
volumes or velocities in any parts of the Premises by reason of any
rearrangement of partitioning or other Alterations made or performed by or on
behalf of Tenant or any person claiming through or under Tenant.
C. Cooling/Package Unit Installed by Tenant. Landlord shall not be
obligated to provide air-conditioning to the Premises. Tenant shall have the
right to install an air-conditioning unit(s) in the Premises as part of Tenant's
Initial Alteration subject to the provisions contained in Article 3 hereof.
Tenant agrees to maintain and repair any air-cooling unit located in the
Premises at Tenant's sole cost and expense. Once installed, Tenant shall not
alter, modify or replace such air-cooling unit, or any part thereof, without
Landlord's consent, which shall not be unreasonably withheld. Landlord shall not
be responsible if the air-cooling unit shall fail to provide cooled air to the
Premises. Tenant shall pay for the costs of electrical energy consumed by the
air-cooling unit in accordance with the provisions of Section H of this Article
29. Tenant shall pay to Landlord in connection with the air conditioning unit(s)
installed as part of Tenant's Initial Alteration, as additional rent, on a
monthly basis, a sum equal to (i) Three Hundred Fifty and 00/100 ($350.00)
Dollars per ton, per annum, of condenser water provided to the
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Premises, for the period commencing on January 1, 2000 and ending on December
31, 2004, and (ii) Four Hundred and 00/100 ($400.00) Dollars per ton, per annum,
of condenser water provided to the Premises for the period commencing on January
1, 2005 through and including the Expiration Date. The foregoing payments shall
be pro-rated on the basis of any partial lease year. Tenant may use the air
conditioning unit(s) servicing the Premises twenty-four (24) hours per day in
accordance with the provisions of this subsection C.
D. After Hours and Additional Services. The Rent does not include any
charge to Tenant for the furnishing of any additional passenger elevator
facilities, any freight elevator facilities (other than as contemplated in
Article 29 subsection A) or for the service of heat to the Premises during
periods other than the hours and days set forth in sections A and B of this
Article 29 for the furnishing and distributing of such facilities or services
(referred to as "Overtime Periods"). Accordingly, if Landlord shall furnish any
(i) passenger elevator facilities to Tenant during Overtime Periods or freight
elevator facilities, except as provided in subsection A of this Article 29, or
(ii) heat to the Premises during Overtime Periods, then Tenant shall pay
Landlord additional rent for such facilities or services at the standard rates
then fixed by the Landlord for the Building or, if no such rates are then fixed,
at reasonable rates. Neither the facilities nor the services referred to in this
Article 29D shall be furnished to Tenant or the Premises if Landlord has not
received advance notice from Tenant specifying the particular facilities or
services requested by Tenant at least twenty-four (24) hours prior to the date
on which the facilities or services are to be furnished; or if Tenant is in
default beyond any applicable notice and cure periods under or in breach of any
of the terms, covenants or conditions of this Lease. All of the facilities and
services referred to in this Article 29D are conveniences and are not and shall
not be deemed to be appurtenances to the Premises, and the failure of Landlord
to furnish any or all of such facilities or services shall not constitute or
give rise to any claim of an actual or constructive eviction, in whole or in
part, or entitle Tenant to any abatement or diminution of Rent, or relieve
Tenant from any of its obligations under this Lease, or impose any liability
upon Landlord or its agents by reason of inconvenience or annoyance to Tenant,
or injury to or interruption of Tenant's business or otherwise. In the event
Tenant installs a supplemental air cooling system in the Premises, and if
condenser water for such system shall be supplied by Landlord, (x) Tenant shall
pay to Landlord, annually upon demand, a sum equal to 750 per ton of air
conditioning capacity, adjusted annually, to compensate Landlord for the cost of
supplying condenser water for such supplemental system and (y) Tenant shall pay
to Landlord upon demand, Tenant's share of the cost of maintaining, repairing
and/or replacing the cooling tower providing such supplemental condenser water,
such share to be based upon Tenant's total demand of condenser water relative to
the total demand of all other tenants and occupants in the Building who are
similarly supplied condenser water by Landlord. In addition, any such
supplemental air-cooling system shall be installed with balancing valves and
circuit setters manufactured by Bell & Gossett for balancing by Landlord, at
Tenant's sole cost and expense, which cost shall be reasonable and customary.
E. Cleaning/Provided by Landlord. Landlord, at Landlord's expense, shall
cause the Premises to be kept clean in building standard manner, in accordance
with the cleaning specifications set forth on Exhibit 2, which may be modified
from time to time. Tenant shall, however, have the option in its sole discretion
to clean or independently contract for the cleaning of the Premises at Tenant's
sole expense, with appropriate adjustment in the Rent, provided that such
cleaning is done in a manner satisfactory to Landlord and no one other than
persons approved by Landlord shall be permitted to enter the Premises or the
Building for such purpose. Tenant shall pay to Landlord, as additional rent, the
cost of removal of any of Tenant's refuse and rubbish from the Premises and the
Building to the extent that the same exceeds the reasonable amount of refuse and
rubbish usually attendant upon the use of such Premises as offices, which cost
shall be payable within twenty (20) days of Landlord's bill therefor.
F. Sprinkler System. If there now is or shall be installed in the
Building a "sprinkler system" located in the Premises and which also services
any portion of the Premises, and such system or any of its appliances shall be
damaged or injured or not in proper working order by reason of any act or
omission of Tenant, Tenant's agents, servants, employees, licensees or visitors,
Tenant shall forthwith restore the same to good working condition at its own
expense; and if the New York Board of Fire Underwriters or the New York Fire
Insurance Rating Organization or any bureau, department or official of the state
or city government, shall require or recommend that any changes, modifications,
alterations or additional sprinkler heads or other equipment be made or supplied
by reason of Tenant's business, or the location of the partitions, trade
fixtures, or other contents of the Premises, Tenant shall, at Tenant's expense,
promptly make and supply such changes, modifications, alterations, additional
sprinkler heads or other equipment. Tenant agrees to use Landlord's fire alarm
vendor for final termination.
G. Water. Landlord shall provide water for ordinary drinking, cleaning
and lavatory purposes, but if Tenant requires, uses or consumes water for any
other purposes or in usual quantities (of which fact Landlord shall be the sole
judge), Landlord may install a water meter at Tenant's expense and thereby
measure Tenant's water consumption for all purposes. In such event (i) Tenant
shall keep said meter and installation equipment in good working order and
repair at Tenant's own cost and expense; (ii) Tenant agrees to pay for water
consumed, as shown on said meter five (5) days after bills are rendered as
additional rent; and (iii) Tenant covenants and agrees to pay the sewer rent,
charge or any other tax, rent,
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levy or charge which now or hereafter is assessed, imposed or shall become a
lien upon the Premises or the realty of which they are part pursuant to law,
order or regulation made or issued in connection with any such metered use,
consumption, maintenance or supply of water, water system, or sewage or sewage
connection or system.
H. Electricity Service.
(i) Tenant's consumption of electrical energy in the Premises shall be
measured by a submeter installed or to be installed in the Premises by Landlord.
The cost of electricity utilized by Tenant shall be paid for by Tenant to
Landlord as additional rent and shall be calculated at the then applicable rate
prescribed by the public utility company serving the Premises for submetered
electrical energy, plus (a) Landlord's charge for overhead and supervision in
the amount of eight percent (8%) of the total electric bill and (b) any taxes or
other charges in connection therewith. If any tax shall be imposed upon
Landlord's receipts from the sale or resale of electrical energy to Tenant, the
pro rata share applicable to the electrical energy service received by Tenant
shall be passed on to, included in the bill of, and paid by Tenant if and to the
extent permitted by law. Landlord shall bill Tenant, monthly, for the cost of
its consumption of electricity in the Premises and Tenant shall pay the amount
thereof at the time of payment of each installment of Rent.
(ii) Landlord has installed or caused to be installed in the
Premises such electrical risers, feeders and wiring as are necessary to permit
Tenant to receive, and Landlord shall throughout the Term make available to
Tenant, a connected load of six (6) watts per rentable square foot in the
Premises. If Tenant requires additional electrical energy for any reason
whatsoever, including without limitation, the use of additional business
machines, office equipment or other appliances in the Premises which utilize
electrical energy, Tenant shall request such additional electrical energy from
Landlord in each instance and Landlord shall provide such additional electric
capacity ("Additional Capacity") to the Premises that Tenant requests, provided,
however, in no event shall Landlord be required to provide more than a connected
load of ten (10) watts per rentable square foot of electric capacity to the
Premises. In the event Tenant desires Additional Capacity, (in excess of a
connected load of ten (10) watts per rentable square foot ["Excess Capacity"]),
Landlord shall endeavor to provide to Tenant such Excess Capacity if the same is
available. Landlord shall provide Tenant with three (3) competitive bids for any
work to be performed in connection with providing such Additional Capacity or
Excess Capacity, as the case may be, to the Premises. Tenant shall pay to
Landlord, as additional rent, all costs associated with providing any Additional
Capacity and/or Excess Capacity to the Premises. If Landlord provides any
Additional Capacity or agrees to provide any Excess Capacity, any additional
feeders or risers which are required to supply Tenant's additional electrical
requirements, and all other equipment proper and necessary in connection with
such feeders or risers, shall be installed by Landlord upon Tenant's request, at
the sole cost and expense of Tenant (including without limitation, in the case
of any Additional Capacity, a connection fee in the amount of $5,000.00 per watt
of such Additional Capacity, and in the case of any Excess Capacity, a
connection fee of Three Hundred Fifty and 00/100 ($350.00) Dollars per kilovolt
ampere), provided that, in Landlord's reasonable judgment, such additional
feeders or risers are necessary and are permissible under applicable laws and
insurance regulations and the installation of such feeders or risers will not
cause permanent damage or injury to the Building or the Premises or cause or
create a dangerous or hazardous condition or entail excessive or unreasonable
alterations or interfere with or disturb other tenants or occupants of the
Building. Tenant covenants that at no time shall the use of electrical energy in
the Premises exceed the capacity of the existing feeders or wiring installations
then serving the Premises. Tenant shall not make or perform, or permit the
making or performance of, any alterations to wiring installations or other
electrical facilities in or serving the Premises without the prior consent of
Landlord in each instance and without paying Landlord's customary changes
therefor. Any such Alterations, additions or consent by Landlord shall be
subject to the provisions of this Lease including, but not limited to, the
provisions of Article 3 hereof.
(iii) Landlord reserves the right to discontinue furnishing
electricity to Tenant in the Premises on not less than sixty (60) days notice to
Tenant. If Landlord exercises such right to discontinue, or is compelled to
discontinue furnishing electricity to Tenant, this Lease shall continue in full
force and effect and shall be unaffected thereby, except only that from and
after the effective date of such discontinuance, Landlord shall not be obligated
to furnish electricity to Tenant. If Landlord so discontinues furnishing
electricity to Tenant, Tenant shall arrange to obtain electricity directly from
the public utility or other company servicing the Building. Such electricity may
be furnished to Tenant by means of the then existing electrical facilities
serving the Premises to the extent that the same are available, suitable and
safe for such purposes. All meters and all additional panel boards, feeders,
risers, wiring and other conductors and equipment which may be required to
obtain electricity, of substantially the same quantity, quality and character,
shall be installed by Landlord at Tenant's sole cost and expense. Landlord shall
not voluntarily discontinue furnishing electricity to Tenant until Tenant is
able to receive electricity directly from the public utility or other company
servicing the Building.
(iv) Landlord shall not be liable to Tenant in any way for any
interruption, curtailment or failure or defect in the supply or character of
electricity furnished to the Premises by reason of any requirement, act or
omission of Landlord or of any public utility or other company servicing the
Building with electricity or for any other reason except Landlord's negligence
or willful misconduct. If
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either the quantity or character of electrical services is changed by the public
utility or other company supplying electrical service to the Building or is no
longer available or suitable for Tenant's requirements, no such change,
unavailability or unsuitability shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent, or relieve Tenant from any of its obligations under this Lease, or
impose any liability upon Landlord, or its agents, by reason of inconvenience or
annoyance to Tenant, or injury to or interruption of Tenant's business, or
otherwise.
(iv) In the event that the submeter to be installed in the
Premises in accordance with the provisions of subsection H(i) of this Article 29
is not installed, activated and fully operational on or before the Commencement
Date (and irrespective of whether or not Rent shall be payable for such period),
Tenant will pay, monthly, as additional rent, the Interim Electrical Charge on
the Commencement Date and on the first day of each calendar month thereafter
until such time as the submeter is installed, activated and fully operational.
If the Commencement Date occurs on a date other than the first day of a calendar
month, the Interim Electrical Charge for such month shall be an amount equal to
such proportion of the Interim Electrical Charge as the number of days from and
including the Commencement Date to the last day of the calendar month in which
the Commencement Date occurs bears to the total number of days in such calendar
month. If the first day that the electrical submeter becomes activated and fully
operational occurs on a date other than the first day of a calendar month, the
Tenant shall pay for such month an amount equal to such proportion of the
Interim Electrical Charge as the number of days from the beginning of such
calendar month through and including the date that such electrical submeter
becomes operational bears to the total number of days in such calendar month
plus the cost of electricity as determined by the submeter, for the remainder of
such month.
I. Interruption of Services. Landlord reserves the right to stop service
of the heating, the elevator, electrical, plumbing or other mechanical systems
or facilities in the Building and cleaning services when necessary, by reason of
accident or emergency, or for repairs, additions, alterations, replacements,
decorations or improvements in the judgment of Landlord desirable or necessary
to be made, until said repairs, additions, alterations, replacements,
decorations or improvements shall have been completed. Landlord shall have no
responsibility or liability for interruption, curtailment or failure to supply
heat, cooled or outside air, elevator, plumbing, electricity or cleaning when
prevented by exercising its right to stop service or by strikes, labor troubles
or accidents or by any cause whatsoever reasonably beyond Landlord's control, or
by failure of independent contractors to perform or by laws, orders, rules or
regulations of any federal, state, county or municipal authority (including,
without limitation, regulations may require the removal of CFC's as well as the
alteration or replacement of equipment utilizing CFC's), or failure of suitable
fuel supply, or inability by exercise of reasonable diligence to obtain suitable
fuel or by reason of governmental preemption in connection with a National
Emergency or by reason of the conditions of supply and demand which have been or
are affected by war or other emergency. The exercise of such right or such
failure by Landlord shall not constitute an actual or constructive eviction, in
whole or in part, or entitle Tenant to any compensation or to any abatement or
diminution of Rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord or its agents by reason of
inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's
business, or otherwise.
J. Life Safety Systems . Landlord shall, at Landlord's expense, provide
and maintain in accordance with applicable laws, life safety service through the
Building's Class E system to the points of connection to each floor of the
Premises which shall provide such service to the Premises. Landlord shall
provide Tenant with sufficient capability to connect Tenant's strobes, speakers
and other related life safety equipment to the Building's Class E system as
required for Tenant to comply with such laws.
K. Conduit Riser. Tenant shall, as part of Tenant's Initial Alteration,
propose a location to be mutually agreed upon by both Landlord and Tenant, which
location shall be made available for the installation (at Tenant's sole cost and
expense) of two (2) three (3") inch conduit risers (which risers Tenant shall
install simultaneously) and Tenant shall have the right to install such risers
subject to Landlord's approval.
30. PARTNERSHIP TENANT.
A. Partnership Tenants. If Tenant's interest in this Lease shall be
assigned to a partnership (or to two (2) or more persons, individually and as
co-partners of a partnership) pursuant to Article 12 (any such partnership and
such persons are referred to in this Article 30 as a "Partnership Tenant"), the
following provisions of this Article 30 shall apply to such Partnership Tenant:
(i) the liability of each of the parties comprising a Partnership Tenant shall
be joint and several, and (ii) each of the parties comprising a Partnership
Tenant hereby consents in advance to, and agrees to be bound by, any written
instrument which may hereafter be executed, changing, modifying or discharging
this Lease, in whole or in part, or surrendering all or any part of the Premises
to Landlord, and by any notices, demands, requests or other communications which
may hereafter be given by a Partnership Tenant or by any of the parties
comprising a Partnership Tenant, and (iii) any bills, statements, notices,
demands, requests or other communications given or rendered to a Partnership
Tenant and to all such parties shall be binding upon a
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Partnership Tenant and all such parties, and (iv) if a Partnership Tenant shall
admit new partners, all of such new partners shall, by their admission to a
Partnership Tenant, be deemed to have assumed performance of all of the terms,
covenants and conditions of this Lease on Tenant's part to be observed and
performed, and (v) a Partnership Tenant shall give prompt notice to Landlord of
the admission of any such new partners, and upon demand of Landlord, shall cause
each such new partner to execute and deliver to Landlord an agreement in form
satisfactory to Landlord, wherein each such new partner shall assume performance
of all the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed (but neither Landlord's failure to request any such
agreement nor the failure of any such new partner to execute or deliver any such
agreement to Landlord shall vitiate the provisions of subdivision (v) of
subsection A of this Article 30). Landlord hereby acknowledges that the
co-occupancy of the Premises by Tenant and a related corporation shall not, in
and of itself, create a partnership nor shall Tenant thereby be deemed a
Partnership Tenant.
B. Limited Liability Entity. Notwithstanding anything to the contrary
contained herein, if Tenant is a limited or general partnership (or is comprised
of two (2) or more persons, individually or as co-partners), the change or
conversion of Tenant to (i) a limited liability company, (ii) a limited
liability partnership, or (iii) any other entity which possesses the
characteristics of limited liability (any such limited liability company,
limited liability partnership or entity is collectively referred to as a
"Limited Liability Successor Entity"), shall be prohibited unless the prior
written consent of Landlord is obtained, which consent may be withheld in
Landlord's sole discretion. Notwithstanding the foregoing, Landlord agrees not
to unreasonably withhold or delay such consent provided that:
(a) The Limited Liability Successor Entity succeeds to all or
substantially all of Tenant's business and assets;
(b) The Limited Liability Successor Entity shall have a net
worth, determined in accordance with generally accepted accounting principles,
consistently applied, of not less than the greater of the net worth of Tenant on
(1) the date of execution of this Lease, or (2) the day immediately preceding
the proposed effective date of such conversion;
(c) Tenant is not in default of any of the terms, covenants or
conditions of this Lease on the proposed effective date of such conversion;
(d) Tenant shall cause each partner of Tenant to execute and
deliver to Landlord an agreement, in form and substance satisfactory to
Landlord, wherein each such partner agrees to remain personally liable for all
of the terms, covenants and conditions of this Lease that are to be observed and
performed by the Limited Liability Successor Entity; and
(e) Tenant shall reimburse Landlord within ten (10) business days
following demand by Landlord for any and all reasonable costs and expenses that
may be incurred by Landlord in connection with said conversion of Tenant to a
Limited Liability Successor Entity, including, without limitation, any
attorney's fees and disbursements.
31. VAULT SPACE. Any vaults, vault space or other space outside the boundaries
of the Real Property, notwithstanding anything contained in this Lease or
indicated on any sketch, blueprint or plan are not included in the Premises.
Landlord makes no representation as to the location of the boundaries of the
Real Property. All vaults and vault space and all other space outside the
boundaries of the Real Property which Tenant may be permitted to use or occupy
is to be used or occupied under a revocable license, and if any such license
shall be revoked, or if the amount of such space shall be diminished or required
by any Federal, State or Municipal authority or by any public utility company,
such revocation, diminution or requisition shall not constitute an actual or
constructive eviction, in whole or in part, or entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord. Any fee, tax or charge imposed by
any governmental authority for any such vaults, vault space or other space
actually used by Tenant shall be paid by Tenant.
32. SECURITY DEPOSIT.
A. Tenant has deposited with Landlord upon the execution of this Lease
the Security Deposit (as defined in Article 1) as security for the faithful
performance and observance by Tenant of the terms, covenants and conditions of
this Lease on Tenant's part to be observed and performed. In the event of any
default beyond notice and any cure by Tenant in the observance or performance of
any of the terms, covenants or conditions of this Lease on the part of Tenant to
be observed or performed including, but not limited to, any default in the
payment when due of any monthly installment of the Rent or increase in the Rent
or of any additional rent or other charges due and payable under this Lease.
Landlord may use or apply all or any part of the Security Deposit for the
payment to Landlord for Tenant's account of any sum or sums due under this
Lease, without thereby waiving any other rights or remedies of Landlord with
respect to such default. Tenant agrees to replenish all or any part of the
Security Deposit so used or applied during the Term. After (i) the Expiration
Date or any other date upon which the Term shall expire
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and come to an end, and (ii) the full observance and performance by Tenant of
all the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed. Landlord shall return to Tenant the balance of the
Security Deposit then held or retained by Landlord. Landlord agrees that, unless
prohibited by law or by the general policies of lending institutions in New York
City, Landlord shall deposit the Security Deposit in an interest-bearing savings
account with a bank selected by Landlord, in which event all interest accruing
thereon shall be added to and become part of the Security Deposit and shall be
retained by Landlord under the same conditions as the sum originally deposited.
Tenant agrees that Tenant shall not assign or encumber any part of the Security
Deposit, and no assignment or encumbrance by Tenant of all or any part of the
Security Deposit shall be binding upon Landlord, whether made prior to, during,
or after the Term. Landlord shall not be required to exhaust its remedies
against Tenant or against the Security Deposit before having recourse to any
other form of security held by Landlord and recourse by Landlord to any form of
security shall not affect any remedies of Landlord which are provided in this
Lease or which are available to Landlord in law or equity. In the event of any
sale, assignment or transfer by Landlord named herein (or by any subsequent
landlord) of its interest in the Building as owner or lessee, Landlord (or such
subsequent landlord) shall have the right to assign or transfer the Security
Deposit to its grantee, assignee or transferee and, in the event of such
assignment or transfer, Landlord named herein (or such subsequent landlord)
shall have no liability to Tenant for the return of the Security Deposit and
Tenant shall look solely to the grantee, assignee or transferee for such return.
A lease of the entire Building shall be deemed a transfer within the meaning of
the foregoing sentence.
B. In lieu of the cash security (the "Cash Security") described in
subparagraph A above, Tenant may deposit with Landlord, at the time of the
execution and delivery of this Lease, an unconditional, irrevocable letter of
credit, in the form annexed hereto as Exhibit 3, issued by Citibank, N.A.
(referred to as the "Bank"), in favor of Landlord, in the sum of One Million
Four Hundred Nineteen Thousand Seven Hundred Eighty-Four and 00/100
($1,419,784.00) DOLLARS in funds available immediately or same day funds in the
City of New York, as security for the faithful observance and performance by
Tenant of the terms, covenants and conditions of this Lease on Tenant's part to
be observed and performed. Such letter of credit is for a term of not less than
one (1) year which term shall be automatically renewed for successive one (1)
year terms, unless the Bank gives not less than one hundred twenty (120) days
prior written notice that it will not so renew the letter of credit for such
successive term and the last term of the letter of credit shall end not less
than six (6) months after the Expiration Date. If such letter of credit is not
automatically renewed as aforesaid, Tenant agrees to cause the Bank to renew
such letter of credit, from time to time, during the Term, at least ninety (90)
days prior to the expiration of said letter of credit or any renewal or
replacement, upon the same terms and conditions. In the event of any transfer of
said letter of credit pursuant to subsection A above and notice of such transfer
to Tenant, Tenant within ten (10) days thereafter, shall cause a new letter of
credit to be issued by said Bank to the transferee upon the same terms and
conditions in replacement of the letter of credit so transferred and Landlord
agrees that simultaneously with the delivery of such new letter or credit, it
will return to said Bank the letter of credit being replaced. The letter of
credit deposited hereunder, and all renewals and replacements, are referred to,
collectively, as the "Letter of Credit". The Letter of Credit shall be held in
trust by Landlord for the purposes set forth in this Article and shall not be
transferred except for transfer (a) to an agent for collection, or (b) pursuant
to subsection A above. In the event Tenant defaults beyond any applicable grace
period hereunder in the performance of its obligations to issue a replacement
Letter of Credit, or in the observance or performance of Tenant's agreement to
cause the Bank to renew the Letter of Credit, Landlord, in addition to all
rights and remedies which Landlord may have under this Lease or at law, shall
have the right to require the Bank to make payment to Landlord of the entire sum
of One Million Four Hundred Nineteen Thousand Seven Hundred Eighty-Four and
00/100 ($1,419,784.00) DOLLARS or the undrawn portion thereof, as the case may
be, represented by the Letter of Credit which sum may be held by Landlord as
Cash Security in the same manner as if said sum had been deposited with Landlord
pursuant to the provisions of subsection A of this Article. If payment of the
entire sum of One Million Four Hundred Nineteen Thousand Seven Hundred
Eighty-Four and 00/100 ($1,419,784.00) Dollars or the undrawn portion thereof is
made to Landlord by reason of Tenant's failure to renew or replace the Letter of
Credit in accordance with the foregoing provisions of this Article, Landlord
shall have the right, at any time on behalf of Tenant, to replace said Cash
Security with a new Letter of Credit issued by the Bank or any other bank
selected by Landlord, in Landlord's sole discretion, and Tenant hereby
irrevocably constitutes and appoints Landlord as Tenant's agent and
attorney-in-fact to cause the Bank or any such other bank selected by Landlord
to issue such a replacement Letter of Credit. The Letter of Credit provides for
partial drawings. In the event Tenant defaults in the payment when due of an
installment of Rent or in the payment when due of any additional rent or other
charges due and payable under this Lease and such default shall continue for a
period of three (3) business days after notice by Landlord to Tenant of such
default or if this Lease and the Term shall expire and come to an end as
provided in Article 17 or by or under any summary proceeding or any other action
or proceeding, or if Landlord shall re-enter the Premises as provided in Article
18, or by or under any summary proceeding or any other action or proceeding,
then Landlord, in addition to all rights and remedies which Landlord may have
under this Lease or at law, may from time to time, draw on the Letter of Credit
in one or more drawings for the amount of any Rent or additional rent or other
charges then due and for any amount then due and payable to Landlord under this
Lease. In the event of a partial drawing, as provided in the immediately
preceding
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sentence, Tenant shall, within five (5) business days after demand, cause the
Bank to issue an amendment to the Letter of Credit restoring the amount
available thereunder to One Million Four Hundred Nineteen Thousand Seven Hundred
Eight-Four and 00/100 ($1,419,784.00) DOLLARS. Notwithstanding anything to the
contrary set forth in this Lease, including, but not limited to, the foregoing
provisions of this Article, in addition to all rights granted to Landlord
pursuant to the provisions of the Lease, if this Lease and the Term shall expire
and come to an end as provided in Article 17, or by or under any summary
proceeding, or any other action or proceeding, or if Landlord shall re-enter the
Premises as provided in Article 18, or by or under any summary proceeding or any
other action or proceeding, Landlord, in addition to all rights and remedies
which Landlord may have under this Lease or at law, shall have the right to
require the Bank to make payment to Landlord of the entire sum of One Million
Four Hundred Nineteen Thousand Seven Hundred Eighty-Four and 00/100
($1,419,784.00) Dollars or the undrawn portion thereof, as the case may be,
represented by the Letter of Credit, which sum shall be held by Landlord as cash
security in the same manner as if said sum had been deposited with Landlord
pursuant to the provisions of subsection A of this Section.
C. Any sum held by Landlord as Cash Security shall be held subject to
the provisions of Section 7-103 of the General Obligations Law or any similar
statute successor thereto.
D. In the event Tenant defaults beyond notice and cure period in the
observance or performance of any term, covenant or conditions of this Lease on
Tenant's part to be observed or performed including, but not limited to, the
covenant for the payment of Rent and additional rent, Landlord may use, apply or
retain the whole or any part of any Cash Security held by Landlord under any of
the provisions of this Article 32, to the extent required for the payment of any
Rent, additional rent or any other sum with respect to which Tenant is in
default, or for the payment of any sum which Landlord may expend or incur
because of Tenant's default in the observance or performance of any such term,
covenant or condition, including, but not limited to, the payment of any damages
or deficiency in the reletting of the Premises, whether such damage or
deficiency accrued before or after summary proceedings or other re-entry by
Landlord, without thereby waiving any other rights or remedies of Landlord with
respect to such default, and Landlord shall hold the remainder of such Cash
Security as security for the faithful performance and observance by Tenant of
the terms, covenants and conditions of this Lease on Tenant's part to be
observed and performed with the same rights as hereinabove set forth to use,
apply or retain all or any part of such remainder in the event of any further
default by Tenant under this Lease.
E. If Landlord uses, applies or retains the whole or any part of the
Cash Security held by Landlord under any of the provisions of subsection B,
Tenant, promptly after notice thereof, shall deliver to Landlord, in cash or by
cashier's check, or Tenant's certified check, in either case drawn by or on a
bank which is a member of the New York Clearing House Association and payable to
the order of Landlord, the sum necessary to restore the Cash Security to the sum
or One Million Four Hundred Nineteen Thousand Seven Hundred Eighty-Four and
00/100 ($1,419,784.00) DOLLARS.
F. The Letter of Credit and/or any remaining portion of any Cash
Security then held by Landlord for the performance of Tenant's obligations under
this Lease as security shall be returned to Tenant six (6) months after the
Expiration Date.
G. In the event of a sale or other transfer of the Building and/or the
land (the "Land") upon which the Building is situated, or Landlord's interest in
this Lease, Landlord shall transfer the Letter of Credit and/or any remaining
portion of any Cash Security then held by Landlord as security for performance
of Tenant's obligations under this Lease to the transferee, and Landlord shall
thereupon be released from all liability for the return of such security; Tenant
agrees to look solely to the transferee for the return of any such security and
it is agreed that the provisions of this sentence shall apply to every sale or
transfer of the Land and/or Building or Landlord's interest in this Lease by
Landlord named herein or its successors, and to every transfer or assignment
made of any such security. Any transferee shall be deemed to have agreed that
any Letter of Credit or Cash Security transferred to such transferee pursuant to
this Article shall be held in trust for the purposes of set forth herein. A
lease of the entire Building pursuant to which the lessee shall be entitled to
collect the rents hereunder shall be deemed a transfer within the meaning of
this subsection G.
H. Owner agrees that, if not prohibited by law or the general policies
of lending institutions in New York City, Landlord shall deposit any Cash
Security held by Landlord in an interest-bearing savings account at a bank or
banks selected by Landlord, and all interest accruing thereon shall be added to
and become part of such Cash Security and shall be retained by Landlord under
the same conditions as the principal sum held as Cash Security. Notwithstanding
anything to the contrary set forth in this Article with respect to any Cash
Security, Landlord shall be entitled to retain the one (1%) percent
administrative fee permitted by law to be retained by landlords with respect to
cash security deposits.
I. Tenant agrees that it will not assign, mortgage or encumber, or
attempt to assign, mortgage or encumber, the Letter of Credit or any Cash
Security held by Landlord under this Lease, and that neither Landlord nor its
successors or assigns shall be bound by any such assignment, mortgage,
encumbrance,
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attempted assignment, attempted mortgage or attempted encumbrance. Landlord
shall not be required to exhaust its remedies against Tenant before having
recourse to the Letter of Credit, the Cash Security or any other security held
by Landlord. Recourse by Landlord to the Letter of Credit, the Cash Security or
any other security held by Landlord shall not affect any remedies of Landlord
which are provided in this Lease or which are available in law or equity.
J. Landlord has agreed that Landlord shall return to Tenant the sum of
Two Hundred Thirty-Six Thousand Six Hundred Thirty and 66/100 ($236,630.66)
Dollars of such security on each of the following dates (each referred to as a
"Partial Return Date") (i) January 1, 2003, (ii) January 1, 2004, and (iii)
January 1, 2005, provided Tenant is not then in default beyond notice and any
cure period under any of the terms, covenants or conditions of this Lease on
Tenant's part to be observed and performed. Accordingly, if on any Partial
Return Date Tenant shall not so be in default, Tenant may replace the Letter of
Credit with a letter of credit in a sum reduced by the amount of such partial
reduction as set forth above, and the amounts referred to in the previous
subsections of this Article shall be deemed reduced as the provisions of this
subsection J shall operate to so reduce the Letter of Credit and/or Cash
Security, as the case may be.
33. CAPTIONS. The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this Lease nor
the intent of any provision thereof.
34. ADDITIONAL DEFINITIONS.
A. The term "office" or "offices", wherever used in this Lease, shall
not be construed to mean premises used as a store or stores, for the sale or
display, at any time, of goods, wares or merchandise, of any kind, or as a
restaurant, shop, booth, bootblack or other stand, barber shop, or for other
similar purposes or for manufacturing.
B. The words "reenter" and "reentry" as used in this Lease are not
restricted to their technical legal meaning.
C. The term "rent" as used in this Lease shall mean and be deemed to
include Rent, any increases in Rent, all additional rent and any other sums
payable hereunder.
D. The term "business days" as used in this Lease shall exclude
Saturdays, Sundays and all days observed by the State or Federal Government as
legal holidays and union holidays for those unions that materially affect the
delivery of services in the Building.
35. PARTIES BOUND. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective heirs, distributees, executors, administrators, successors, and,
except as otherwise provided in this Lease, their assigns.
36. BROKER. Each of Landlord and Tenant represent and warrant to the other that
it has dealt directly with (and only with), the Broker (as defined in Article 1
herein) as broker in connection with this Lease, and that insofar as Tenant and
Landlord know no other broker negotiated this Lease or is entitled to any
commission in connection therewith; and Tenant and Landlord covenant and agree
to pay, hold harmless and indemnify the other from and against any and all cost,
expense (including reasonable attorney's fees) or liability for any
compensation, commissions or charges claimed by any broker or agent, other than
the Broker, with respect to this Lease or the negotiations thereof, arising from
Tenant's or Landlord's acts, conduct or conversations. The execution and
delivery of this Lease by Landlord and Tenant shall be conclusive evidence that
Landlord and Tenant have relied upon the foregoing representation and warranty.
Any commissions due to the Broker in connection with this Lease shall be paid by
Landlord pursuant to a separate agreement.
37. INDEMNITY. Tenant shall not do or permit any act or thing to be done upon
the Premises which may subject Landlord to any liability or responsibility for
injury, damages to persons or property or to any liability by reason of any
violation of law or of any legal requirement of public authority, but shall
exercise such control over the Premises as to fully protect Landlord against any
such liability. Tenant agrees to indemnify and save harmless Landlord from and
against all liabilities, obligations, damages, penalties, claims, costs and
expenses, including reasonable attorney fees, incurred or arising from (i) any
act, omission or negligence of Tenant, its contractors, licensees, agents,
employees, invitees or visitors; (ii) any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring during the
Term in or about the Premises, (iii) any accident, injury or damage to any
person, entity or property, occurring outside of the Premises but anywhere
within or about the Real Property, where such accident, injury or damage results
or is claimed to have resulted from an act or omission or negligence of Tenant
or Tenant's contractors, licensees, agents, employees, invitees or visitors,
(iv) any breach, violation or nonperformance of any covenant, condition or
agreement in this Lease set forth and contained on the part of Tenant to be
fulfilled, kept, observed and performed and (v) Tenant, or any of Tenant's
contractors, licensees, agents, employees, invitees or visitors causing or
permitting any
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Hazardous Substance (as hereinafter defined) to be brought upon, kept or used in
or about the Premises or the Real Property or any seepage, escape or release of
such Hazardous Substances. The term "Hazardous Substances" shall mean,
collectively, (a) asbestos and polychlorinated biphenyls and (b) hazardous or
toxic materials, wastes and substances which are defined, determined and
identified as such pursuant to any law. Tenant's liability under this Lease
extends to the acts and omissions of any subtenant and any contractor, licensee,
agent, employee, invitee or visitor of any subtenant. As used herein and in all
other provisions in this Lease containing indemnities made for the benefit of
Landlord, the term "Landlord" shall mean the Landlord herein named and its
managing agent and their respective parent companies and/or corporations, their
respective controlled, associated, affiliated and subsidiary companies and/or
corporations and their respective members, officers, partners, agents,
consultants, servants, employees, successors and assigns. This indemnity and
hold harmless agreement shall include indemnity from and against any and all
liability, fines, suits, demands, costs and expenses of any kind or nature
incurred in or in connection with any such claim or proceeding brought thereon,
and the defense thereof.
38. ADJACENT EXCAVATION SHORING. If an excavation shall be made upon land
adjacent to the Premises, or shall be authorized to be made, Tenant shall afford
to the person causing or authorized to cause such excavation, license to enter
upon the Premises for the purpose of doing such work as said person shall deem
reasonably necessary to preserve the wall or the Building from injury or damage
and to support the same by proper foundations without any claim for damages or
indemnity against Landlord, or diminution or abatement of Rent. Landlord shall
endeavor to have such entry accomplished during reasonable hours in the presence
of a representative of Tenant, who shall be designated by Tenant promptly upon
Landlord's request.
39. MISCELLANEOUS.
A. No Offer. This Lease is offered for signature by Tenant and it is
understood that this Lease shall not be binding upon Landlord unless and until
Landlord shall have executed and delivered a fully executed copy of this Lease
to Tenant.
B. Certificates. From time to time, within ten (10) business days next
following request by Landlord or the mortgagee of a Mortgage, Tenant shall
deliver to Landlord or such mortgagee, as the case may be, a written statement
executed and acknowledged by Tenant, in form satisfactory to Landlord or such
mortgagee, (i) stating that this Lease is then in full force and effect and has
not been modified (or if modified, setting forth all modifications), (ii)
setting forth the date to which the Rent, additional rent and other charges
hereunder have been paid, together with the amount of fixed base monthly Rent
then payable, (iii) stating whether or not, to the best knowledge of Tenant,
Landlord is in default under this Lease, and, if Landlord is in default, setting
forth the specific nature of all such defaults, (iv) stating the amount of the
security deposit under this Lease, (v) stating whether there are any subleases
affecting the Premises, (vi) stating the address of Tenant to which all notices
and communications under the Lease shall be sent, (vii) stating the Commencement
Date and the Expiration Date, and (viii) as to any other matters requested by
Landlord or such mortgagee. Tenant acknowledges that any statement delivered
pursuant to this subsection B may be relied upon by any purchaser or owner of
the Real Property or the Building, or Landlord's interest in the Real Property
or the Building or any Superior Lease, or by any mortgagee of a Mortgage, or by
any assignee of any mortgagee of a Mortgage, or by any lessor under any Superior
Lease.
C. Directory Listings. Landlord agrees to provide Tenant, at Landlord's
sole cost and expense, with five (5) listings on the directory in the lobby of
the Building. Upon written request by Tenant, Landlord agrees to provide Tenant
with additional listings on such directory, at Tenant's sole cost and expense,
provided Tenant shall be limited to a number of listings determined by
multiplying Tenant's Proportionate Share by the total number of spaces for
listings on such directory.
D. Authority. The individuals executing this Lease on behalf of Landlord
and Tenant hereby respectively represent and warrant that Landlord and Tenant
are duly formed and validly existing entities qualified to do business in the
State of New York and that Landlord and Tenant have full right and authority to
execute and deliver this Lease and that the persons signing on behalf of
Landlord and Tenant are authorized to do so.
E. Signage. Tenant shall not exhibit, inscribe, paint or affix any sign,
advertisement, notice or other lettering on any portion of the Building or the
outside of the Premises without the prior written consent of Landlord in each
instance, which consent shall not be unreasonably withheld or delayed, provided
such signage is in conformity with Building standard signage and is installed in
accordance with all applicable laws, rules and regulations having jurisdiction
thereof. Landlord shall, at Tenant's sole cost and expense, cooperate with
Tenant in connection with Tenant's application for any necessary approval from
any governmental or quasi-governmental agency having jurisdiction thereof with
respect to Tenant's proposed signage. A plan of all signage or other lettering
proposed to be exhibited, inscribed, painted or affixed on the entry door(s) to
the Premises shall be prepared by Tenant in conformity with building standard
signage requirements (if any) and submitted to Landlord for Landlord's consent
which consent
34
<PAGE> 40
shall not be unreasonably withheld. Upon the granting of Landlord's consent,
Tenant may install such signage at Tenant's sole cost and expense. Upon
installation of any such signage or other lettering, such signage or lettering
shall not be removed, changed or otherwise modified in any way without
Landlord's prior written approval. Any signage, advertisement, notice or other
lettering which shall be exhibited, inscribed, painted or affixed by or on
behalf of Tenant in violation of the provisions of this section may be removed
by Landlord and the cost of any such removal shall be paid by Tenant as
additional rent. Tenant shall not exhibit, inscribe, paint or affix on any part
of the Premises or the Building visible to the general public any signage or
lettering including the words "temporary" or "personnel".
F. Consents and Approvals. All references in this Lease to the consent
or approval of Landlord shall be deemed to mean the written consent of Landlord
or the written approval of Landlord and no consent or approval of Landlord shall
be effective for any purpose unless such consent or approval is set forth in a
written instrument executed by Landlord. Wherever in this Lease Landlord's
consent or approval is required, if Landlord shall delay or refuse such consent
or approval, Tenant in no event shall be entitled to make, nor shall Tenant
make, any claim, and Tenant hereby waives any claim for money damages (nor shall
Tenant claim any money damages by way of set-off, counterclaim or defense) based
upon any claim or assertion by Tenant that Landlord unreasonably withheld or
unreasonably delayed its consent or approval. Any dispute as to whether Landlord
was reasonable with respect to giving its consent under Article 12 shall be
determined by arbitration conducted in the City of New York, Borough of
Manhattan in accordance with the expedited rules of the American Arbitration
Association ("AAA") for commercial arbitration (if such rules are then existing)
pursuant to a submission filed within ten (10) business days after written
notice of the election by one party to submit the dispute to arbitration has
been delivered to the other party. If the AAA is not then in existence or does
not desire to act, then the submitting party may apply within said ten (10)
business day period to a judge of a court of competent jurisdiction in the City
of New York, Borough of Manhattan, for the appointment of an arbitrator to hear
the parties and determine the matter. Provided the rules and regulations of the
AAA, or the court, as the case may be, so permit, the AAA, or such court, shall
select a single arbitrator within two (2) business days after such submission or
application, the arbitration shall commence two (2) business days thereafter and
the arbitrator shall make a determination within three (3) business days after
conclusion of the arbitration. All action necessary to implement the decision of
the AAA shall be undertaken as soon as possible, but in no event later than
three (3) business days after the rendering of such decision.
G. Governing Law. This Lease shall be deemed to have been made in New
York County, New York, and shall be construed in accordance with the laws of New
York. All actions or proceedings relating, directly or indirectly, to this Lease
shall be litigated only in courts located within the County of New York.
Landlord and Tenant, any guarantor of the performance of Tenant's obligations
hereunder and their respective successors and assigns, hereby subject themselves
to the jurisdiction of any state or federal court located with such county, and
shall be subject to service provided that the terms, provisions and conditions
of Article 27 are adhered to.
H. Financial Statements. Tenant shall, upon written request of Landlord,
furnish Landlord throughout the Term, within ninety (90) days following the end
of Tenant's fiscal year (or within five [5] business days after Landlord's
request therefor), an updated, current annual financial statement of Tenant,
which statement shall be audited (if available).
I. Signatories. If more than one person executes this Lease as Tenant,
each of them understands and hereby agrees that the obligations of each of them
under this Lease are and shall be joint and several, that the term "Tenant" as
used in this Lease shall mean and include each of them jointly and severally and
that the act of or notice from, or notice or refund to, or the signature of, any
one or more of them, with respect to the tenancy and/or this Lease, including,
but not limited to, any renewal, extension, expiration, termination or
modification of this Lease, shall be binding upon each and all of the persons
executing this Lease as Tenant with the same force and effect as if each and all
of them had so acted or so given or received such notice or refund or so signed.
40. HAZARDOUS SUBSTANCES. Tenant shall not permit the presence, handling, use,
storage or transportation of Hazardous Substances in or about the Premises or
the Building and Tenant shall, at its sole cost and expense, perform any and all
Remedial Work arising from, growing out of or related to any breach of the
foregoing covenant by Tenant. The term "Remedial Work" shall mean all
investigation, monitoring, restoration, abatement, detoxification, containment,
handling, treatment, removal, storage, decontamination, clean-up, transport,
disposal or other ameliorative work or response action undertaken in connection
with (a) any "Environmental Laws" (as hereinafter defined), (b) any order of any
governmental authority having jurisdiction over the Premises and/or the
Building, or (c) any final judgment, consent decree, settlement or compromise
with respect to any "Hazardous Substances Claims" (as hereinafter defined). The
term "Hazardous Substances Claims" shall mean any and all enforcement, clean-up,
removal, remedial or other governmental or regulatory actions, agreements or
orders threatened in writing, instituted or completed pursuant to any
Environmental Laws and any and all other actions, proceedings, claims, written
demands or causes of action, whether meritorious or not (including, without
limitation, third party claims for contribution, indemnity, personal injury or
real or personal property
35
<PAGE> 41
damage), that, in each case, relate to, arise from or are based, in whole or in
part, on the occurrence or alleged occurrence of any violation or alleged
violation of or responsibility under any applicable Environmental Law relating
to the Premises and/or the Building or to the ownership, use, occupation or
operation thereof. The term "Environmental Laws" shall mean any and all present
and future federal, state and local laws (whether under common law, statute,
ordinance, rule, regulation or otherwise), court or administrative orders or
decrees, requirements of permits issued with respect thereto, and other
requirements of governmental authorities having jurisdiction over the Premises
and/or the Building relating to protection of the environment, to public health
and safety or any Hazardous Substances (including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"), 42 U.S.C. Sections 9601, et seq., as heretofore or hereafter amended
from time to time). To Landlord's actual knowledge, on the Commencement Date,
the Premises shall not be in violation of Environmental Laws having jurisdiction
thereof.
41. INTENTIONALLY DELETED.
42. INTENTIONALLY DELETED.
43. RIGHT OF FIRST OFFER.
A. Provided this Lease (i) is in full force and effect and Tenant is not
in default after notice and the expiration of the applicable grace period, if
any, and (ii) Tenant is in occupancy of at least eighty (80%) percent of the
second (2nd) floor portion of the Premises, Tenant shall have a right of first
offer with respect to the first leasing of any space located on the third (3rd)
floor of the Building comprising at least five thousand (5,000) rentable square
feet which is contiguous to the Premises ("First Offer Space") which becomes
available for leasing during the Term upon the terms and conditions set forth in
this Article 43.
B. Landlord shall provide a notice to Tenant ("Landlord's First Offer
Notice") that (i) such First Offer Space shall become available for leasing, and
(ii) describing such First Offer Space and the material business terms which
Landlord intends to market such space. Tenant shall have a right by notice
("Tenant's First Offer Notice") given to Landlord within five (5) business days
after Tenant's receipt of Landlord's First Offer Notice to lease such First
Offer Space from Landlord upon the terms and conditions hereinafter set forth.
If Tenant delivers a Tenant's First Offer Notice, Landlord shall negotiate with
Tenant in good faith to enter into a lease or lease amendment for such First
Offer Space.
C. TIME SHALL BE OF THE ESSENCE with respect to the giving of Tenant's
First Offer Notice and Tenant's failure to deliver Tenant's First Offer Notice
to Landlord within such five (5) business day period shall be deemed to
constitute a waiver by Tenant of its right to lease such First Offer Space.
Landlord shall thereafter be free to lease such First Offer Space to any third
party and Tenant shall no longer have a right to lease such First Offer Space
should it subsequently become available for leasing throughout the Term in
accordance with the provisions of this Article 43 (provided, however, if such
First Offer Space is subsequently configured in a materially different manner
(i.e., square footage) than in the manner initially offered to Tenant by
Landlord and such reconfigured First Offer Space becomes available for leasing
hereunder, then Tenant shall have an additional one (1) time right to lease such
reconfigured First Offer Space in accordance with the terms and conditions of
this Article 43).
D. Any exercise by Tenant of its option to lease First Offer Space as
above provided shall be subject to the following additional limitations:
(i) The rights of existing tenants in the Building as of the date
hereof to lease such First Offer Space;
(ii) Landlord's desire to extend the term of any tenant (or
subtenant) then occupying the First Offer Space;
(iii) The term for which the First Offer Space shall be leased
shall be for the balance of the Term, as the same may be extended in accordance
with the provisions of this Lease;
(iv) The rent for the First Offer Space shall be equal to the
greater of (a) then-prevailing fair market rent for such space, and (b) the Rent
and additional rent and other charges that Tenant is then paying for the
Premises. Tenant's obligation to pay rent and additional rent and other charges
with respect to the First Offer Space shall commence on the date Landlord
delivers the First Offer Space to Tenant and thereafter the Premises shall be
deemed to include the First Offer Space and shall be increased by the number of
square feet comprising the First Offer Space. Tenant's Proportionate Share and
Labor Rate Factor shall each be recalculated to reflect that the First Offer
space has been incorporated into the Premises, and in the event that the First
Offer Space is not then sub-metered, Tenant shall pay an interim electric charge
in the amount of $3.00 per rentable square foot for such First Offer Space;
36
<PAGE> 42
(v) The configuration of the First Offer Space shall be
reasonably determined by Landlord; and
(vi) All of the other terms and conditions of this Lease shall
apply to the First Offer Space, provided, however, that Landlord shall have no
obligation to perform Landlord's Pre-Commencement Core Work or Landlord's
Post-Commencement Core Work or to provide Tenant with Landlord's Contribution
with respect to the First Offer Space, except as provided in Landlord's First
Offer Notice.
E. Promptly after the exercise of the right to lease any First Offer
Space, Landlord and Tenant shall execute and deliver to each other an agreement
setting forth (1) a description of the First Offer Space, (2) the effective date
of inclusion of such First Offer Space in the Premises, and (3) the increase in
the Rent and Tenant's Proportionate Share and Labor Rate Factor resulting from
such inclusion.
[Remainder of this Page Intentionally left Blank]
37
<PAGE> 43
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
POLESTAR FIFTH PROPERTY ASSOCIATES LLC, Landlord
By: New Rock Realty Management LLC,
a New York limited liability company,
its authorized agent
By: NR Realty LLC,
a New York limited liability company,
its sole member
By: /s/ NR Realty LLC
-----------------------------------
Name:
---------------------------------
Title:
---------------------------------
WOMEN.COM Networks, LLC, Tenant
By: /s/ Women.com Networks, LLC
------------------------------
Name:
-------------------------
Title:
--------------------
- -----------------------------------
Tenant's Tax I.D. Number
38
<PAGE> 44
EXHIBIT 1
Floor Plan of Premises
[To Be Included]
39
<PAGE> 45
EXHIBIT 2
Cleaning Specifications for Premises
GENERAL CLEANING
NIGHTLY:
General Offices:
1. All hard-surfaced flooring to be swept using approved dust-down
preparation.
2. Carpet sweep all carpets, moving only light furniture (desks, file
cabinets, etc., not to be moved).
3. Hand dust and wipe clean all furniture, fixtures and window sills.
4. Empty and clean all ash trays and screen all sand urns.
5. Empty and clean all waste disposal cans and baskets.
6. Dust interiors of all waste disposal cans and baskets.
7. Wash clean all water fountains and coolers.
Public Lavatories:
1. Sweep and wash all floors, using proper disinfectants.
2. Wash and polish all mirrors, shelves, bright work and enameled surfaces.
3. Wash and disinfect all basins, bowls and urinals.
4. Wash all toilet seats (both sides).
5. Hand dust and clean all partitions, tile walls, dispensers and
receptacles in lavatories and restrooms.
6. Empty paper receptacles and remove wastepaper.
7. Fill and clean all soap, towel and toilet tissue dispensers as needed.
8. Empty and clean all sanitary disposal receptacles.
WEEKLY:
1. Vacuum clean all carpeting and rugs.
2. Dust all door louvers and other ventilating louvers within a person's
reach.
3. Wipe clean all brass and other bright work.
QUARTERLY:
High dust the Premises complete, including the following:
1. Dust all pictures, frames, charts, graphs and similar wall hangings not
reached in nightly cleaning.
2. Dust clean all vertical surfaces, such as walls, partitions, doors and
door bucks and other surfaces not reached in nightly cleaning.
3. Dust all pipes, ventilating and air-conditioning louvers, ducts, high
moldings and other high areas not reached in nightly cleaning.
4. Dust all Venetian blinds.
Wash exterior and interior of windows two (2) times per annum, subject to
weather conditions and requirements of law.
40
<PAGE> 46
SCHEDULE A
RULES AND REGULATIONS
I. The rights of each tenant in the Building to the entrances, corridors
and elevators of the Building are limited to ingress to and egress from
such tenant's premises and no tenant shall use, or permit the use of the
entrances, corridors, or elevators for any other purpose. No tenant
shall invite to its premises, or permit the visit of persons in such
numbers or under such conditions as to interfere with the use and
enjoyment of any of the plazas, entrances, corridors, elevators and
other facilities of the Building by other tenants. No tenant shall
encumber or obstruct, or permit the encumbrances or obstruction of any
of the sidewalks, plazas, entrances, corridors, elevators, fire exits or
stairways of the Building. Landlord reserves the right to control and
operate the public portions of the Building, the public facilities, as
well as facilities furnished for the common use of the tenants, in such
manner as Landlord deems best for the benefit of the tenants generally.
II. Landlord may refuse admission to the Building outside of ordinary
business hours to any person not known to the watchman in charge or not
having a pass issued by Landlord or not properly identified, and may
require all persons admitted to or leaving the Building outside of
ordinary business hours to register. Tenants' employees, agents and
visitors shall be permitted to enter and leave the Building whenever
appropriate arrangements have been previously made between Landlord and
the tenant with respect thereto. Each tenant shall be responsible for
all persons for whom it requests such permission and shall be liable to
Landlord for all acts of such persons. Any person whose presence in the
Building at any time shall, in the judgment of Landlord, be prejudicial
to the safety, character, reputation or interests of the Building or its
tenants may be denied access to the Building or may be ejected
therefrom. In case of invasion, riot, public excitement or other
commotion Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the
safety of the tenants and protection of property in the Building.
Landlord may require any person leaving the Building with any package or
other object to exhibit a pass from the tenant from whose premises the
package or object is being removed, but the establishment and
enforcement of such requirement shall not impose any responsibility on
Landlord for the protection of any tenant against the removal of
property from the premises of tenant. Landlord shall, in no way, be
liable to any tenant for damages or loss arising from the admission,
exclusion or ejection of any person to or from a tenant's premises or
the Building under the provisions of this rule.
III. No tenant shall obtain or accept for use in its premises ice, drinking
water, towels, barbering, boot blacking, floor polishing, lighting
maintenance, cleaning or other similar services from any persons not
authorized by Landlord in writing to furnish such services. Such
services shall be furnished only at such hours, in such places within
the tenant's premises and under such regulation as may be fixed by
Landlord.
IV. No window or other air-conditioning units shall be installed by any
tenant, and only such window coverings as are supplied or permitted by
Landlord shall be used in a tenant's premises.
V. There shall not be used in any space, nor in the public halls of the
Building, either by any tenant, jobber or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with
rubber tires and side guards.
VI. All entrance doors in each tenant's premises shall be left locked when
the tenant's premises are not in use. Entrance doors shall not be left
open at any time. All windows in each tenant's premises shall be kept
closed at all times and all blinds therein above the ground floor shall
be lowered when and as reasonably required because of the position of
the sun, during the operation of the air-conditioning system to cool or
ventilate the tenant's premises.
VII. No noise, including the playing of any musical instruments, radio or
television, which, in the judgment of Landlord, might disturb other
tenants in the Building, shall be made or permitted by any tenant. No
dangerous, inflammable, combustible or explosive object, material or
fluid shall be brought into the Building by any tenant or with the
permission of any tenant.
VIII. Each tenant shall be required to use Landlord's designated locksmith and
may only install such locks and other security devices as Landlord
approves. Each tenant shall furnish Landlord with keys to its respective
premises so that Landlord may have access thereto for the purposes set
forth in the Lease. No additional locks or bolts of any kind shall be
placed upon any of the doors or windows in any tenant's premises and no
lock on any door therein
A-1
<PAGE> 47
shall be changed or altered in any respect. Duplicate keys for a
tenant's premises and toilet rooms shall be procured only from Landlord,
which may make a reasonable charge therefore. Upon the termination of a
tenant's lease, all keys of the tenant's premises and toilet rooms shall
be delivered to Landlord.
IX. Each tenant, shall, at its expense, provide artificial light in the
premises for Landlord's agents, contractors and employees while
performing janitorial or other cleaning services and making repairs or
alterations in said premises.
X. No tenant shall install or permit to be installed any vending machines,
except for the use of Tenant's employees.
XI. No animals or birds may be brought into or kept in or about the
Building; Tenant acknowledges that any violation of this Rule and
Regulation will impair the first-class character and reputation of the
Building and shall be a material default under this Lease, in addition
no bicycles, mopeds or vehicles of any kind shall be brought into or
kept in or about the Building or permitted therein.
XII. No furniture, office equipment, packages or merchandise will be received
in the Building or carried up or down in the elevator, except between
such hours as shall be designated by Landlord. Landlord shall prescribe
the charge for freight elevator use and the method and manner in which
any merchandise, heavy furniture, equipment or safes shall be brought in
or taken out of the Building, and also the hours at which such moving
shall be done. No furniture, office equipment, merchandise, large
packages or parcels shall be moved or transported in the passenger
elevators at any time.
XIII. All electrical fixtures hung in offices or spaces along the perimeter of
any tenant's Premises must be fluorescent, of a quality, type, design
and bulb color reasonably approved by Landlord unless the prior consent
of Landlord has been obtained for other lamping, which consent shall not
be unreasonably withheld.
XIV. The exterior windows and doors that reflect or admit light and air into
any premises or the halls, passageways or other public places in the
Building, shall not be covered or obstructed by any tenant, nor shall
any articles be placed on the windowsills.
XV. Canvassing, soliciting and peddling in the Building is prohibited and
each tenant shall cooperate to prevent same.
XVI. No tenant shall do any cooking, conduct any restaurant, luncheonette or
cafeteria for the sale or service of food or beverages to its employees
or to others, except as expressly approved in writing by Landlord. In
addition, no tenant shall cause or permit any odors of cooking or other
processes or any unusual or objectionable odors to emanate from the
premises. The foregoing shall not preclude tenant from having food or
beverages delivered to the premises, provided that no cooking or food
preparation shall be carried out at the premises, except for reheating
of pre-cooked foods.
XVII. No tenant shall generate, store, handle, discharge or otherwise deal
with any Hazardous Substances on or about the Real Property.
A-2
<PAGE> 48
SCHEDULE B
I. Landlord agrees, at its sole cost and expense and without charge
to Tenant, to do the following work in the Premises all of which
shall be of design, capacity, finish and color of the Building
Standard adopted by Landlord for the Building hereinafter called
"Building Standard."
II. Landlord shall perform Landlord's Pre Commencement Core Work
prior to Tenant's Initial Alteration. Tenant shall coordinate
Tenant's Initial Alteration so that it does not interfere with
the performance of Landlord's Post-Commencement Core Work.
LANDLORD'S PRE-COMMENCEMENT CORE WORK
- - 2nd floor premises shall be delivered demolished and in broom clean
condition.
- - Mezzanine premises shall be delivered in "as-is" broom clean condition.
- - All columns on the 2nd floor shall be boxed to 10 feet from the floor.
- - Landlord to provide Tenant one (1) connection point for the 2nd floor, and
(1) additional connection point to the mezzanine, for Tenant's devices into
the Building's Class E System.
- - Floor surfaces shall be delivered in "as-is" condition.
- - Tenant shall use the existing sprinkler system which shall be delivered in
good working order.
- - Ceiling and walls shall be delivered in "as-is" condition.
- - Landlord shall install submeter(s) for entire 2nd floor and mezzanine.
- - Premises shall be delivered free of leaks upon the date of delivery for
commencement of Tenant's construction.
LANDLORD'S POST COMMENCEMENT CORE WORK
- - All non-showroom picture windows (including lot line windows) shall be
replaced with double-glazed fully operable thermopane windows on both the
2nd floor and the mezzanine.
- - Landlord to provide reasonable electric capacity to accommodate Tenant's
estimated ninety five (95) tons of HVAC cooling equipment.
- - Landlord to provide Tenant one (1) connection point for the Second (2nd)
floor, and one (1) additional connection point to the mezzanine level, for
Tenant's devices into the Building's Class E System.
- - Landlord shall provide valved outlet(s) for Tenant's HVAC unit.
- - Landlord shall deliver the plumbing connection(s) that serve the Premises
properly routed to the Premises and in good working order.
B-1
<PAGE> 49
SCHEDULE C
REQUIREMENTS FOR
"CERTIFICATES OF FINAL APPROVAL"
1. All required Building Department Forms must be properly filled out and
completed by the approved architect/engineer of record or Building
Department expediter, as required.
2. All forms are to be submitted to Landlord for Landlord's review and
signature prior to submission of final plans and forms to the New York
City Building Department, as required.
3. All pertinent forms and filed plans are to be stamped and sealed by a
licensed architect and/or professional engineer, as required. All
controlled inspections are to be performed by the architect/engineer of
record unless approved otherwise by Landlord.
4. A copy of all approved forms, permits and approved Building Department
plans (stamped and signed by the New York City Building Department), are
to be submitted to the building office prior to start of work.
5. Copies of all completed inspection reports and NYC Building Department
sign-offs are to be submitted to the building office immediately
following completion of construction, as required.
6. All claims, violations or discrepancies with improperly filed plans,
applications, or improperly completed work shall become the sole
responsibility of the applicant to resolve, as required.
7. All changes to previously approved plans and applications must be filed
under an amended application, as required. Landlord reserves the right
to withhold approvals to proceed with changes until associated plans are
properly filed with the New York City Building Department, as required.
8. The architect/engineer of record accepts full responsibility for any and
all discrepancies or violations which arise out of non-compliance with
all local laws and building codes having jurisdiction over the work.
9. Landlord reserves the right to reject any and all work requests and new
work applications that are not properly filed or accompanied by approved
plans and building permits.
10. All ACP's and asbestos inspections must be conducted by a licensed and
fully qualified asbestos inspection agency approved by Landlord.
These forms must be furnished by the Architect/ Engineer of
record or Building Department expediter (filing agency) and approved by the
Landlord prior to submitting all plans and forms to the New York City Building
Department for final approval.
These forms must be furnished in order for Tenant to receive
"Landlord's Contribution."
<TABLE>
<CAPTION>
Form Description
---- -----------
<S> <C> <C>
- ---- *PW-1 Building Notice Application (Plan work approval
application)
- ---- *PW-1B Plumbing/Mechanical Equipment
Application and Inspection Report
- ---- *PW-1 Statement Form B
- ---- *TR-1 Amendment Controlled Inspection
Report
- ---- PW-2 Building Permit Form (All Disciplines)
B Form 708 Building Permit "Card"
- ---- *TR-1 Certification of Completed Inspection and
Certified Completion Letter by
Architect/Engineer of record or Building
Department expediter
- ---- PW-3 Cost Affidavit Form
</TABLE>
C-1
<PAGE> 50
<TABLE>
<S> <C> <C>
- ---- PW-4 Equipment Use Application Form
- ---- *PW-6 Revised Certificate of Occupancy for change in
use (if applicable)
- ---- Form ACP7 New York City Department of
or Environmental Protection Asbestos
Form ACP5 Inspection Report as prepared by a licensed and
approved asbestos inspection agency
Building Department Equipment Use Permits for
all new HVAC equipment installed under this
application
Revised Certificate of Occupancy for change in
use (if applicable)
</TABLE>
* These items must be perforated (with the date and New York City Building
Department Stamp) to signify New York City Building Department Approval.
All forms must bear proper approvals and sign-offs prior to
authorization given by Landlord to proceed with the work.
C-2
<PAGE> 51
SCHEDULE D
TENANT'S INITIAL ALTERATION
I. Tenant shall perform or cause the performance of Alterations in and
to the Premises to prepare same for Tenant's initial occupancy thereof
("Tenant's Initial Alteration"). All Alterations to be performed by Tenant shall
be, at a minimum, of a quality and standard equivalent to the standards for
construction set by Landlord, from time to time, for the Building, and shall be
subject to the prior approval of Landlord as set forth in Article 3 hereof.
Tenant shall submit to Landlord or, at Landlord's direction, Landlord's
Consultant, complete and detailed architectural, mechanical and engineering
plans and specifications prepared by an architect or engineer licensed in the
State of New York and reasonably approved by Landlord, which plans and
specifications shall be stamped and certified by such architect or engineer,
showing Tenant's Initial Alteration, which plans and specifications shall be
prepared by Tenant, at Tenant's own cost and expense. Tenant's plans and
specifications shall include all information necessary to reflect Tenant's
requirements for the design and installation of any air-cooling equipment,
ductwork, heating, electrical, plumbing and other mechanical systems and all
work necessary to connect any non-standard facilities to the Building's base
mechanical, electrical and structural systems. Tenant's submission shall include
not less than three (3) sets of sepias and five (5) sets of black and white
prints.
II. Tenant shall not perform work which would (a) require changes to
structural components of the Building or the exterior design of the Building,
(b) require any material modification to the Building's mechanical installations
or other Building installations outside the Premises, (c) not be in compliance
with all applicable laws, rules, regulations and requirements of any
governmental department having jurisdiction over the Building and/or the
construction of the Premises, including but not limited to, the Americans with
Disabilities Act of 1990, or (d) be incompatible with the Certificate of
Occupancy for the Building. Any changes required by any governmental department
affecting the construction of the Premises shall be performed at Tenant's sole
cost.
III. At the time that Tenant submits its plans and specifications to
Landlord for Landlord's approval, such plans and specifications must be
transmitted to Landlord with a cover letter specifically stating that "the
enclosed plans and specifications are being transmitted to Landlord for its
review and approval pursuant to the terms of the Lease." Landlord or Landlord's
Consultant shall respond to Tenant's request for approval of any plans and
specifications described in Paragraph I above within ten (10) business days
following the submission of such plans and specifications prepared in accordance
with the terms hereof. In the event Landlord or Landlord's Consultant shall
disapprove of all or a portion of any of Tenant's plans and specifications, such
disapproval shall be set forth in writing and shall include the reasons therefor
in reasonable detail, in which event Tenant shall revise such plans and
specifications and resubmit same to Landlord within five (5) business days
thereafter, time being of the essence. If Landlord or Landlord's Consultant
approves a portion of Tenant's plans and specifications, Tenant shall be
permitted to commence work on such items of work depicted on the portion of the
plans and specifications so partially approved, provided such work is not
related (directly or indirectly) to any items of work which have not been
approved by Landlord or Landlord's Consultant. Landlord or Landlord's Consultant
shall respond to Tenant's request for consent of any such revised plans within
five (5) business days following resubmission. The approval of plans and
specifications by Landlord or Landlord's Consultant (hereinafter referred to as
the "Final Plans") together with Tenant's satisfactory compliance with the
requirements set forth in items (1) through (4) of Schedule E annexed to this
Lease, shall be deemed an authorization for Tenant to proceed with Tenant's
Initial Alteration, which shall be performed in accordance with the provisions
of Article 3 and Schedule D of this Lease. Tenant shall reimburse Landlord for
any reasonable fees of Landlord's Consultant incurred in connection with
Tenant's Initial Alteration. Neither the recommendation or designation of an
architect or engineer nor the approval of the final plans and specifications by
Landlord or Landlord's Consultant shall be deemed to create any liability on the
part of Landlord with respect to the design or specifications set forth in the
Final Plans.
IV. Intentionally Deleted.
V. Landlord agrees to reimburse Tenant for the cost of Tenant's Initial
Alteration, as approved by Landlord or Landlord's Consultant and made by Tenant
within twelve ( 12 ) months of the Commencement Date, in an amount not to exceed
Landlord's Contribution. Provided this Lease is in full force and effect and
Tenant is not in default hereunder, Landlord's Contribution shall be paid by
progress payments as follows: on or before the first (1st) day of each calendar
month (but in no event more than four (4) times in the aggregate), Tenant may
submit to each of Landlord and Landlord's Consultant an application and
certificate for payment (standard AIA Form G702) for that portion of Tenant's
Initial Alteration previously completed, which application and certificate for
payment must be accompanied by (a) all information and documents required
thereunder and (b) a partial lien waiver executed by the general contractor (the
"General Contractor") and its subcontractors employed in connection with
D-1
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Tenant's Initial Alteration covering work previously paid for out of prior
progress payments. Provided Landlord's architect verifies in writing that the
work described in any such application and certificate for payment has been
completed in accordance with the Final Plans, Landlord, on or about the
thirtieth (30th) day of such calendar month shall remit to Tenant ninety percent
(90%) of the amount so requisitioned by Tenant or such other amount as is
approved by Landlord, based on the portion of Tenant's Initial Alteration which
has been completed, with ten (10%) percent to be retained until final payment of
Landlord's Contribution is due pursuant to the terms of this Paragraph IV.
Provided this Lease is in full force and effect and Tenant is not in default
hereunder, Landlord shall pay the balance of Landlord's Contribution to Tenant
within thirty (30) days of submission by Tenant of (1) paid receipts (or such
other proof of payment as Landlord shall reasonably require) for work done in
connection with Tenant's Initial Alteration, (2) a written statement from
Tenant's architect or engineer that the work described on any such invoices has
been completed in accordance with the Final Plans, (3) a lien waiver executed by
the General Contractor, (4) proof reasonably satisfactory to Landlord that
Tenant has complied with all of the conditions set forth in this Schedule C (as
applicable), which shall include, without limitation, submission of all of the
items described on Schedule E annexed to this Lease and (5) two (2) complete
sets of "as-built" plans.
VI. All plans and specifications for Initial Tenant Alteration shall be
submitted by Tenant to Landlord on or before the Plan Submission Date.
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<PAGE> 53
SCHEDULE E
TENANT ALTERATION WORK AND NEW CONSTRUCTION
CONDITIONS AND REQUIREMENTS
1. No Alterations are permitted to commence until original
Certificates of Insurance required from Tenant's general
contractor (the "General Contractor") and all subcontractors
complying with the attached requirements are on file with the
Building office.
2. All New York City Building Department applications with assigned
BN# and permits must be on file with the Building office prior to
starting work. A copy of the building permit must also be posted
on the job site by the General Contractor. The General Contractor
shall make all arrangements with Landlord's expediter for final
inspections and sign-offs prior to substantial completion.
3. The General Contractor shall comply with all Federal, State and
local laws, building codes, OSHA requirements, and all laws
having jurisdiction over the performance and handling of the
Alterations.
4. The existing "Class E" fire alarm system (including all wiring
and controls), if any, must be maintained at all times. Any
additions or alterations to the existing system shall be
coordinated with the Building office as required. All final
tie-in work is to be performed by Landlord's fire alarm vendor
and coordinated by the General Contractor. All costs for the
tie-ins are reimbursable to Landlord by Tenant.
5. All wood used, whether temporary or not, such as blocking, form
work, doors, frames, etc. shall be fire rated in accordance with
the New York City Building and Fire Code requirements governing
this work.
6. Building standby personnel (i.e. Building operating engineer
and/or elevator operator), required for all construction will be
at Landlord's discretion. Freight elevators used for overtime
deliveries must be scheduled in writing with Landlord at least 24
hours in advance, as required. All costs associated are
reimbursable to Landlord by Tenant.
7. The General Contractor shall comply with the Rules and
Regulations of the Building elevators and the manner of handling
materials, equipment and debris to avoid conflict and
interference with Building operations. All bulk deliveries or
removals will be made prior to 8:00 a.m. and after 5:00 p.m.
or on weekends, as required.
8. No exterior hoisting will be permitted. All products or materials
specified are to be assembled on-site, and delivered to the site
in such a manner so as to allow unobstructed passage through the
Building's freight elevator, lobbies, corridors, etc. The General
Contractor will be responsible for protection of all finished
spaces, as required.
9. All construction personnel must use the freight elevator at all
times. Any and all tradesman found riding the passenger elevators
without prior approval from Landlord will be escorted out of the
Building and not be allowed re-entry without written approval
from the Building office.
10. During the performance of Alterations, Tenant's construction
supervisor or job superintendent must be present on the job site
at all times.
11. During the performance of Alterations, all demolition work shall
be performed after 6:00 p.m. during the week or on weekends. This
would include carting or rubbish removal as well as performing
any operations that would disturb other Building tenants or other
occupants (drilling, chopping, grinding, recircuiting, etc.).
12. No conduits or cutouts are permitted to be installed in the floor
slab without prior written approval from Landlord. Landlord
reserves the right to restrict locations of such items to areas
that will not interfere with the Building's framing system or
components. No conduits or cutouts are permitted outside of
Tenant's Premises.
13. Plumbing connections to Building supply, waste and vent lines are
to be performed after normal working hours, and coordinated with
the Building manager, and are to include the following minimum
requirements:
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<PAGE> 54
A. Separate shutoff valves for all new hot and/or cold water
supply lines (including associated access doors).
B. Patch and repair of existing construction on floor below,
immediately following completion of plumbing work (to be
performed after normal working hours, as required).
14. The General Contractor must coordinate all work to occur in
public spaces, core areas and other tenant occupied spaces with
Landlord, and perform all such work after normal working hours
(to include associated patch and repair work). The General
Contractor shall provide all required protection of existing
finishes within the affected area(s).
15. The General Contractor must perform all floor coring, drilling or
trenching after normal business hours, and obtain Landlord's
permission and approval of same prior to performing such work.
16. Convector mounted outlets and associated conduits, wiring, boxes,
etc., shall be located and installed in areas where they will not
hinder the operation or maintenance of existing fan coil units or
prevent removal or replacement of access panels or removable
covers.
17. The General Contractor shall be responsible for all final tests,
inspections and approvals associated with all modifications,
deletions or additions to Building Class "E" systems and
equipment.
18. Recircuiting of existing power/lighting panels and circuits
affecting Building and/or tenant operations are to be performed
after normal business hours and coordinated with the Building
office in advance, as required.
19. All burning and welding to be performed in occupied or finished
areas shall be performed after normal business hours and
coordinated with the Building office in advance, as required.
Proper ventilation of the work area will be required in order to
perform this work.
20. The General Contractor shall provide Landlord's managing agent
and the Building office with all approved submittal and closeout
documents as well as all required final inspections and Building
Department sign-offs just prior to or immediately following
completion of construction.
21. Any and all Alterations to the Building sprinkler system
(including draining of system) are to be performed after normal
business hours and coordinated with the Building office, as
required. All costs associated with the shut down, drain and
refill of the sprinkler system are reimbursable to Landlord.
22. The General Contractor shall be responsible for any and all daily
cleanup required to keep the job site clean throughout the entire
course of the Alterations. No debris shall be allowed to
accumulate in any public spaces.
23. The General Contractor shall be responsible for proper protection
of all existing finishes and construction for Alterations to be
performed in common Building areas. All Alterations to be
performed in occupied areas outside of the Premises shall be
performed after normal business hours and coordinated with the
Building office, as required.
24. The General Contractor shall perform any and all hoisting
associated with the Alterations after normal business hours. The
General Contractor will obtain all required permits and insurance
to perform work of this nature. The General Contractor shall
specify hoisting methods and provide all required permits and
insurance to Landlord's managing agent and the Building office
prior to commencement of Alterations.
25. Union labor shall be used by all contractors and subcontractors
performing any and all Alterations within the Building. All
contractors and subcontractors shall perform all work in a
professional manner, and shall work in close harmony with one
another as well as with the Building management and maintenance
personnel.
26. The General Contractor shall forward complete copies of all
approved contractor submittal, and Building and Fire Department
sign-offs and Statement of Responsibility forms, to the Building
office immediately following completion of construction.
E-2
<PAGE> 55
INSURANCE REQUIREMENTS
LIABILITY LIMITATIONS
A. Comprehensive or Commercial General Liability Insurance
written on an occurrence basis, to afford protection of
$5,000,000 combined single limit for personal injury,
bodily injury and/or death and Broad Form property
damage arising out of any one occurrence; and which
insurance shall include coverage for premises-operations
(including explosion, collapse and underground
coverage), elevators, contractual liability, owner's and
contractor's protective liability, and completed
operations liability.
B. Comprehensive Auto Liability Insurance covering the use
of all owned, non-owned and hired vehicles providing
bodily injury and property damage coverage, all on a per
occurrence basis, at a combined single limit of
$1,000,000.
C. Worker's Compensation Insurance providing statutory
benefits for contractor's employees and Employer's
Liability Coverage in an amount not less than
$100,000/$500,000/$100,000.
D. Property coverage damage to or loss of use of
contractor's equipment.
CERTIFICATE HOLDER FOR 417 FIFTH AVENUE
Polestar Fifth Property Associates LLC
c/o New Rock Realty Management LLC
545 Fifth Avenue
New York, New York 10017
ADDITIONAL INSUREDS FOR 417 FIFTH AVENUE
417 FS Realty LLC
c/o Prince Management Corp.
498 Seventh Avenue
New York, New York 10036
Polestar Fifth Property Associates LLC
c/o New Rock Realty Management LLC
545 Fifth Avenue
New York, New York 10017
Polestar Fifth Funding LLC
c/o NorthStar Capital Partners LLC
527 Madison Avenue
New York, New York 10022
Polestar Fifth Optionee LLC
c/o NorthStar Capital Partners LLC
527 Madison Avenue
New York, New York 10022
Polestar Fifth Holding LLC
c/o NorthStar Capital Partners LLC
527 Madison Avenue
New York, New York 10022
PW Real Estate Investments Inc.
c/o Paine Weber Real Estate Securities, Inc.
1285 Sixth Avenue, 19th Floor
New York, New York 10019
E-3
<PAGE> 56
Emmes Asset Management Corp.
420 Lexington Avenue, Suite 2702
New York, New York 10170
New Rock Realty Management LLC
545 Fifth Avenue
New York, New York 10017
In addition to listing each of the Additional Insured parties, as noted above,
the Certificate of Insurance, general liability form, shall state that "The
General Aggregate limit applies separately to each project."
The name and address of the Additional Insureds shall appear on the Certificate
of Insurance. The insurance agent's address and telephone number is also
required.
E-4
<PAGE> 57
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- ----
<S> <C>
Additional Capacity.........................................................................28
Alterations..................................................................................3
Assessed Valuation..........................................................................24
Bank........................................................................................31
Base Labor Rates............................................................................24
Base Labor Year..............................................................................1
Base Tax Year................................................................................1
Base Taxes..................................................................................24
Broker.......................................................................................1
Building.....................................................................................1
business days...............................................................................33
Cash Security...............................................................................31
CERCLA......................................................................................36
CFC's........................................................................................4
Class A Office Buildings....................................................................24
Commencement Date............................................................................1
Comparison Year.............................................................................24
Courtyard Space.............................................................................17
Decorative Changes...........................................................................3
Deficiency..................................................................................19
Environmental Laws..........................................................................35
Events of Default...........................................................................17
Excess Capacity.............................................................................28
Expiration Date..............................................................................1
Final Plans................................................................................D-1
First Offer Space...........................................................................36
Future Non-Disturbance Agreement.............................................................7
Future Non-Disturbance Provisions............................................................7
Future Tenant Recognition Agreement..........................................................7
Future Tenant Recognition Provisions.........................................................7
General Contractor.........................................................................D-1
Governmental Entity.........................................................................14
Hazardous Substances........................................................................33
Hazardous Substances Claims.................................................................35
Labor Rate Factor............................................................................1
Labor Rate Multiple..........................................................................1
Labor Rates.................................................................................24
Land........................................................................................32
Landlord.....................................................................................1
Landlord's Consultant........................................................................4
Landlord's Contribution......................................................................1
Landlord's Core Work.........................................................................1
Landlord's First Offer Notice...............................................................36
Landlord's Post-Commencement Core Work.......................................................1
Landlord's Pre-Commencement Core Work........................................................1
Landlord's Statement........................................................................24
Letter of Credit............................................................................31
Limited Liability Successor Entity..........................................................30
Master Lease.................................................................................1
Master Lessor................................................................................7
Maintenance Personnel.......................................................................17
Mortgage/Mortgages...........................................................................6
Non-Disturbance Agreement....................................................................6
Non-Disturbance Provision....................................................................7
office(s)...................................................................................33
Others......................................................................................24
Overtime Periods............................................................................27
Partial Return Date.........................................................................33
Parties.....................................................................................17
Partnership Tenant..........................................................................29
Permitted Uses...............................................................................1
Plans Submission Date........................................................................1
Premises.....................................................................................1
</TABLE>
-iv-
<PAGE> 58
<TABLE>
<S> <C>
R.A.B.......................................................................................24
Real Property................................................................................1
Regular Freight Hours.......................................................................26
reenter/reentry.............................................................................33
related corporation.........................................................................14
Remedial Work...............................................................................35
Rent.........................................................................................1
Rent Commencement Date.......................................................................2
Rules and Regulations........................................................................7
Security Deposit.............................................................................2
Sublet Space................................................................................13
Superior Leases..............................................................................6
Tax Year....................................................................................24
Taxes.......................................................................................23
Tenant.......................................................................................1
Tenant's Termination Notice..................................................................9
Tenant's Initial Alteration..................................................................2
Tenant's Proportionate Share.................................................................2
Term.........................................................................................2
Window Work.................................................................................15
</TABLE>
v
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 6 to the Registration
Statement on Form S-1 of our reports dated May 7, 1999, except for Note 1 and
Note 13, as to which the date is September 27, 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
October 4, 1999
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 6 to the Registration Statement No.
333-78363 of Women.Com Networks, Inc. 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.
/s/ DELOITTE & TOUCHE LLP
New York, New York
September 30, 1999
