Asset Purchase Agreement among Babygear.com, Inc., iVillage Inc., and iBaby, Inc. dated July 6, 2000
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Summary
This agreement is between Babygear.com, Inc., iVillage Inc., and iBaby, Inc. It outlines the sale and purchase of certain assets from Babygear.com to iVillage and iBaby. The contract details the assets being sold, the purchase price, payment terms, and any adjustments. It also specifies which liabilities are retained by the seller, the closing process, and the responsibilities of each party. The agreement includes representations, warranties, and indemnification provisions, as well as conditions that must be met before the sale is finalized.
EX-2.1 2 0002.txt ASSET PURCHASE AGREEMENT EXECUTION COPY ================================================================================ ASSET PURCHASE AGREEMENT by and among Babygear.com, Inc., a Delaware corporation, iVillage Inc., a Delaware corporation, and iBaby, Inc., a Delaware corporation Dated As Of July 6, 2000 ================================================================================ TABLE OF CONTENTS Page ARTICLE I DEFINITIONS...................................................1 1.1 Certain Defined Terms............................................1 1.2 Other Defined Terms..............................................5 ARTICLE II PURCHASE AND SALE OF ASSETS...................................5 2.1 Purchase of Assets...............................................5 2.2 Purchase Price and Payment.......................................6 2.3 Adjustment.......................................................6 2.4 Full Possession..................................................6 2.5 No Assignment in Certain Circumstances...........................7 2.6 Parent Obligations...............................................7 ARTICLE III RETAINED LIABILITIES..........................................7 3.1 Retained Liabilities.............................................7 ARTICLE IV CLOSING.......................................................8 4.1 Closing..........................................................8 4.2 Seller's Obligations at Closing..................................8 4.3 Buyer's Obligations at Closing...................................9 ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT...........9 5.1 Organization, Standing and Power................................10 5.2 Authorization...................................................10 5.3 Non-Contravention...............................................10 5.4 Disclosure......................................................10 5.5 Title to Assets.................................................11 5.6 Intellectual Property...........................................11 5.7 Compliance With Laws............................................11 5.8 Taxes...........................................................12 5.9 Insurance.......................................................12 5.10 Accredited Investor.............................................12 5.11 Litigation......................................................13 5.12 Employees and Employee Plans....................................13 5.13 Inventory.......................................................13 -i- TABLE OF CONTENTS (continued) Page 5.14 Ownership of Seller.............................................13 5.15 Financial Information...........................................13 5.16 Tangible Property...............................................14 5.17 Privacy of Customer Information.................................14 5.18 Restricted Securities...........................................14 5.19 Purchase for Own Account........................................14 5.20 Related Party Transactions......................................15 5.21 Contracts.......................................................15 5.22 Website Traffic Information.....................................15 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER......................15 6.1 Organization....................................................15 6.2 Authorization...................................................16 6.3 Non-Contravention...............................................16 6.4 Disclosure......................................................16 6.5 Litigation......................................................16 6.6 Equity Securities...............................................17 6.7 Insurance.......................................................17 ARTICLE VII CERTAIN COVENANTS............................................17 7.1 Access to Information...........................................17 7.2 Financial Statements............................................18 7.3 Conduct of Business Subsequent to Closing.......................18 7.4 Confidentiality.................................................20 7.5 Authorizations..................................................20 7.6 Bulk Sales Compliance...........................................20 7.7 Non-Competition.................................................21 7.8 Financing/Issuance of Equity Securities.........................21 7.9 Customer Notification...........................................22 7.10 Notification....................................................22 7.11 Domain Names....................................................22 7.12 Change and Use of Company's Name................................22 ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF BUYER.......................23 -ii- TABLE OF CONTENTS (continued) Page 8.1 Accuracy of Representations and Warranties......................23 8.2 Performance.....................................................23 8.3 HSR Act.........................................................23 8.4 Opinion.........................................................23 8.5 Related Agreements..............................................23 8.6 Seller Closing Certificates.....................................23 8.7 Parent Closing Certificates.....................................23 8.8 Absence of Governmental Orders..................................24 ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF SELLER......................24 9.1 Accuracy of Representations and Warranties......................24 9.2 Performance.....................................................24 9.3 HSR Act.........................................................24 9.4 Opinion.........................................................24 9.5 Related Agreements..............................................24 9.6 Closing Certificates............................................24 9.7 Absence of Governmental Orders..................................24 9.8 Consent of Preferred Stock Holders..............................24 ARTICLE X INDEMNIFICATION..............................................25 10.1 Survival........................................................25 10.2 Indemnification by Seller and Parent............................25 10.3 ERISA Claims....................................................28 10.4 Indemnification by Buyer........................................28 10.5 General Indemnification Provisions..............................29 ARTICLE XI TAX MATTERS..................................................30 11.1 Allocation of Purchase Price....................................30 11.2 Taxes Relating to Transactions Contemplated by this Agreement...31 ARTICLE XII GENERAL PROVISIONS...........................................31 12.1 Fees and Expenses...............................................31 12.2 Notices.........................................................31 12.3 Disclosure Schedule.............................................32 12.4 Interpretation..................................................32 -iii- TABLE OF CONTENTS (continued) Page 12.5 Severability....................................................32 12.6 Assignment......................................................33 12.7 No Third-Party Beneficiaries....................................33 12.8 Amendment, Other Remedies and Waiver............................33 12.9 Further Assurances..............................................33 12.10 Mutual Drafting.................................................34 12.11 Governing Law; Consent to Jurisdiction..........................34 12.12 Counterparts....................................................34 12.13 Public Announcements............................................34 12.14 Entire Agreement................................................35 -iv- ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT, dated as of July 6, 2000, by and among Babygear.com, Inc. a Delaware corporation, iBaby, Inc., a Delaware corporation, and iVillage Inc., a Delaware corporation. RECITALS WHEREAS, Seller is an online e-commerce company which operates iBaby.com, a website offering baby-related products for retail sale to consumers (the "Business"); WHEREAS, Seller desires to sell and cause to be transferred to Buyer (including either existing Affiliates of Buyer or those organized for that purpose), and Buyer (including such Affiliates) desires to purchase and accept the transfer from Seller of certain assets and properties of Seller used primarily in the Business; and WHEREAS, Parent is the sole stockholder of Seller and wishes to cause Seller to comply with all of its obligations under this Agreement and the agreements contemplated hereby; NOW, THEREFORE, in consideration of the premises and the respective representations, warranties and agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS 1.1 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such definitions to be equally applicable to both the singular and plural forms of the terms defined): "Action" means any notice of noncompliance or violation, or any claim, demand, action, suit, audit, assessment or arbitration, or any other request (including any request for information), proceeding or investigation, by or before any Governmental Authority or any nongovernmental arbitration, mediation or other nonjudicial dispute resolution body. "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations under the Exchange Act. "Agreement" means this Asset Purchase Agreement, including all schedules and exhibits hereto, as it may be further amended from time to time as herein provided. "Agreement Date" means July 6, 2000. "Assets" has the meaning specified in Section 2.1. "Auditor" has the meaning specified in Section 2.3. "Business" has the meaning specified in the Recitals to this Agreement. "Buyer" means Babygear.com, Inc., a Delaware corporation, and, as applicable, Affiliates of Buyer used or formed for the purpose of consummating the transactions contemplated by this Agreement. "Buyer Indemnified Parties" has the meaning specified in Section 10.2. "Buyer Loss" has the meaning specified in Section 10.2. "Bylaws" means a corporation's bylaws, code of regulations or equivalent document. "Charter" means a corporation's articles of incorporation, certificate of incorporation or equivalent organizational documents. "Closing" means the closing of the transactions contemplated by this Agreement as specified in Section 4.1. "Closing Date" has the meaning specified in Section 4.1. "Code" means the Internal Revenue Code of 1986 and any successor statute thereto, as amended. Reference to a specific Section of the Code shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section. "Dan Howard Agreement" has the meaning specified in Section 3.1. "Disclosure Schedule" means the Disclosure Schedule dated as of the date hereof delivered to Buyer by Seller. "Domain Names" has the meaning specified in Section 7.11. "Employer Plans" has the meaning specified in Section 10.3. "Encumbrance" means any interest (including any security interest), pledge, mortgage, lien (including environmental liens), charge, claim (including any adverse claim) or other right of third Persons, whether created by law or in equity, including any such restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership. "Equity Securities" means, with respect to any Financing or Prior Equity Financing, equity securities of Buyer comparable to those issued in such Financing or Prior Equity Financing with such exceptions as noted in Section 6.6. For purposes of Sections 10.2(b), 10.2(c) and 10.2(d), the term "Equity Securities" shall also include any securities or other assets issued in exchange for or upon conversion, sale or other transfer of, or as a dividend or distribution in respect of, the Note or any Equity Securities. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder. 2 "ERISA Claims" has the meaning specified in Section 10.3. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Financing" means the issuance by Buyer of its Equity Securities to investors and the receipt by Buyer of cash in exchange therefor in an aggregate amount of at least $20.0 million when added to the gross proceeds to Buyer from all Prior Equity Financings described under subsection (ii) of the definition of such term, if any. "GAAP" means U.S. generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the U.S. accounting profession, which are in effect on the date of this Agreement. "Governmental Authority" means any international, national, federal, state, territorial or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, court, tribunal, official, arbitrator or arbitral body. "Governmental Order" means any order, writ, rule, judgment, injunction, decree, stipulation, determination, award, citation or notice of violation entered by or with any Governmental Authority. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indemnitee" has the meaning specified in Section 10.5. "Indemnitor" has the meaning specified in Section 10.5. "Intellectual Property" means (i) the trademark set forth in Disclosure Schedule Section 2.1 including all applications, registrations or other rights to such trademark acquired by usage; and (ii) the Internet domain name in Universal Resource Locator form set forth in Disclosure Schedule Section 2.1. "Inventory" has the meaning specified in Section 5.13. "Inventory Schedule" has the meaning specified in Section 2.3. "Liabilities" means any and all debts, liabilities and obligations of any nature whatsoever, whether accrued or fixed, absolute or contingent, mature or unmatured or determined or determinable, including those arising under any law, rule, regulation, Action, Governmental Order, and those arising under any contract, agreement, commitment or undertaking. 3 "Liens" shall mean all liens, pledges, charges, claims, security interests or other encumbrances. "Losses" has the meaning specified in Section 10.5. "Material Adverse Effect" has the meaning specified in the introduction to Article V. "Note" has the meaning specified in Section 4.3. For purposes of Sections 10.2(b), 10.2(c) and 10.2(d), the term "Note" shall also include any note issued pursuant to Section 7(b) of the Note. "On-Hand Inventory" has the meaning specified in Section 5.13. "On-Order Inventory" has the meaning specified in Section 5.13. "Online" as provided for herein includes any means or platforms for distribution of digital information via the Internet and/or wireless technologies now known or hereinafter developed. "Online Baby Retailer" means any Person 15% or more of whose total sales are derived from the Online retail of a broad array of products marketed toward parents of infants including clothes, equipment, appliances and the like designed for infants aged 0-3. "Parent" means iVillage Inc., a Delaware corporation and the sole stockholder of Seller. "Person" shall include any individual, trustee, firm, corporation, partnership, limited liability company, Governmental Authority or other entity, whether acting in an individual, fiduciary or any other capacity. "Prior Equity Financing" means either (i) the issuance by Buyer of the Series B Convertible Preferred Stock of Buyer in April 2000 or (ii) a subsequent equity financing of Buyer in which Buyer receives at least $10.0 million of gross proceeds and the purchase price per Equity Security paid by the investor(s) exceeds $10.91 (the purchase price paid per share of Series B Convertible Preferred Stock), if such equity financing occurs on or prior to September 30, 2000. "Purchase Price" has the meaning specified in Section 2.2. "Retained Liabilities" has the meaning specified in Section 3.1. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreement" has the meaning specified in Section 2.6. "Seller" means iBaby, Inc., a Delaware corporation. 4 "Seller Indemnification Obligation" has the meaning specified in Section 10.2. "Seller Indemnified Parties" has the meaning specified in Section 10.4. "Seller Loss" has the meaning specified in Section 10.4. "Tangible Property" has the meaning specified in Section 5.16. "Tax" means any federal, state, local, or foreign income, gross receipts, license, payroll, parking, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated tax, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto and any obligations under any tax sharing, tax allocation or similar agreements to which Seller is a party, whether disputed or not, including Liability therefor as a transferee or successor-in-interest. "Tax Claims" means any claim arising out of or otherwise in respect of (i) any inaccuracy in or breach of any representation or warranty of Seller contained in this Agreement related to Taxes or (ii) any Retained Liability included in Section 3.1(c) of this Agreement. "Third Party Claims" has the meaning specified in Section 10.5. "Transfer Form" has the meaning specified in Section 7.11. "Uncapped Losses" has the meaning specified in Section 10.2. "WARN Act" has the meaning specified in Section 3.1. "Women's Content Provider" has the meaning specified in Section 7.7. 1.2 Other Defined Terms. In addition to the terms defined in Section 1.1, certain other terms are defined elsewhere in this Agreement and, whenever such terms are used in this Agreement, they shall have their respective defined meanings. ARTICLE II PURCHASE AND SALE OF ASSETS 2.1 Purchase of Assets. Upon the terms and subject to the conditions herein set forth, in reliance upon the representations and warranties contained herein and in consideration of the payment of the Purchase Price, at the Closing Parent shall direct Seller to, and Seller shall, sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of the rights, title and interests of Seller in and to the assets specified in Disclosure Schedule Section 2.1 (the "Assets"). Except as set forth on Disclosure Schedule Section 2.1, Seller at the Closing shall sell, transfer, deliver and assign the Assets to Buyer free and clear of all Encumbrances. 5 2.2 Purchase Price and Payment. Upon the terms and subject to the conditions herein set forth, and in consideration of the sale, assignment, transfer and delivery to Buyer of the Assets, at the Closing Buyer shall pay to Seller an aggregate of $9,898,627.11 (the "Purchase Price") as adjusted pursuant to Section 2.3 hereof, which shall be payable in the form and at the time designated in Section 4.3 hereof. The Purchase Price shall be allocated in accordance with Section 11.1. 2.3 Adjustment. Within five (5) days after the Closing Date, Buyer and Seller shall appoint a mutually agreeable firm of nationally recognized certified independent public accountants (which shall be PricewaterhouseCoopers LLP) (the "Auditor") to audit the inventory of Seller. Within thirty (30) days after the appointment of the Auditor, the Auditor shall deliver to Buyer and Seller a list of all of the Inventory, which shall set forth the manufacturer, product name, variant id, sku, cost, inventory and total cost of each item of Inventory in a format consistent with that of Schedule I of the Disclosure Schedule and calculated at the lower of cost (first-in, first-out method) or market of Seller as of the Closing Date (the "Inventory Schedule"), together with applicable work papers, schedules and other documents used in connection with the preparation of the Inventory Schedule, which Inventory Schedule shall be final, binding and conclusive on Buyer and Seller. At the Auditor's request, each of Buyer, Seller and Parent agrees to permit the Auditor access to its premises (including Seller's warehouse in San Diego, California) during normal business hours, and to provide such work papers, records and other documents to the Auditor as reasonably necessary to prepare the Inventory Schedule. Within five (5) days of the receipt of the Inventory Schedule, to the extent the total cost of the inventory listed in the Inventory Schedule exceeds the total cost of the inventory listed in Schedule I of Disclosure Schedule Section 2.1 under the column titled "total cost", Buyer shall cause to be paid to Seller an amount equal to such excess by directing Seller to indicate on Schedule I of the Note that the outstanding principal amount of the Note has been increased by such excess amount effective as of the Closing Date, a copy of which Schedule I shall be delivered to Buyer after such indication. Within five (5) days of receipt of the Inventory Schedule, to the extent the total cost of the inventory listed in Schedule I of Disclosure Schedule Section 2.1 under the column titled "total cost" exceeds the total cost of the inventory listed on the Inventory Schedule, Seller shall cause to be paid to Buyer an amount equal to such excess by indicating on Schedule I of the Note that a prepayment of the Note in an amount equal to the excess has occurred, effective as of the Closing Date, a copy of such Schedule I shall be delivered to Buyer after such indication. The fees and expenses of the Auditor shall be borne equally by Buyer and Seller. 2.4 Full Possession. Subject to the terms and conditions of this Agreement, at the Closing, Seller shall put Buyer and its Affiliates into full and actual possession, enjoyment and operating control of the Assets. The sale of the Assets contemplated hereby shall be effected by instruments of conveyance, transfer and assignment as Buyer may reasonably request that are necessary to vest in Buyer all of the rights, title and interests of Seller in the Assets and, subject to the obtaining of any required authorizations, approvals, consents and waivers, and the satisfaction or termination of any required waiting periods under any applicable law, to such sale of the Assets, to put Buyer in full and actual possession, enjoyment and operating control of the Assets. 6 2.5 No Assignment in Certain Circumstances. (a) Notwithstanding anything else contained in this Agreement to the contrary, this Agreement shall not constitute an agreement to sell, convey, assign, transfer or deliver (i) any right or interest in any member, user or customer list or customer information of Seller or its Affiliates used in connection with the Business or otherwise, other than as set forth in Section 7.9 hereof or (ii) any interest in any instrument, commitment, contract, lease, permit or other agreement or arrangement listed in Disclosure Schedule Section 2.5(a) or any claim, right or benefit arising thereunder or resulting therefrom; provided however in the case of clause (ii), Seller shall use commercially reasonable efforts to the greatest extent permitted by law and any such instrument, commitment, contract, lease, permit or other agreement or arrangement (including by acting as an agent of Buyer or its Affiliates) (1) to maintain such instrument, commitment, contract, lease, permit or other agreement or arrangement for the current term of such Agreement and (2) to provide Buyer any benefit under such instrument, commitment, contract, lease, permit or other agreement or arrangement that is related to the Assets without any cost to the Buyer except that Buyer shall be required to pay (x) any commissions payable to third parties under any such instrument, commitment, contract, lease, permit or other agreement or arrangement that are based on total sales of products similar to the Assets and (y) to the extent agreed to by Buyer, any costs or expenses incurred by Seller under any extension or renewal of such instrument, commitment, contract, lease, permit or other agreement or arrangement beyond its current term to the extent such costs or expenses are directly and solely related to benefits received by the Buyer under such extended or renewed instrument, commitment, contract, lease, permit or other agreement or arrangement. (b) Notwithstanding the foregoing, under no circumstances shall Seller or Parent be obligated to maintain any such contract, instrument, commitment, agreement, arrangement, permit or lease in place if Seller or Parent in their sole discretion determines that doing so is not in the interest of Seller or Parent. In addition, under no circumstances shall Seller or Parent be required to comply with Section 2.5(a) above if doing so threatens to affect Seller or Parent's rights under such contract, instrument, commitment, agreement, arrangement, permit or lease as determined by Seller or Parent in their sole discretion. 2.6 Parent Obligation. Parent agrees to cause Seller to comply with all of its obligations under this Agreement, the Note and the Security Agreement dated as of the date hereof by and between Seller and Buyer in the form attached hereto as Exhibit A (the "Security Agreement"). ARTICLE III RETAINED LIABILITIES 3.1 Retained Liabilities. Buyer and its Affiliates shall not assume and shall not be responsible for, and there shall not be transferred to or assumed by Buyer or any of its Affiliates, any Liabilities of Seller or its Affiliates (or any predecessor thereof) arising from or relating to, 7 in whole or in part, (a) the activities, conduct or transactions of the Business or from the use, operation, ownership, lease, possession, control, occupancy, maintenance or condition of the Assets up through and including the Closing Date; provided however that Buyer shall be required to pay for the On-Order Inventory, (b) any and all other operations, activities or transactions of Seller or its Affiliates or the use, operation, ownership, lease, possession, control, occupancy, maintenance or condition of any other assets or properties of Seller or its Affiliates at any time, including, without limitation, the operation of the Seller's warehouse in San Diego, provided, however that if Buyer requests that Seller maintain its warehouse in San Diego subsequent to the thirty-day transition period referred to in Section 7.3 then any operating costs incurred by Seller subsequent to such thirty-day period with respect to the warehouse in San Diego shall be borne by Buyer, (c) any Liability or obligation, whether disputed or not, to any federal, state, local or foreign taxing authority of Seller or any of its Affiliates, with respect to Taxes arising from activities, conduct or transaction of the Business, or from the use, operation, ownership, lease, possession, control, occupancy, maintenance or condition of the Assets, up through and including the Closing Date, whether or not any such Liabilities become known before or after the Closing Date, and for any Liability or obligation, whether disputed or not, to any federal, state, local or foreign taxing authority of Seller or any of its Affiliates with respect to Taxes arising from any and all other operations, activities or transactions of Seller or its Affiliates or from the use, operation, ownership, lease, possession, control, occupancy, maintenance or condition of any assets or properties, other than the Assets, of Seller or its Affiliates at any time and (d) the Agreement between Parent and Dan Howard, Inc. dated February 23, 1999, as amended (the "Dan Howard Agreement"), all of which Liabilities shall be and remain the sole responsibility of Seller or its Affiliates (collectively, the "Retained Liabilities"). Seller hereby covenants that it will be solely responsible and liable for any costs, obligations and liabilities arising under, or as a result of, the application of the Workers Adjustment and Retraining Notification Act of 1988, as amended (the "WARN Act") with respect to its employees in the transactions contemplated by this Agreement or otherwise. ARTICLE IV CLOSING 4.1 Closing. The consummation of the purchase and sale of the Assets (the "Closing") shall take place at the offices of the Parent located at 212 Fifth Avenue, New York, New York 10010 at 10 a.m., local time, on July 6, 2000 or on such date that is five (5) business days after the satisfaction of all conditions to Closing set forth in Article VIII and Article IX or at such other place, time and date as the parties hereby may agree in writing. The consummation of such transactions is herein collectively referred to as the "Closing." The date and time of the Closing are sometimes referred to herein as the "Closing Date." 4.2 Seller's Obligations at Closing. At the Closing, Seller shall deliver or cause to be delivered to Buyer: (a) All bills of sale and other instruments of conveyance, transfer and assignment (in recordable form with respect to real property interests) and agreements as Buyer may reasonably request, including a trademark assignment in connection with the Intellectual Property, that are necessary to vest in Buyer all of the rights, title and interests of Seller in the 8 Assets, free and clear of all Encumbrances, and to reflect the allocation provided for in Section 11.1; (b) Such officers' certificates certifying as to compliance with the conditions set forth in Article VIII as may be reasonably requested by Buyer; and (c) Seller shall have furnished Buyer with a certificate that Seller is not a foreign person within the meaning of Section 1445 of the Code, which certificate shall set forth all information required by, and otherwise be executed in accordance with, Treasury Regulation Section 1.1445-2(b) thereunder. 4.3 Buyer's Obligations at Closing. At the Closing, Buyer shall deliver or cause to be delivered to Seller: (a) the Purchase Price, in the form of a $9,898,627.11 note which shall be a full-recourse convertible promissory note of Buyer in the form attached hereto as Exhibit B and delivered to Seller on the Closing Date, which convertible promissory note shall be due and payable in full thirty (30) months after the Closing Date or as otherwise specified in such note (the "Note"); (b) Such officers' certificates certifying as to compliance with the conditions set forth in Article IX as may be reasonably requested by Seller; and (c) A California resale certificate pursuant to Sections 6091 et seq of the California Revenue and Taxation Code and any other resale certificate reasonably required by Seller. ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT The sale of the Assets to Buyer pursuant to this Agreement shall, except as otherwise expressly provided in this Agreement, be without any representations or warranties of any kind or nature, express or implied, as to the title to, or the condition, value or quality of, the Assets and, except as otherwise expressly provided in this Article V of this Agreement, each of Seller and Parent SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT. Each of Seller and Parent hereby jointly and severally represents and warrants to Buyer that the following statements (Sections 5.1 through 5.22) are true and correct as of the date of this Agreement. Whenever the term "Material Adverse Effect" appears in this Agreement, it means, a material adverse effect on the operations, results of operations or condition (financial or otherwise) of the Business, taken as a whole or on the ability of Parent or Seller to perform their obligations under this Agreement and the agreements contemplated hereby. 9 5.1 Organization, Standing and Power. Each of Seller and Parent is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has full corporate power and authority and is duly qualified to own its assets and properties and to conduct its business as and where it is being conducted, including, in the case of Seller, to own the Assets owned by it. 5.2 Authorization. (a) Each of Seller and Parent has full corporate power and authority to enter into this Agreement, perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of each of Seller and Parent. Each of this Agreement, the Security Agreement and the Note has been duly executed and delivered by each of Seller and Parent, to the extent that it is a party to any such Agreement, Security Agreement or Note. Each of this Agreement, the Security Agreement and the Note constitutes a legal, valid and binding obligation of each of Seller and Parent, to the extent that it is a party to such agreement, enforceable against each of Seller and Parent in accordance with its terms, to the extent that it is a party to such agreement, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (b) Except as set forth in Disclosure Schedule Section 5.2(b), no consent, waiver, approval, order or authorization of, notice to, or registration, declaration, designation, qualification or filing with, any Governmental Authority or third Person, domestic or foreign, the absence of which would, either individually or in the aggregate, have a Material Adverse Effect, is or has been or will be required on the part of Seller, Parent or any of their respective Affiliates in connection with the execution and delivery of this Agreement, the performance of their respective obligations hereunder or the consummation by Seller, Parent or any of their respective Affiliates of the transactions contemplated hereby. 5.3 Non-Contravention. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate or conflict with or provide a right of termination to any Person under (a) any provision of the Charter or Bylaws of Seller, Parent or any of their respective Affiliates, (b) any law, statute, rule, regulation, qualification or Governmental Order to which Seller, Parent or any of their respective Affiliates or the Assets are bound or subject or (c) any material agreement, indenture, undertaking, permit, license or other instrument to which Seller, Parent or any of their respective Affiliates is a party or by which it or any of their respective properties may be bound or affected, other than (x) the requirements of any applicable bulk sales or bulk transfer laws or (y) as set forth in Disclosure Schedule Section 5.3. 5.4 Disclosure. No representations or warranties by Seller or Parent, singly or collectively, in this Agreement and no statement contained in any document, certificate or other writing furnished or to be furnished by Parent, Seller or any of their respective Affiliates to Buyer or any Affiliate thereof pursuant to the provisions hereof or in connection with the 10 transactions contemplated hereby, contain or will contain any untrue statement of material fact or omit or will omit to state any material fact necessary in order to make the statements herein or therein not misleading. There is no fact (other than matters of a general societal, economic or political nature which do not affect the business of Seller or Buyer uniquely) known to Seller, Parent or any of their respective Affiliates, and there have been no events or transactions or information which have come to the attention of Seller, Parent or any of their respective Affiliates, which might reasonably be expected to have a Material Adverse Effect. All projections, forecasts or other forward- looking information, if any, that were furnished to Buyer by or on behalf of Seller were prepared in good faith and based upon reasonable estimates and all the facts and circumstances then known to Seller. 5.5 Title to Assets. Except as set forth in Disclosure Schedule Section 5.5, Seller has good and marketable title to the Assets, free and clear of all Encumbrances, and, at the Closing, Buyer shall acquire good and marketable title to the Assets, free and clear of all Encumbrances. Except as set forth on Disclosure Schedule Section 5.5, none of the Assets is subject to any Encumbrance, and there is no action, suit or proceeding pending or to Seller's knowledge threatened against Parent or Seller that questions Seller's title to any of the Assets nor is either Seller or Parent aware that there is any basis for the foregoing. 5.6 Intellectual Property. (a) Seller owns (or has the right to use pursuant to a valid license, sublicense or other agreement) the Intellectual Property. Each item of Intellectual Property owned or used by Seller immediately prior to the Closing hereunder will be owned or available for use by the Buyer on identical terms and conditions immediately subsequent to the Closing hereunder; provided, however, the parties understand and agree that the transfer of the Internet domain name in Universal Resource Locator form set forth in Disclosure Schedule Section 2.1 may not occur immediately subsequent to the Closing and that Seller shall use its best efforts to secure such transfer as soon as reasonably practicable after the Closing. (b) To the knowledge of Seller, Seller has not infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of third parties, and Seller has not received any complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that Seller must license or refrain from using any intellectual property rights of any third party). To the knowledge of Seller, no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any intellectual property rights of Seller as it relates to the Intellectual Property which has not been resolved in Seller's favor. Each of Seller's employees has executed an agreement with Seller assigning to Seller all right, title and interest in and to any Intellectual Property created or devised by such employee in connection with such employee's employment by Seller. All Seller's patents, copyrights and trademarks have been duly maintained and all maintenance fees timely paid. 5.7 Compliance With Laws. To the knowledge of Seller, Seller has complied with all laws, statutes, regulations, rules, qualifications and Governmental Orders in its use, operation, ownership, lease, possession, control, occupancy and maintenance of the Assets in all material respects. To the knowledge of Seller, none of the use, ownership, lease, possession, control, 11 occupancy, maintenance or condition of any of the Assets, or their sale under this Agreement, conflicts with the rights of any other Person or violates, or with or without the giving of notice or passage of time, or both, will violate, conflict with or result in a default, right to accelerate or loss of rights under, any terms or provisions of any Encumbrance, lease, license, agreement, contract, agreement, commitment or understanding or any law, statute, regulation, rule, qualification or Governmental Order to which Seller or any of its Affiliates is a party or by which Seller or any of its Affiliates or any of the Assets, may be bound or affected, other than such conflicts or violations which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.8 Taxes. (a) Except as set forth in Disclosure Schedule Section 5.8: (i) Seller has filed or cause to be filed on a timely basis all Tax returns and any other filings in respect of Taxes that are or were required to be filed by or with respect to it, either separately or as a member of a group of corporations, with respect to taxable periods (or any portion thereof) ending on or prior to the Closing Date pursuant to applicable legal requirements; (ii) all such Tax returns and other filings were correct and complete in all material respects; (iii) Seller has paid, or made provision for payment of, all Taxes that have or may have become due pursuant to those Tax returns and other filings, or pursuant to any assessment received by Seller or its business and any other Taxes due and payable by it for all tax periods (or any portion thereof) ending on or prior to the Closing Date; (iv) no claim has ever been made by an authority in a jurisdiction where Seller does not file Tax returns that it is or may be subject to taxation by that jurisdiction; and (v) there are no Liens for Taxes upon the Assets of the Company. (b) Except as set forth in Disclosure Schedule Section 5.8, there is no dispute or claim concerning any Tax liability of Seller either (i) claimed or raised by any authority in writing or (ii) as to which any of Seller and the directors and officers (and employees responsible for Tax matters) of Seller has actual knowledge after reasonable investigation in each case that could reasonably be expected to have a Material Adverse Effect. (c) Seller has not waived any statute of limitation in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. 5.9 Insurance. Seller has in full force and effect fire, casualty, liability, product liability, burglary, fidelity, workers' compensation, life, vehicular and other forms of insurance policies, with extended coverage, sufficient in nature and in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed, to permit it to operate the Business and to insure against all risks and Liabilities to an extent and in a manner customarily insured against by Persons operating comparable properties, assets or businesses in the same geographic locations. 5.10 Accredited Investor. Seller is an accredited investor as defined in Rule 501(d) of Regulation D promulgated under the Securities Act. 12 5.11 Litigation. There is no action, suit or proceeding pending or, to Seller's knowledge, threatened against Seller or Parent that questions the validity of this Agreement or the right of Seller or Parent to enter into this Agreement or to consummate the transactions contemplated hereby or that might result either individually or in the aggregate in a Material Adverse Effect, nor is Seller or Parent aware that there is any basis for the foregoing. 5.12 Employees and Employee Plans. Disclosure Schedule Section 5.12 identifies each Employee Plan currently or previously maintained, contributed to or entered into by Seller or Parent for the benefit of any employee or former employee of Seller or Parent under which Seller has any present or future material obligation or liability. All contributions due and payable on or before the Closing Date in respect of any Employee Plan have been made in full and proper form. Except as set forth in Disclosure Schedule Section 5.12, the consummation of the transactions contemplated by this Agreement will not entitle any individual to severance or separation pay or accelerate the time of payment or vesting, or increase the amount, of compensation due to any individual. 5.13 Inventory. Schedule I of Disclosure Schedule Section 2.1 identifies the inventory that is held at Seller's facility in San Diego, California (the "On-Hand Inventory") and Schedule II of Disclosure Schedule Section 2.1 identifies the inventory of Seller on order as of June 19, 2000 (the "On-Order Inventory"). The On-Hand Inventory and the On-Order Inventory are collectively referred to herein as the "Inventory." The Inventory is being purchased by Buyer pursuant to this Agreement. The On-Hand Inventory is in good and merchantable condition, and suitable and usable or salable in the ordinary course of business for the purposes for which it is intended and none of such On-Hand Inventory is obsolete, damaged or defective. All of such On-Hand Inventory is held at the Seller's facility in San Diego, California and, to the extent legally permissible, shall be transferred subject to currently existing manufacturer's warranties and any other existing claims against manufacturers and Buyer shall have the right to enforce such warranties and/or claims in Seller's place. Neither Seller nor Parent is aware of any adverse condition affecting the purchase of the Inventory for use in the Business. If any manufacturer's warranty or other existing claim cannot be transferred, Seller agrees to enforce any such warranty and claim in accordance with the instructions of Buyer and at Buyer's expense, and to provide Buyer with all the benefits received in respect of such warranties or claims. Seller is not aware of any adjustment necessary to be recorded to verify that the Inventory is calculated at the lower of cost (first-in, first-out method) or market. 5.14 Ownership of Seller. Parent owns all of the issued and outstanding capital stock of Seller. 5.15 Financial Information. The unaudited income statements of Seller relating to the Business for the fiscal year 1999 and the first fiscal quarter of 2000, as previously provided to Buyer, were prepared on 13 a basis consistent with Parent's customary practices and procedures in the preparation of Parent's financial statements. The Parent's financial statements are prepared in accordance with GAAP. 5.16 Tangible Property. All machinery, accessories, computers, computer disks and peripheral devices, equipment and appliances, any related capitalized items and other tangible property of Seller being transferred as part of the Assets and set forth in Disclosure Schedule Section 2.1 (collectively, the "Tangible Property") is in good operating condition and repair, ordinary wear and tear excepted, subject to continued repair and replacement in accordance with past practice, and is suitable for its intended use. 5.17 Privacy of Customer Information. With respect to the Business, neither Seller nor Parent uses any of the customer information it receives through Seller's website in an unlawful manner or in a manner that violates Parent's or Seller's privacy policy or applicable laws in such a way as to have a Material Adverse Effect. Each of Seller and Parent has adequate security measures in place to protect the customer information it receives though Seller's website from illegal use by third parties. 5.18 Restricted Securities. Seller understands that the Note and the securities issuable upon conversion or exchange of the Note will not be registered at the time of their issuance under the Securities Act for the reason that their issuance as provided for in this Agreement is exempt pursuant to Section 4(2) of the Securities Act and that the reliance of Buyer on such exemption is predicated in part on such representations set forth herein; provided, however that the securities issuable upon conversion of the Note will have certain registration rights as described in the Note. Seller represents that it has experience in evaluating companies such as Buyer, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to suffer the total loss of its investment. Seller further represents that it has had the opportunity to ask questions of and receive answers from Buyer concerning the terms and conditions of the Note and to obtain additional information to Seller's satisfaction. 5.19 Purchase for Own Account. The Note to be received by Seller pursuant to this Agreement is being or will be acquired for its own account and with no intention of distributing or reselling such Note or the securities issuable upon conversion or exchange of the Note or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, or the securities or "blue sky" laws of any state or foreign jurisdiction, without prejudice, however, to the rights of Seller at all times to sell or to otherwise dispose of all or any part of such Note or the securities issuable upon conversion or exchange of the Note under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of Seller's property being at all times within its control. If Seller should in the future decide to dispose of any such Note or the securities issuable upon conversion of the Note, Seller understands and agrees that it may do so 14 only in compliance with the Securities Act and applicable state securities laws, as then in effect. Seller agrees to the imprinting, so long as required by law, of legends on the Note and on certificates representing all of the securities issuable upon conversion of the Note substantially to the following effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS THAT IS AVAILABLE IF AN OPINION OF COUNSEL TO SUCH EFFECT IS DELIVERED TO BABYGEAR.COM, INC. IN A FORM THAT IS REASONABLY SATISFACTORY TO BABYGEAR.COM, INC. THE SECURITIES REPRESENTED BY THIS NOTE ARE ALSO SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT, DATED JULY 6, 2000, BY AND AMONG BABYGEAR.COM, INC., iBABY, INC. AND iVILLAGE INC." 5.20 Related Party Transactions. There have been no sales or transfers by Seller of any of its inventory or products to Parent or any of Seller's or Parent's Affiliates (or other transactions with Parent or its Affiliates which have the effect of increasing the sales of Seller) since January 1, 1999. 5.21 Contracts. After the Closing, Buyer has no obligations under the Dan Howard Agreement or any other agreement to which either Seller, Parent or any of their respective subsidiaries is a party and to which Buyer is not a party and is subject to no restrictions on its activities as a result of any such agreement, other than such obligations and restrictions set forth in Section 2.5. Seller has provided Buyer true and complete copies of each of the agreements set forth in Disclosure Schedule Section 2.5, together with all amendments, modifications, supplements or side letters affecting the obligations of any party thereunder. 5.22 Web Site Traffic Information. The information provided by Seller to Buyer relating to page views on Seller's web site as set forth in Disclosure Schedule Section 5.22 is identical in all respects to the information that was provided to Seller by the third party vendor preparing such data. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: 15 6.1 Organization. Buyer is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has full corporate power and authority and is duly qualified to own its assets and properties and to conduct its business as and where it is being conducted. 6.2 Authorization. (a) Except as set forth in Disclosure Schedule Section 6.2(a), Buyer has full corporate power and authority to enter into this Agreement, perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer. This Agreement constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). (b) Except as set forth in Disclosure Schedule Section 6.2(b), no consent, waiver, approval, order or authorization of, notice to, or registration, declaration, designation, qualification or filing with, any Governmental Authority or third Person, domestic or foreign, the absence of which would have a material adverse effect on the operations, results of operations or condition (financial or otherwise) of Buyer or the ability of Buyer to perform its obligations under this Agreement and the agreements contemplated hereby is or has been or will be required on the part of Buyer or any of its Affiliates in connection with the execution and delivery of this Agreement, the performance of its obligations hereunder or the consummation by Buyer or any of its Affiliates of the transactions contemplated hereby. 6.3 Non-Contravention. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate or conflict with or provide a right of termination to any Person under (a) any provision of the Charter or Bylaws of Buyer or any of its Affiliates, (b) any law, statute, rule, regulation, qualification or Governmental Order to which Buyer or any of its Affiliates or any of their respective businesses or assets are bound or subject or (c) any material agreement, indenture, undertaking, permit, license or other instrument to which Buyer or any of its Affiliates is a party or by which any of its or any of their properties may be bound or affected other than as set forth in Disclosure Schedule Section 6.3. 6.4 Disclosure. No representations or warranties by Buyer, singly or collectively, in this Agreement and no statement contained in any document, certificate or other writing furnished or to be furnished by Buyer or any of its Affiliates to Seller or any Affiliate thereof pursuant to the provisions hereof or in connection with the transactions contemplated hereby, contain or will contain any untrue statement of material fact or omit or will omit to state any material fact necessary in order to make the statements herein or therein not misleading. 6.5 Litigation. 16 Except as disclosed in writing to Seller, there is no action, suit or proceeding pending or, to the Buyer's knowledge threatened against Buyer that questions the validity of this Agreement or the right of Buyer to enter into this Agreement or to consummate the transactions contemplated hereby or that might result either individually or in the aggregate in a material adverse effect on the operations, results of operations or condition (financial or otherwise) of Buyer or on the ability of Buyer to perform its obligations under this Agreement and the agreements contemplated hereby, nor is Buyer aware that there is a basis for the foregoing. 6.6 Equity Securities. Other than as set forth in this Agreement or the Note, there is no contractual restriction on Buyer's ability to issue and deliver on conversion or exchange of the Note the Equity Securities pursuant to the terms of the Note. The Equity Securities to be issued to Seller upon conversion or exchange of the Note will have the same rights, privileges and preferences as each other holder of the same class of Equity Securities held by Seller other than such additional rights that are granted to Seller under the terms of the Note and certain transfer restrictions as referred to in Sections 5.18 and 10.2 of this Agreement and certain set-off rights as set forth in Section 10.2 of this Agreement. 6.7 Insurance. Buyer has in full force and effect fire, casualty, liability, product liability, burglary, fidelity, workers' compensation, life, vehicular and other forms of insurance policies, with extended coverage, sufficient in nature and in amount (subject to reasonable deductibles) to allow it to replace any of its properties that might be damaged or destroyed, to permit it to operate Buyer's business and to own the Assets and to insure against all risks and Liabilities to an extent and in a manner customarily insured against by Persons operating comparable properties, assets or businesses in the same geographic locations. ARTICLE VII CERTAIN COVENANTS 7.1 Access to Information. (a) From the date hereof until the Closing and subsequent to the Closing to the extent reasonably requested by Buyer, but subject to any confidentiality or other rights of third Persons, upon reasonable notice, Seller shall (a) afford the officers, employees and authorized agents and representatives of Buyer reasonable access during normal business hours to the offices, properties, personnel and books and records of Seller relating to the Assets and (b) furnish to the officers, employees and authorized agents and representatives of Buyer such additional financial and operating data and other information regarding the Assets (or legible copies thereof) as Buyer may from time to time reasonably request; provided, however, that such investigation shall not unreasonably interfere with any of the businesses or operations of Seller. Without limiting the generality of the foregoing, Seller shall cooperate fully with Buyer's investigation of the Assets and provide copies of such documents in its possession as Buyer may reasonably request to confirm the title to the Assets. 17 (b) Subsequent to the Closing to the extent reasonably requested by Seller and upon reasonable notice, Buyer shall afford the officers, employees and authorized agents and representatives of Seller reasonable access during normal business hours to the books, records, invoices and other documents relating to the Assets and as may from time to time be reasonably requested by Seller and to provide copies of such books, records, invoices and other documents relating to the Assets; provided, however, that such access shall not unreasonably interfere with any of the businesses or operations of Buyer. 7.2 Financial Statements. Within ninety (90) days after the Closing, Seller shall deliver to Buyer the following unaudited financial statements of Seller that are prepared in conformity with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission (x) unaudited balance sheets as of December 31, 1999 and 1998 and unaudited income statements and statements of cash flows for fiscal years 1998 and 1999; and (y) unaudited balance sheets as of the end of each fiscal quarter of fiscal 1999 and as of the end of the first fiscal quarter of fiscal 2000 and the Closing Date, and the unaudited income statements and statements of cash flows for each quarter of fiscal 1999 and for the first fiscal quarter of fiscal 2000 and the period from April 1, 2000 until the Closing Date. Seller shall use commercially reasonable efforts to cause PricewaterhouseCoopers LLP to (i) deliver audited financial statements of Seller in the form and for the periods specified in clause (x) above in conformity with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission as soon as commercially reasonably practicable but in no event later than three (3) months from the Closing Date and (ii) deliver (upon receipt of customary management letters of Seller) to Buyer any consents or audit reports related to such financial statements and any "comfort" letters related to such financial statements delivered under this Section 7.2 and the financial information contained therein in such customary form and covering matters of the type customarily covered in "comfort" letters in connection with underwritten offerings of securities; provided, however that Buyer and Seller shall bear all costs of PricewaterhouseCoopers LLP equally for compliance with this Section 7.2 and provided, further however that in no event shall Seller be obligated to pay in excess of $80,000 for any costs of PricewaterhouseCoopers LLP incurred in connection with compliance with this Section 7.2. Parent and Seller agree to take such reasonable actions within their control, and shall not omit to take any reasonable actions within their control, reasonably necessary in order to cause the delivery of such unaudited financial statements, audit reports, and comfort letters. 7.3 Conduct of Business Subsequent to Closing. For a period of thirty (30) days after the Closing Date, except as required or permitted by this Agreement or otherwise consented to or approved by Buyer in writing, and except for any transactions which do not materially affect the Assets: (a) Seller shall operate the Business only in its usual, regular and ordinary manner and substantially in the same manner as heretofore conducted, including without limitation maintaining the warehouse for the Inventory, maintaining and operating Seller's web site, and maintaining and paying all obligations under, all of Seller's currently existing insurance policies during such thirty-day period provided that Buyer acknowledges that Parent shall have the right to terminate the Dan Howard Agreement on the Closing Date or at any time thereafter. During such thirty-day period, Parent and Seller shall make Buyer an additional insured party or a loss payee as determined by Seller's insurer of their existing property and transit insurance policies 18 that are related to the Business and shall, at the request of Buyer, make claims on behalf of Buyer for any losses for damaged property and for goods in transit on the Assets during such period and pay Buyer any insurance recoveries related to a loss for damaged property and for goods in transit on the Assets that occurs during such thirty-day period; provided however that under no circumstances shall Seller be obligated to purchase or order inventory other than the On-Order Inventory set forth in Schedule II of Disclosure Schedule Section 2.1. Seller shall use commercially reasonable efforts to (i) preserve the Business, including its relationships with customers and suppliers, and (ii) keep available to Buyer the services of the present employees, agents and independent contractors of the Business. In addition, Seller shall use commercially reasonable efforts to comply with all laws, statutes, rules, qualifications and regulations of any Governmental Authority and all material permits, licenses, orders, approvals, and authorizations of any Governmental Authority or third Person applicable to it and to the Business and Assets. (b) With respect to the Assets, Seller shall not: (i) permit or allow any of the Assets to be subject to any additional Encumbrance or sell, transfer, lease or otherwise dispose of any such Assets, except in the ordinary course of business and consistent with past practice and as otherwise directed by Buyer; (ii) agree, whether in writing or otherwise, to do any of the foregoing. (c) All customer orders for Inventory received during this thirty-day period will be processed and filled by Seller on behalf of Buyer with Seller performing the fulfillment, distribution, inventory and accounting functions substantially in accordance with its prior practice. Within five (5) business days of the end of the thirty-day period (and after processing all orders received on or prior to the expiration of such thirty-day period), Seller shall ship all remaining inventory to Buyer at Buyer's warehouse at 3423 South Park Place, Grove City, Ohio 43123 or as otherwise directed by Buyer at Buyer's expense. After the Closing Date, to the extent Seller's account has been credited with a payment for Assets sold after the Closing Date, Seller shall on each Monday of the thirty-day transition period beginning with Monday, July 17, 2000, cause all such payments for Assets received in the week prior to such Monday to be transferred by wire transfer to an account specified by the Buyer in writing to the Seller; provided that Buyer shall bear all third-party expenses of such wire transfer. After such thirty-day transition period, the Seller, at its expense, shall cause any payments for Assets sold after the Closing Date to be promptly transferred to Buyer after receipt of such payment by Seller. (d) Notwithstanding Seller's operation of the Business during this thirty-day period, it is understood that Seller is acting solely as Buyer's agent during such period and that Buyer shall have the power to make any operational decisions (including, without limitation, the right to override any pricing or promotion decision relating to products and inventory made by Seller during such period); provided however that Buyer shall convey any operational decisions to Seller in writing and Seller shall use commercially reasonable efforts to implement such decisions in the time period requested provided that it is feasible to do so. In addition, Seller shall have no liability to Buyer for the operation of the Business during such thirty-day period if Seller is relying on written instructions of Buyer or acting substantially in accordance with this Section 7.3t (except to the extent that any liability arises out of or relates to the negligence, 19 willful misconduct or bad faith of the Seller, Parent and their Affiliates in complying with such written instructions). 7.4 Confidentiality. During the period between the Agreement Date and for one year after the Closing Date, Buyer shall, and shall cause its representatives, Affiliates and employees to, and after the Closing Date, Seller shall, and shall cause its representatives, Affiliates and employees: (a) to treat and hold as confidential (and not to disclose or provide access to any Person to) any confidential information with respect to the Business or the Assets; provided, however that Buyer may disclose on a need to know basis any confidential information to its prospective financing sources provided that such financing sources agree to enter into a confidentiality agreement with provisions similar to this Section 7.4 and Buyer agrees to be fully responsible for any breach by such financing sources of the provisions hereof or of such confidentiality agreement; (b) in the event that any of them becomes legally compelled to disclose any such information, to provide the other party with prompt written notice of such requirement so that such other party or an Affiliate thereof may seek a protective order or other remedy or waive compliance with this Section 7.4; (c) in the event that such protective order or other remedy is not obtained, or such other party waives compliance with this Section 7.4, to furnish only that portion of such information which is legally required to be provided and to exercise commercially reasonable efforts to obtain assurances that confidential treatment will be accorded such information; (d) to the extent permitted by law, to promptly furnish (prior to, at, or as soon as practicable following, the Closing) to the other party any and all copies (in whatever form or medium) of all such information and to destroy any and all additional copies of such information and any analyses, compilations, studies or other documents prepared, in whole or in part, on the basis thereof; provided, however, that this sentence shall not apply to any information which, at the time of disclosure, is available publicly and was not disclosed in breach of this Agreement or any agreement with Buyer or Seller and provided further that this sentence shall not apply to Buyer subsequent to the Closing with respect to confidential information related to the Assets, but shall apply with respect to confidential information related to the Business (to the extent not included in the Assets). Each party agrees and acknowledges that remedies at law for any breach of its obligations under this Section 7.4 may be inadequate and that in addition thereto the other party (or its Affiliate) shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach. 20 7.5 Authorizations. Seller, as promptly as commercially practicable after the Agreement Date, shall (i) deliver, or cause to be delivered, all notices and make, or cause to be made, all such declarations, designations, registrations, filings and submissions under all statutes, laws (including, without limitation, the HSR Act), rules and regulations applicable to it as may be required for it to consummate the transfer of the Assets and the other transactions contemplated hereby in accordance with the terms of this Agreement; (ii) use commercially reasonable efforts to obtain, or cause to be obtained, all authorizations, approvals, orders, consents and waivers from all Persons necessary to consummate the foregoing; and (iii) use commercially reasonable efforts to take, or cause to be taken, all other actions necessary, proper or advisable in order for it to fulfill its respective obligations hereunder and to carry out the intentions of the parties expressed herein. Each party shall use commercially reasonable efforts to satisfy the conditions to Closing applicable to it in Articles VIII and IX as soon as commercially practicable. 7.6 Bulk Sales Compliance. Buyer will not seek to enforce compliance by Seller with the provisions of any bulk sales or transfers law or similar law of any jurisdiction in respect of the transactions contemplated by this Agreement. If by reason of any such applicable bulk sales law, any claims are asserted by creditors of Seller related to any Liabilities of Seller or Parent, such claims shall be the sole responsibility of Seller or Parent. 7.7 Non-Competition. (a) Buyer and its subsidiaries shall not, for a period of thirty (30) months beginning after the Closing, enter into any agreement, arrangement or understanding with any organization whose primary business is the operation of content based websites that are directed to or targeted at a primarily female demographic in the United States (a "Women's Content Provider") which agreement, arrangement or understanding results in (i) the Business or any portion thereof (including, without limitation, the Intellectual Property) being acquired by a Women's Content Provider (other than pursuant to a sale of all or substantially all of Buyer's assets or securities to a Women's Content Provider); (ii) any investment by Buyer or its subsidiaries regardless of the form of such investment in a Women's Content Provider (other than a purchase of securities which does not result in ownership in excess of 5% by Buyer and its subsidiaries in the aggregate). Notwithstanding the foregoing, nothing contained in this Agreement (but subject to other agreements between Buyer and Seller or Parent) prohibits (x) Buyer or its subsidiaries from entering into advertising, sponsorship, revenue sharing, co-branding, content licensing or similar agreements or arrangements with a Women's Content Provider or any other party and (y) Buyer from entering into any agreement or transaction with Gruner + Jahr Printing & Publishing Co., Growing Family, Inc. and Bertelsmann AG or their Affiliates. (b) Each of Seller, Parent, and their subsidiaries with respect to operations based in the United States or directed toward U.S. customers (collectively, the "Seller Restricted Parties") shall not, for a period of thirty (30) months beginning after the Closing, conduct any business as an Online Baby Retailer or enter into any agreement, arrangement or understanding with an Online Baby Retailer which agreement, arrangement or understanding results in (i) the creation of an Online Baby Retailer or (ii) any investment by any Seller Restricted Party in Online Baby Retailers regardless of the form of such investment in an Online Baby Retailer 21 (other than investments in Buyer or a purchase of securities in an Online Baby Retailer other than Buyer which does not result in ownership in excess of 5% by the Seller Restricted Parties in the aggregate). Notwithstanding the foregoing, nothing contained in this Agreement (but subject to other agreements between Buyer and Seller or Parent) prohibits Parent, Seller or their subsidiaries from entering into advertising, sponsorship, revenue sharing, co-branding, content licensing or similar agreements or arrangements with an Online Baby Retailer or any other party. (c) Each party agrees and acknowledges that remedies at law for any breach of its obligations under this Section 7.7 may be inadequate and that in addition thereto the other party (or its Affiliate) shall be entitled to seek equitable relief, including injunction and specific performance, in the event of any such breach. 7.8 Financing/Issuance of Equity Securities. Buyer shall use commercially reasonable efforts to consummate a Financing on or prior to September 30, 2000. Buyer shall issue to Seller the Equity Securities required to be issued by it pursuant to the terms of the Note upon consummation of the Financing on or prior to September 30, 2000 or other conversion or exchange of the Note. 7.9 Customer Notification. Subject to the terms of Parent's privacy policy as currently in effect or as hereafter may be amended, Seller shall use commercially reasonable efforts to notify Persons that have been customers of the Business that Buyer has acquired the Assets and to distribute other mailings (including e-mail) to such customers on Buyer's behalf to the extent that such customers have agreed to receive such mailings. Seller and Buyer shall mutually agree on the form and content of such notifications. In addition, if requested by Buyer, Seller shall use commercially reasonable efforts to redirect the Universal Resource Locator set forth in Disclosure Schedule Section 2.1 to a Universal Resource Locator specified by Buyer. 7.10 Notification. Seller shall give prompt notice to Buyer, and Buyer shall give prompt written notice to Seller, of (a) the occurrence, or failure to occur, of any known event which occurrence or failure would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the Agreement Date through the Closing Date; or (b) any known failure of Seller or Buyer to comply with, perform or satisfy in any material respect any covenant or comply with, perform or satisfy any condition contained in this Agreement to be complied with, performed or satisfied by either such party. 7.11 Domain Name. Seller agrees to take all necessary steps within thirty days after the Closing Date to cause NSI to transfer the domain names "iBaby.com" and "internetBaby.com" (the "Domain Names") to Buyer using NSI's Priority Registrant Name Change service and to comply with all procedures required by NSI for effectuating such transfer on a priority basis, including completing, executing and having notarized NSI's Registrant Name Change Agreement - Transfer (the "Transfer Form"). Seller shall use commercially reasonable efforts to file the Transfer Form promptly following the Closing (but in no event later than the thirtieth day after the Closing Date) and to ensure that NSI effects the transfer of the Domain Names and shall notify Buyer immediately upon receipt of notification that such transfer has been effectuated. Notwithstanding the foregoing, Seller is not ensuring that NSI will have transferred the Domain Names to Buyer within thirty days after the Closing Date. 22 7.12 Change and Use of Company's Name. Within thirty (30) days after the Closing Date, the Seller shall use commercially reasonable efforts to cease all uses of the name and marks "iBaby" or "InternetBaby" and shall use commercially reasonable efforts to take or cause to be taken such action as may be required to change its corporate name to a name that is not the same as, or confusingly similar to, the name and marks "iBaby" or "InternetBaby" and promptly thereafter the Seller shall deliver to the Buyer evidence that all necessary filings in the jurisdictions in which Seller is licensed or qualified to do business to effect such name change have been made. Seller agrees to execute all documents as Buyer may reasonably request to enable Buyer or any of its Affiliates or subsidiaries to change their respective corporate names to include the name "iBaby" or "InternetBaby" or any variation thereof or to register the name "iBaby" or "InternetBaby" as a fictitious, assumed business or trade name in any jurisdiction. Seller agrees that any rights under federal or state statutory or common law relating to trademarks that become associated with the name "iBaby" or "InternetBaby" as a result of Buyer's use thereof shall vest with Buyer. ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF BUYER The obligations of Buyer to effect the transactions contemplated herein shall be subject to the fulfillment, satisfaction or waiver, on or before the Closing Date, of each of the following conditions: 8.1 Accuracy of Representations and Warranties. The representations and warranties of Parent and Seller contained in Article V that are qualified as to materiality shall be true and correct in all respects, and the representations and warranties of Seller and Parent contained in Article V that are not so qualified shall be true and correct in all material respects, at and as of the Closing Date with the same effect as though made at and as of the Closing Date, except that representations and warranties made as of, or in respect of, only a specified date or period shall be true and correct (or in all material respects, as applicable) in respect of, or as of, such date or period. 8.2 Performance. Seller shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be performed or complied with by it on or prior to the Closing Date, including delivery of each deliverable specified in Section 4.2. 8.3 HSR Act. Any waiting period (and any extension thereof) under the HSR Act applicable to the transactions contemplated hereby shall have expired or shall have been terminated and any other required approvals of a Governmental Authority shall have been obtained. 8.4 Opinion. Buyer shall have received on the Closing Date an opinion, dated the Closing Date, of counsel for Seller, in form and substance reasonably satisfactory to Buyer. 8.5 Related Agreements. Each of Seller and Parent shall have executed (to the extent it is a party thereto) and delivered this Agreement, the Security Agreement, the Note, a bill of 23 sale and a trademark assignment agreement, in each case in a form reasonably satisfactory to Buyer and Seller. 8.6 Seller Closing Certificates. Buyer shall have received on the Closing Date a certificate dated the Closing Date, signed by the President of Seller, confirming the matters set forth in Section 8.1 and stating that Seller has complied with all the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied by Seller on or prior to the Closing Date. Buyer shall have received a Secretary's or Assistant Secretary's Certificate of Seller, dated as of the Closing Date, attaching resolutions authorizing the transactions and certifying the Charter and Bylaws of Seller and otherwise in a form reasonably satisfactory to Buyer. 8.7 Parent Closing Certificates. Buyer shall have received on the Closing Date a certificate dated the Closing Date, signed by the Senior Vice President, Business Affairs of Parent, confirming the matters set forth in Section 8.1 and stating that Parent has complied with all the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied by Parent on or prior to the Closing Date. Buyer shall have received a Secretary's Certificate of Parent, dated as of the Closing Date, attaching resolutions authorizing the transactions and certifying the Charter and Bylaws of Parent and otherwise in a form reasonably satisfactory to Buyer. 8.8 Absence of Governmental Orders. No temporary or permanent Governmental Order shall be in effect that prohibits or makes unlawful consummation of the transactions contemplated hereby or that is reasonably likely to have a Material Adverse Effect. ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF SELLER The obligations of Seller to effect the transactions contemplated herein shall be subject to the fulfillment, satisfaction or waiver, on or before the Closing Date, of each of the following conditions: 9.1 Accuracy of Representations and Warranties. The representations and warranties of Buyer contained in Article VI that are qualified as to materiality shall be true and correct in all respects, and the representations and warranties of Buyer contained in Article VI that are not so qualified shall be true and correct in all material respects, at and as of the Closing Date with the same effect as though made at and as of the Closing Date, except that representations and warranties made as of, or in respect of, only a specified date or period shall be true and correct (or in all material respects, as applicable) in respect of, or as of, such date, or period. 9.2 Performance. Buyer shall have performed and complied in all material respects with all agreements and obligations required by this Agreement to be performed or complied with by it on or prior to the Closing Date, including delivery of each deliverable specified in Section 4.3. 9.3 HSR Act. Any waiting period (and any extension thereof) under the HSR Act applicable to the transactions contemplated hereby shall have expired or shall have been 24 terminated and any other required approvals of a Governmental Authority shall have been obtained. 9.4 Opinion. Seller shall have received on the Closing Date an opinion, dated the Closing Date, of counsel for Buyer, in form and substance reasonably satisfactory to Seller. 9.5 Related Agreements. Buyer shall have executed and delivered this Agreement, the Security Agreement, the Note, a bill of sale and a trademark assignment agreement, in each case in a form reasonably satisfactory to Buyer and Seller. 9.6 Closing Certificates. Seller shall have received on the Closing Date a certificate dated the Closing Date, signed by the President of Buyer, confirming the matters set forth in Section 9.1 and stating that Buyer has complied with all the agreements and satisfied all of the conditions herein contained and required to be complied with or satisfied by Buyer on or prior to the Closing Date. Seller shall have received a Secretary's Certificate of Buyer, dated as of the Closing Date, attaching resolutions authorizing the transactions and certifying the Charter and Bylaws of Buyer and otherwise in a form reasonably satisfactory to Seller. 9.7 Absence of Governmental Orders. No temporary or permanent Governmental Order shall be in effect that prohibits or makes unlawful consummation of the transactions contemplated hereby or that is reasonably likely to result in a material adverse effect on the operations, results of operations or condition (financial or otherwise) of Buyer or on the ability of Buyer to perform its obligations under this Agreement and the agreements contemplated hereby. 9.8 Consent of Preferred Stock Holders. Buyer shall have received on or prior to the Closing Date, and delivered copies thereof to Seller on the Closing Date, the consent of the holders of the outstanding Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock to the issuance of any Equity Securities upon a conversion or exchange of the Note in the forms attached hereto as Exhibit C. ARTICLE X INDEMNIFICATION 10.1 Survival. All representations and warranties of Seller, Parent and Buyer and their Affiliates contained in this Agreement (including all schedules and exhibits hereto and thereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement) shall survive the consummation of the transactions contemplated hereby for eighteen (18) months unless such representations and warranties expire earlier by their terms, except that any theretofore unasserted Tax Claim, ERISA Claims, claims under environmental laws ("Environmental Claims") or the WARN Act shall expire ninety (90) days after the applicable period under the statute of limitations relating to such claim has expired. All indemnification obligations of Seller, Parent and Buyer in this Agreement (including all schedules and exhibits thereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement), other than indemnity obligations arising in respect of Tax Claims, ERISA Claims, Environmental Claims, Retained Liabilities, the WARN Act or the covenants described in the last sentence of this Section 10.1, shall survive for eighteen (18) months. All indemnity obligations of Seller and Parent in this Agreement arising in respect of Tax Claims, ERISA 25 Claims, Environmental Claims or the WARN Act shall survive until ninety (90) days after the applicable period under the statute of limitations for such Tax Claim, ERISA Claim, Environmental Claim or the WARN Act has expired. Except as set forth in the preceding sentence, all indemnification obligations of Seller and Parent in this Agreement arising in respect of any Retained Liability shall survive for three (3) years after the Closing Date. It is understood that if any claim for any indemnification obligation is made pursuant to the terms of this Agreement prior to the expiration of the applicable survival period, then the indemnification obligation in respect of such claim shall not expire until such claim is resolved. Unless otherwise specified in the terms of such covenant in Article VII or elsewhere in this Agreement, all of the covenants in such Article VII or elsewhere in this Agreement (including without limitation, Sections 7.1, 7.5(iii), 7.6, 7.9, 7.10, 12.9, 12.13 and the applicable portion of Section 7.2) shall survive the execution, delivery and performance of this Agreement. 10.2 Indemnification by Seller and Parent. (a) Except as otherwise limited by this Article X, each of Seller and Parent, shall indemnify, severally and jointly, and hold harmless Buyer, its subsidiaries and Affiliates, any assignee or successor thereof, and each officer, director, employee, agent and representative of each of the foregoing (collectively, the "Buyer Indemnified Parties") from and against, and pay or reimburse the Buyer Indemnified Parties for, any and all losses, Actions, Liabilities, damages, claims, costs and expenses (including reasonable expenses of investigation and legal fees and costs in connection therewith), interest, awards, judgments, penalties and Encumbrances suffered or incurred by any of the Buyer Indemnified Parties (hereinafter a "Buyer Loss"), subject to Section 10.2(b) below, arising out of or resulting directly or indirectly from: (i) any breach of any representation or warranty of Seller, Parent or their respective Affiliates in this Agreement (including all schedules and exhibits hereto and thereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement or made in connection herewith or therewith); (ii) any breach of any covenant, obligation or agreement of Seller, Parent or their respective Affiliates in this Agreement (including all schedules and exhibits hereto and thereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement or made in connection herewith and therewith); and (iii) any Retained Liability. (b) Neither Seller nor Parent shall be obligated to indemnify any Buyer Indemnified Party for any Buyer Loss in excess of $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of this Agreement, the outstanding principal amount of the Note as of July 6, 2000) in the aggregate or such lesser amount as described below, provided that any Buyer Loss arising solely out of or resulting directly from any Retained Liability, Tax Claim, ERISA Claim, Environmental Claim or claim under the WARN Act (including any interest and penalties suffered or incurred by any Buyer Indemnified Party in connection therewith and any reasonable expenses of investigation and legal fees and costs incurred in connection therewith) (collectively, "Uncapped Losses") shall not be subject to the $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of this Agreement, the outstanding principal amount of the Note as of 26 July 6, 2000) limit (or the other limitations described in Section 10.2(b) or Section 10.2(c)) and shall not be considered in determining whether the $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of this Agreement, the outstanding principal amount of the Note as of July 6, 2000) limit has been reached. Under no circumstances shall Seller or Parent be required to deliver to any Buyer Indemnified Party cash in respect of any indemnification obligations for any Buyer Loss (other than for Uncapped Losses) in excess of all cash payments received by the Seller or Parent under this Agreement, the Security Agreement and the Note plus the amount of cash received by such Person in respect of any sale or transfer of, or dividend or distribution on, the Note or the Equity Securities or other securities or assets received in exchange for or upon conversion of the Note or Equity Securities or in respect of any assignment of this Agreement, the Security Agreement or the Note. Also, under no circumstances shall Seller or Parent be required to deliver to any Buyer Indemnified Party for any indemnification obligations for any Buyer Loss (other than for Uncapped Losses) any property of either Seller or Parent other than the cash provided under the preceding sentence, the Note and any Equity Securities or other securities or assets issued to Seller on exchange or conversion of the Note or Equity Securities, in each case, to the extent such Note, Equity Securities or other securities or assets have not been transferred or sold. (c) To the extent Seller or Parent is obligated to indemnify any Buyer Indemnified Party for any Buyer Loss (other than an Uncapped Loss) (a "Seller Indemnification Obligation"), then Buyer shall have the option to have the Seller Indemnification Obligation satisfied in any of the following ways or any combination thereof: (A) Buyer may require Seller or Parent to deliver up to an amount of cash to any Buyer Indemnified Party to satisfy the Seller Indemnification Obligation equal to all cash payments received by the Seller or Parent under this Agreement, the Security Agreement and the Note plus the amount of cash received by such Person in respect of any sale or transfer of, or dividend or distribution on, the Note or the Equity Securities or other securities or assets received in exchange for or upon conversion of the Note or Equity Securities or in respect of any assignment of this Agreement, the Security Agreement or the Note, but subject to the limitations set forth in the last two sentences of Section 10.2(b) above, if applicable; (B) to the extent any principal is still outstanding under the Note , Buyer may require Seller to reduce the outstanding principal amount under the Note and accrued and unpaid interest thereon (by revising Schedule I of the Note appropriately) by up to the amount of the Seller Indemnification Obligation or (C) to the extent Seller or Parent has received any Equity Securities or other securities or assets whether as a result of the conversion or exchange of, sale or transfer or, or dividend or distribution on, all or any portion of the Note or any Equity Securities, Buyer may require Seller or Parent to return such number of Equity Securities or other securities or assets to Buyer up to the amount of the Seller Indemnification Obligation divided by the greater of (a) the purchase price per Equity Security of the Equity Securities paid by Seller (as such purchase price may be adjusted as a result of stock splits, conversions, exchanges, dividends, mergers, consolidations, reorganizations, recapitalizations or other corporate transactions as provided pursuant to the terms of the document governing such Equity Securities whether as a result of antidilution provisions or otherwise) on the date Seller returns such Equity Securities (or with respect to any other securities or assets, such amount of other securities or assets having a fair market value equal to the amount of the Seller Indemnified Obligations (such fair market value as determined by the parties or an independent expert appointed by the parties (whose expenses are shared equally by Buyer and Seller)) and (b) if such Equity Securities or other securities are traded on a securities exchange or the Nasdaq 27 National Market System the average of the closing price of the Equity Securities or other securities on such exchange over a ten-day period ending three days prior to the date the Seller Indemnification Obligations becomes due and payable by Seller or Parent. Notwithstanding the foregoing, the Seller or Parent may elect to settle an indemnification obligation at any time by delivering cash to the Buyer Indemnified Party. To the extent the limitations set forth in the last two sentences of Section 10.2(b) are not applicable as a result of the application of Section 10.2(d), then Seller shall pay in cash to any Buyer Indemnified Party in satisfaction of any Seller Indemnification Obligation an amount equal to the difference between (x) $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of this Agreement, the outstanding principal amount of the Note as of July 6, 2000) and (y) (1) all cash payments received by the Seller or Parent under this Agreement, the Security Agreement and the Note plus the amount of cash received by such Person in respect of any sale or transfer of, or dividend or distribution on, the Note or the Equity Securities or other securities or assets received in exchange for or upon conversion of the Note or the Equity Securities or in respect of any assignment of this Agreement, the Security Agreement or the Note and paid in satisfaction of any Seller Indemnification Obligation, (2) any reduction in the outstanding principal amount under the Note in satisfaction of any Seller Indemnification Obligation and (3) the purchase price paid by the Seller for the Equity Securities or other securities or assets transferred in satisfaction of any Seller Indemnification Obligation (as calculated under Section 10.2(c) above). All Uncapped Losses shall be settled by Seller and Parent by delivery of cash to any Buyer Indemnified Party. (d) Seller and Parent understand and acknowledge that, in addition to any other transfer restrictions on the Note and the Equity Securities issuable upon conversion or exchange thereof, until Buyer's rights under this Article X terminate pursuant hereto, Seller may not sell, assign, transfer, dispose of, or grant any option with respect to, such Note or Equity Securities to any Person other than any Affiliate of Seller (provided that such Affiliate shall agree to be bound by similar transfer restrictions) (x) on or prior to the second anniversary of the Closing Date without the prior written consent of Buyer and (y) after the second anniversary of the Closing Date without the prior written consent of Buyer (which consent shall not be unreasonably withheld) in each case, except for (i) a sale or other transfer for cash equal to or greater than the outstanding principal amount of the Note being transferred or the purchase price paid by the Seller for the Equity Securities being transferred (as calculated under Section 10.2(c) above), as the case may be; (ii) a sale or other transfer of the Note or the Equity Securities on or prior to the second anniversary of the Closing Date without the consent of Buyer provided that the limitations in the last two sentences of Section 10.2(b) shall no longer apply or (iii) a sale or other transfer of the Note or the Equity Securities after the second anniversary of the Closing Date without the consent of Buyer (which consent shall not be unreasonably withheld) provided that the limitations in the last two sentences of Section 10.2(b) shall no longer apply. 10.3 ERISA Claims. Seller and Parent shall severally and jointly, indemnify Buyer for any obligation, liability or cost associated with any plan, program or agreement relating to or for the benefit of employees of the Business or any employees of Seller of any member of Seller's "controlled group" as defined in Section 414(b), (c), (n) or (o) including, but not limited to retirement plans, stock option plans, health and welfare plans, multi-employer plans, employment, consulting or independent contractor agreements, bonus plans, collective bargaining agreements and severance plans (the "Employer Plans") and any obligation, liability 28 or cost associated with any labor or employment issue or dispute, in each case as incurred or associated with period prior to the Closing ("ERISA Claims"). 10.4 Indemnification by Buyer. Except as otherwise limited by this Article X, Buyer shall indemnify and hold harmless Seller, Parent, their subsidiaries and Affiliates, any assignee or successor thereof, and each officer, director, employee, agent and representative of each of the foregoing (collectively, the "Seller Indemnified Parties") from and against, and pay or reimburse the Seller Indemnified Parties for, any and all losses, Actions, Liabilities, damages, claims, costs and expenses (including reasonable expenses of investigation and legal fees and costs in connection therewith), interest, awards, judgments, penalties and Encumbrances suffered or incurred by any of the Seller Indemnified Parties (hereinafter a "Seller Loss"), up to $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of this Agreement, the outstanding principal amount of the Note as of July 6, 2000) in the aggregate, arising out of or resulting directly or indirectly from: (a) any breach of any representation or warranty of Buyer or its Affiliates in this Agreement (including all schedules and exhibits hereto and thereto and all certificates, documents, instruments and undertakings furnished pursuant to this Agreement or made in connection herewith and therewith); and (b) any breach of any covenant, obligation or agreement of Buyer or its Affiliates in this Agreement (including all schedules and exhibits hereto and thereto and all certificates, documents, instruments or undertakings furnished pursuant to this Agreement or made in connection herewith and therewith). Buyer shall not be obligated to indemnify any Seller Indemnified Party for any Seller Losses in excess of $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of this Agreement, the outstanding principal amount of the Note as of July 6, 2000) in the aggregate. Buyer shall pay all indemnification obligations under this Section 10.4 in cash. 10.5 General Indemnification Provisions. (a) For the purposes of this Section 10.5, the term "Indemnitee" shall refer to the Person or Persons indemnified, or entitled, or claiming to be entitled, to be indemnified, pursuant to the provisions of Section 10.2, 10.3 or 10.4, as the case may be; the term "Indemnitor" shall refer to the Person having the obligation to indemnify pursuant to such provisions; and "Losses" shall refer to Seller Losses or Buyer Losses, as the case may be. (b) Within a reasonable time following the determination thereof, an Indemnitee shall give the Indemnitor written notice of any matter which such Indemnitee has determined has given rise to a right of indemnification under this Agreement stating the amount of the Loss, if known, and method of computation thereof, all with reasonable particularity and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises (subject to the last sentence of this subsection). The obligations and Liabilities of any party under this Article X with respect to Losses arising from claims, assertions, events or proceedings of any third party (including claims by any assignee or successor of the Indemnitee or any Governmental Authority), which are subject to the indemnification provided for in this 29 Article X ("Third Party Claims") shall be governed by and be subject to the following additional terms and conditions: If any Indemnitee shall receive written notice of any Third Party Claim, the Indemnitee shall promptly give the Indemnitor written notice of such Third Party Claim (subject to the last sentence of this subsection) and shall permit the Indemnitor, at its option, to participate in the defense of such Third Party Claim by counsel of its own choice and at its expense. If the Indemnitor acknowledges in writing its obligation to indemnify the Indemnitee hereunder against any Loss (without limitation) that may result from such Third Party Claim, then the Indemnitor shall be entitled, at its option, to assume and control the defense against such Third Party Claim at its expense and through counsel of its choice if it gives written notice of its intention to do so to the Indemnitee within 15 calendar days of the receipt of notice of such Third Party Claim from Indemnitee, unless, in the reasonable opinion of counsel for the Indemnitee, there is a conflict or a potential conflict of interest between the Indemnitee and the Indemnitor in such Action, in which event the Indemnitee shall be entitled to direct the defense of such Action with separate counsel of its choice reasonably acceptable to the Indemnitor. The reasonable fees and expenses of any such separate counsel shall be borne by the Indemnitor. In the event that the Indemnitor exercises its right to undertake the defense against any such Third Party Claim as provided above, the Indemnitee shall cooperate with the Indemnitor in such defense and make available to the Indemnitor, at Indemnitor's expense, all witnesses, pertinent records, materials and information in its possession or under its control reasonably relating thereto as is required by the Indemnitor. Similarly, in the event the Indemnitee is, directly or indirectly, conducting the defense against any Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in such defense and make available to it all witnesses, pertinent records, materials and information in its possession or under its control reasonably relating thereto as is reasonably required by the Indemnitee. No such Third Party Claim, except the settlement thereof which involves (i) the payment of money only either by a party other than the Indemnitee or for which the Indemnitee is totally indemnified (without limitation) by the Indemnitor, (ii) the unconditional release from all related liability of the Indemnitee, (iii) the imposition of no condition or limitation on Indemnitee's on-going business and (iv) no adverse impact on Indemnitee's reputation, may be settled by the Indemnitor without the written consent of the Indemnitee. In the event that an Indemnitee reasonably determines, and gives notification to the Indemnitor, that the failure to resolve a Third Party Claim is having a material adverse effect on the Indemnitee's ongoing business, and as a result the Indemnitee wishes to propose a settlement of the Third Party Claim and the third party will unconditionally release the Indemnitor from any and all Liabilities relating to or arising from such Third Party Claim, then the Indemnitor shall not unreasonably withhold its consent to such settlement; provided, however that this provision shall not apply if the Indemnitee is entitled to direct the defense of such Action pursuant to this Section and the Indemnitee has exercised such right. If the Indemnitor does not consent to such settlement, the Indemnitee may settle the Third Party Claim on the terms proposed without discharging the Indemnitor from its liability hereunder with respect to such Third Party Claim. The foregoing notwithstanding, the failure of any Indemnitee to give any notice required to be given hereunder shall not affect such Indemnitee's right to indemnification hereunder except to the extent the Indemnitor from whom such indemnity is sought shall have been actually and materially prejudiced in its ability to defend the claim or action for which such indemnification is sought by reason of such failure. (c) Payment by an Indemnitee to a third party with respect to a Loss shall not affect such Indemnitee's rights to indemnification pursuant to this Article X. 30 ARTICLE XI TAX MATTERS 11.1 Allocation of Purchase Price. As soon as practicable after the Closing Date, and in any event within sixty (60) days of such date, Buyer shall prepare and submit to Seller a computation of the sale price of the Assets in accordance with the terms hereof and the allocation of such sale price among such Assets. Seller and its Affiliates shall have full opportunity to review such allocation for twenty (20) days after receipt of such allocation from Buyer. Seller may dispute any items in the allocation. Unless Seller delivers notice to Buyer on or prior to the 20th day after receipt by Seller of the allocation specifying any dispute with the allocation, Seller shall be deemed to have accepted and agreed to the allocation, and the allocation shall be final. If Seller so notifies Buyer of any objection to the allocation, Seller and Buyer shall, within ten (10) days following such notice of dispute, attempt to resolve their differences and any resolution by them as to any disputed items shall be final, conclusive and binding on the parties. If at the end of the resolution period there remain any disputed items, then all such remaining disputed items shall be submitted to an independent third party mutually acceptable to both parties for resolution. Such independent party shall resolve any disputed items within twenty (20) days of its appointment thereby and resolution by such independent party shall be conclusive, binding and final on the parties hereto. For purposes of determining Buyer's basis in the Assets and gain or loss recognized by Seller with respect to the sale of the Assets to Buyer, Buyer and Seller covenant and agree that the aggregate purchase price shall be allocated by them and their Affiliates among the Assets consistent with the allocation, and the parties further agree that they and their Affiliates shall file all Tax returns and related forms (including, without limitation, Form 8594) in accordance with the final allocation and shall not make any inconsistent written statement or take any inconsistent position on any Tax returns, in any refund claims, or during the course of any Internal Revenue Service or other Tax audit. 11.2 Taxes Relating to Transactions Contemplated by This Agreement. The responsibility for all sales and use Taxes imposed in connection with the transfer of the Assets, whether such Taxes are assessed initially against Seller or Buyer or any Affiliate of Buyer, shall reside with Seller. ARTICLE XII GENERAL PROVISIONS 12.1 Fees and Expenses. Each party will pay all fees and expenses incurred by it in connection with this Agreement and the transactions contemplated hereby. 12.2 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered or mailed if delivered personally or mailed by registered or certified mail (postage prepaid, return receipt requested), or sent by facsimile transmission, (confirmation received) to the parties at the following addresses and facsimile transmission numbers (or at such other address or number for a party as shall be specified by like notice), except that notices after the giving of which there is a designated period within which to perform an act and notices of changes of address or number shall be effective only upon receipt: 31 (a) If to Seller or Parent: iVillage Inc. 212 5th Avenue New York, New York 10010 Attention: Steven A. Elkes, Senior Vice President, Business Affairs Telecopy No.: (212) 689-9513 Telephone No.: (212) 206-3106 with a copy to: iVillage Inc. 212 5th Avenue New York, New York 10010 Attention: Michael A. Gilbert, Associate General Counsel Telecopy No.: (212) 689-9834 Telephone No.: (212) 206-3167 (b) if to Buyer: Babygear.com 10 West 33rd Street, Suite 400 New York, New York 10001 Attention: Preston Bealle, President and CEO Telecopy No.: (212) 736-3578 Telephone No.: (212) 736-2600 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: John C. Kennedy, Esq. Telecopy No.: (212) 757-3990 Telephone No.: (212) 373-3000 12.3 Disclosure Schedule. The Disclosure Schedule shall be divided into sections corresponding to the sections and subsections of this Agreement. Disclosure of any matter in the Disclosure Schedule shall not be deemed to imply that such matter is or is not material. Disclosure of any matter in the Disclosure Schedule shall not constitute an admission or raise any inference that such matter constitutes a violation of law or an admission of liability or facts supporting liability. 32 12.4 Interpretation. (a) When a reference is made in this Agreement to Sections, subsections, Schedules or Exhibits, such reference shall be to a Section, subsection, Schedule or Exhibit to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The word "herein" and similar references mean, except where a specific Section or Article reference is expressly indicated, the entire Agreement rather than any specific Section or Article. The table of contents and the headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Except as otherwise expressly provided herein, all monetary amounts referenced in this Agreement shall mean U.S. dollars. 12.5 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of statute, law, regulation, Governmental Order or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. In such event, any such term or provision shall be deemed, without further action on the part of the parties hereto, modified, amended and limited to the extent necessary to render the same and the remainder of this Agreement valid, enforceable and lawful. 12.6 Assignment. This Agreement may not be assigned by any party without the prior written consent of the other parties, provided that this Agreement may be assigned to any entity which acquires all or substantially all of the assets or stock of a party hereto or which survives a statutory merger or consolidation of such party. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of Buyer, Seller and Parent. 12.7 No Third-Party Beneficiaries. Other than as set forth in Sections 10.2, 10.3 and 10.4, this Agreement is for the sole benefit of the parties hereto and their permitted assigns and nothing herein expressed or implied shall give or be construed to give to any Person, other than the parties hereto and such assigns, any legal or equitable rights hereunder. 12.8 Amendment, Other Remedies and Waiver. (a) This Agreement may not be amended, modified or waived except by an instrument in writing signed by Seller, Parent and Buyer. (b) The rights and remedies of the parties to this Agreement are cumulative and not alternative of any other remedy conferred hereby or by law or equity, and the exercise of any remedy will not preclude the exercise of any other. (c) Neither the failure nor any delay by any party in exercising any right, power or privilege under this Agreement will operate as a waiver of such right, power or privilege, and single or partial exercise of any such right, power or privilege will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by law, (i) no waiver that may be given by a party will be 33 applicable except in the specific instance for which it is given; and (ii) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 12.9 Further Assurances. Each of Buyer, Seller and Parent agrees to (a) cooperate fully with the other party, and to cause its Affiliates to cooperate fully, (b) execute and cause such Affiliates to execute such further instruments, documents and agreements, and (c) give such further written assurances as may be reasonably requested by Buyer or Seller, as the case may be, to evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. If at any time and from time to time after the Closing Date (without limitation as to time or otherwise) Buyer reasonably determines that all of Seller's rights, title and interests in and to an Asset have failed to be fully transferred and conveyed in accordance with this Agreement to Buyer or an Affiliate thereof, as the case may be, then Seller shall cause such Asset to be transferred and conveyed to Buyer or an Affiliate thereof in accordance with this Agreement as soon as reasonably practicable after notice from Buyer to Seller. If requested by Buyer, Seller or Parent shall prosecute or otherwise enforce in its own name for the benefit of Buyer any claims, rights or benefits that are transferred to Buyer and its Affiliates by this Agreement and that require prosecution or enforcement in the name of Seller. Any prosecution or enforcement of claims, rights or benefits under this Section 12.9 shall be solely at Buyer's expense, unless the prosecution or enforcement is made necessary by a material breach of this Agreement by Seller. Following the Closing Date, Seller shall refer to Buyer or its Affiliates, as appropriate, as promptly as practicable, any telephone calls, letters, orders, notices, requests, inquiries and other communications relating to the Assets and the Business. 12.10 Mutual Drafting. This Agreement is the joint product of Buyer and Seller and each provision hereof has been subject to the mutual consultation, negotiation and agreement of Buyer and Seller and shall not be construed for or against any party hereto. 12.11 Governing Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to its choice of law principles). Each of the parties hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, and (b) the United States District Court for the Southern District of New York, for the purposes of any Action arising out of this Agreement or any transaction contemplated hereby. Each of the parties hereto agrees to commence any Action relating hereto either in the United States District Court for the Southern District of New York, in the Supreme Court of the State of New York. Each of the parties hereto further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in Section 12.2 shall be effective service of process for any Action in New York with respect to any matters to which it has submitted to jurisdiction in this Section 12.11. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or any transaction contemplated hereby in (i) the Supreme Court of the State of New York, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. 34 12.12 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 12.13 Public Announcements. Neither Buyer, Seller, Parent nor the representatives of either of them shall issue to the media any news release or other public announcement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of the other parties hereto. The foregoing notwithstanding, any such news release or other public announcement may be made if required by applicable law including, without limitation, the Exchange Act, provided that the party required to make such news release or other public announcement shall confer with the other party concerning the timing and content of such news release or other public announcement before the same is made. Buyer and Seller will consult with each other concerning the means by which employees, customers and suppliers and others having dealings with Seller with respect to the Business will be informed of the transactions contemplated hereby, and Buyer shall be allowed to have present for any such communication a representative of Buyer. 12.14 Entire Agreement. This Agreement, together with all schedules (including, without limitation the Disclosure Schedule) and exhibits hereto, and the documents and instruments and other agreements among the parties delivered pursuant hereto constitute the entire agreement and supersede all prior agreements and undertakings, both written and oral, among Buyer, Seller and Parent with respect to the subject matter hereof and are not intended to confer upon any other Person any rights or remedies hereunder, except as otherwise expressly provided herein. 35 IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. iBABY, INC., a Delaware corporation By: /s/ Steven A. Elkes ------------------------------------- Name: Steven A. Elkes Title: Chief Executive Officer iVILLAGE INC., a Delaware corporation By: /s/ Steven A. Elkes ------------------------------------- Name: Steven A. Elkes Title: Senior Vice President, Business Affairs BABYGEAR.COM, INC., a Delaware corporation By: /s/ Preston Bealle ------------------------------------- Name: Preston Bealle Title: President and Chief Executive Officer EXHIBIT A Form of Security Agreement EXECUTION COPY SECURITY AGREEMENT This Security Agreement is made as of July 6, 2000 between iBaby, Inc., a Delaware corporation ("Pledgee"), and Babygear.com, Inc. a Delaware corporation ("Pledgor"). Recitals WHEREAS, pursuant to Pledgor's desire to purchase all of the rights, title and interests of Pledgee in and to Assets pursuant to the Asset Purchase Agreement dated as of July 6, 2000 (as amended, supplemented or otherwise modified from time to time, the "Purchase Agreement"), between Pledgor, Pledgee and iVillage Inc., a Delaware corporation, and the agreement between Pledgee and Pledgor that the consideration to be paid for such Assets shall be in the form of a US$9,898,627.11 convertible promissory note (the "Note"); and WHEREAS, Pledgee requires, and Pledgor is willing, as a condition to the consummation of the transactions contemplated by the Purchase Agreement, to grant to the Pledgee, for the benefit of Pledgee, a security interest in 100% of the inventory being transferred as part of the Assets on the date hereof, as will be set forth on Schedules I and II of Disclosure Schedule Section 2.1 of the Purchase Agreement and as may be adjusted by the Inventory Schedule prepared pursuant to Section 2.3 of the Purchase Agreement (the "Closing Inventory"), except for any intellectual property, including without limitation customer lists, goodwill, know-how and other trade secrets, software, patents, copyrights, trademarks and domain names, if any, as partial security for the payment and performance by Pledgor of all of the obligations of Pledgor now or hereafter existing under the Note (the "Secured Obligations") by executing and delivering this Agreement; provided, however, that the Closing Inventory shall, when in the possession of Pledgor, be held separate and apart from the other inventory of Pledgor and shall be clearly marked and identified as security for the benefit of Pledgee. NOW, THEREFORE, in consideration of the mutual premises and covenants herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby agrees with the Pledgee as follows: 1. Definitions. "Agreement" shall mean this Security Agreement, including all amendments, modifications and supplements to the extent executed in accordance with the provisions hereof, and shall refer to this Agreement as the same may be in effect at the time such reference becomes operative. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Purchase Agreement. Except as otherwise specifically provided in this Agreement, the singular of any term shall include the plural, and vice versa, the use of any term shall be equally applicable to any gender, "or" shall not be exclusive, and "including" shall not be limiting or exclusive, and any reference to a "Section" shall refer to the relevant Section of this Agreement. 2. Creation and Description of Security Interest. Pledgor hereby pledges to the Pledgee, and grants to the Pledgee a security interest in Pledgor's right, title and interest in and to the Closing Inventory (collectively, the "Pledged Collateral") until the termination of this Agreement; provided, however that the Pledgee shall acquire a security interest only in such Pledged Collateral in an amount equal to the total cost of the Closing Inventory as of the date hereof and as listed under the columns titled (i) "total cost" on Schedule I of Disclosure Schedule Section 2.1 of the Purchase Agreement and (ii) "ext.cost" on Schedule II of Disclosure Schedule Section 2.1 of the Purchase Agreement and as may be adjusted by the Inventory Schedule prepared pursuant to Section 2.3 of the Purchase Agreement, provided, however, that the Closing Inventory shall, when in the possession of Pledgor, be held separate and apart from the other inventory of Pledgor and shall be clearly marked and identified as security for the benefit of Pledgee and that there shall be no encumbrance on any other inventory of Pledgor. Until the termination of this Agreement pursuant to Section 8 hereof, this Agreement and the Pledged Collateral secure the prompt payment and performance when due of each and every obligation that constitutes a part of the Secured Obligations of Pledgor. 3. Pledgor's Representations and Covenants. To induce Pledgee to enter into this Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows: (a) Payment of Indebtedness. Pledgor will pay the principal sum of the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note. (b) Encumbrances. Assuming that the Pledgor takes possession of the Closing Inventory free and clear of all Encumbrances, Pledgor is the sole owner of the Pledged Collateral and the Pledged Collateral is free of all Encumbrances (other than the Encumbrances hereunder or Encumbrances otherwise created by the Pledgee) and Pledgor will not further encumber the Pledged Collateral without the prior written consent of Pledgee. (c) Authorization. Pledgor has the corporate right and capacity to pledge the Pledged Collateral to the Pledgee as provided herein. (d) Binding Obligation. This Agreement has been duly executed and delivered by Pledgor and constitutes the legal, valid and binding obligation of Pledgor, enforceable in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting creditors' rights generally and general equitable principles (whether considered in a proceeding in equity or at law). The representations and warranties set forth in this Section 3 shall survive the execution and delivery of this Agreement. 4. Pledgor covenants and agrees that as of the date hereof and until the Termination Date: 2 (a) Transfer and Other Liens. Prior to the repayment in full in cash of $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of the Note as of July 6, 2000) of the Note, unless the Pledgee gives its prior written consent, Pledgor will not (a) sell, assign (by operation of law or otherwise), transfer or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral, or (b) create or suffer to exist any Encumbrance or grant a security interest in or upon or with respect to, or otherwise encumber any of its rights in or to, any of the Pledged Collateral; provided, however, that Pledgor may sell, assign, transfer or dispose of all or any part of the Pledged Collateral consistent with Pledgor's current practices or Pledgee's prior practice of selling its inventory without Pledgee's consent if the gross proceeds received from such sale, assignment, transfer or disposition of Closing Inventory set forth on Schedule I of Disclosure Schedule Section 2.1 less the total cost of any such Closing Inventory sold, assigned, transferred or otherwise disposed of as listed under the column titled "total cost" of Schedule I of Disclosure Schedule Section 2.1 of the Purchase Agreement (as may be adjusted under Section 2.3 of the Purchase Agreement) are used by the Pledgor to prepay the Note in accordance with Section 4(b) below. (b) Release of Pledged Collateral Upon Sale. Pledged Collateral that is required to be released by Pledgee from the pledge and security interest created by this Agreement in order to permit the Pledgor to consummate any such permitted sale, assignment, transfer or disposition shall be so released by the Pledgee at such times and to the extent necessary to permit the Pledgor to consummate such permitted transactions. Pledgor shall on the tenth day of each month provide to Pledgee a written report of each permitted transaction that occurred in the prior month stating the type and amount of Pledged Collateral sold, the total consideration received, the total cost of the Pledged Collateral sold as calculated using the amounts listed under the column titled "total cost" of Schedule I of Disclosure Schedule Section 2.1 of the Purchase Agreement and as may be adjusted by the Inventory Schedule prepared pursuant to Section 2.3 of the Purchase Agreement and the amount to be remitted to Pledgee pursuant to clause (a) above. In addition, on the tenth day of each month, Pledgor shall pay to Pledgee the amount due to Pledgee as set forth in the report delivered to Pledgee by Pledgor pursuant to this clause (b). All payments made pursuant to the terms of this clause (b) shall be paid by check in U.S. dollars and shall be delivered to Pledgee at its address specified in Section 13 of this Agreement. The Pledgee shall execute and deliver to the Pledgor any documents requested to be executed by it by the Pledgor that are reasonably necessary to release the Pledged Collateral of record pursuant to any permitted transaction described in clause (a) above. (c) Further Assurances; Creation and Preservation of Lien. Pledgor will, at its expense, promptly execute, acknowledge and deliver all such instruments and take all such action as the Pledgee, from time to time, may reasonably request in order to ensure to the Pledgee the benefits of the liens in and to the Pledged Collateral intended to be created by this Agreement and to protect any pledge or security interest granted or purported to be granted hereby or to enable the Pledgee to exercise and enforce its rights and remedies hereunder with respect to the Pledged Collateral. (d) Title. Pledgor has and will defend the title to the Pledged Collateral and the liens of the Pledgee thereon against the claim of any Person and will maintain 3 and preserve such liens until such liens are realized in accordance with the terms hereof or until the Termination Date. 5. Default. Pledgor shall be deemed to be in Default of the Note and of this Agreement in the event: (a) Payment of principal or interest on the Note shall be delinquent for a period of ten (10) days or more; or (b) Pledgor fails to perform any of the covenants set forth in the Note or contained in this Agreement for a period of thirty (30) days after written notice thereof from Pledgee. Upon the occurrence and during the continuance of an event of Default, as set forth above, (i) Pledgee shall have the right to accelerate payment of the Note upon notice to Pledgor and (ii) Pledgee shall thereafter be entitled to pursue its remedies as a secured party under the New York Commercial Code and Pledgee is hereby authorized and empowered to transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, and to the extent such Default is a payment default under the Note to sell the Pledged Collateral in one or more sales after at least ten (10) days' written notice of the time and place of any public sale or of the time after which a private sale is to take place (which notice Pledgor agrees is commercially reasonable), in each case subject to any limitations or restrictions imposed by applicable law. Subject to the limitations previously set forth in this Section 5, any sale of the Pledged Collateral shall be made at a public or private sale at a place to be named in the notice of sale, either for cash or upon credit or for future delivery at such price as the Pledgee may deem fair, and, to the extent permitted by applicable law, the Pledgee may be the purchaser of the whole or any part of the Pledged Collateral so sold, and hold the same thereafter in their own right free from any claim of Pledgor or any right of redemption. The Pledgee reserves the right to reject any and all bids at such sale which, in its reasonable discretion, it shall deem inadequate. Demands of performance, notices of sale, advertisements and the presence of property at sale are hereby waived, and any sale hereunder may be conducted by an auctioneer or any officer or agent of the Pledgee. If, at the original time or times appointed for the sale of the whole or any part of the Pledged Collateral, the highest bid shall be inadequate to discharge in full the Recoverable Amount if there be but one sale, or if the Pledged Collateral be offered for sale in lots, if at any of such sales the highest bid for the lot offered for sale would indicate to the Pledgee, in its reasonable discretion, the unlikelihood of the proceeds of the sales of the whole of the Pledged Collateral being sufficient to discharge in full the Recoverable Amount, the Pledgee may, on one or more occasions and in its reasonable discretion, postpone any of said sales by public announcement at the time of sale or the time of previous postponement of sale, and no other notice of such postponement or postponements of sale need be given, any other notice being hereby waived. For purposes hereof, "Recoverable Amount" means the difference between (x) $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of the Note as of July 6, 2000) plus the amount of any accrued and unpaid interest due on such principal amount of the Note and (y) all previously paid cash prepayments of the Note paid by Pledgor; provided, however, that 4 Recoverable Amount shall not include any fees, costs, expenses incurred by Pledgee pursuant to this Section 5 and Section12. In the event of any sales under this Section 5, the Pledgee shall, after deducting all costs and expenses of every kind (including reasonable attorneys' fees and disbursements) for care, safekeeping, collection, sale, delivery or otherwise, apply the residue of the proceeds of the sales up to the Recoverable Amount to the payment or reduction, either in whole or in part, of the Secured Obligations in accordance with Section 6 and the agreements and instruments governing and evidencing such Secured Obligations, returning the surplus, if any, to Pledgor. The Pledgor waives notice of the creation, advance, increase, existence, extension, or renewal of, or of any indulgence with respect to, the Secured Obligations; waives presentment, demand, notice of dishonor, and protest; waives notice of the amount of the Secured Obligations outstanding at any time, notice of any Default, and all other notices respecting the Secured Obligations (except for any such notices that are required to be given to the Pledgor pursuant to the other provisions of this Agreement, the Purchase Agreement, the Note or by applicable law); and agrees that maturity of the Secured Obligations and any part thereof may be accelerated, extended, or renewed one or more times by the Pledgee, in its discretion, without notice to the Pledgor (except for any such notices that are required to be given to the Pledgor pursuant to the other provisions of this Agreement, the Purchase Agreement, the Note or by applicable law). The Pledgor waives (a) any claim that, as to any part of the Pledged Collateral, a public sale, should the Pledgee elect so to proceed, is, in and of itself, not a commercially reasonable method of sale for such Pledged Collateral, (b) except as otherwise provided in this Agreement, to the fullest extent not prohibited by applicable laws, notice or judicial hearing in connection with the Pledgee's disposition of any of the Pledged Collateral including any and all prior notice and hearing for any pre-judgment remedy or remedies and any such right that the Pledgor would otherwise have under the Constitution or any statute of the United States or of any state, and all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Pledgee's rights hereunder and (c) all rights of redemption, appraisal or valuation. To the extent permitted by law, Pledgor agrees that it will not interfere with any right, power or remedy of the Pledgee provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by the Pledgee of any one or more of such rights, powers or remedies. No failure or delay on the part of the Pledgee to exercise any such right, power or remedy, and no notice or demand which may be given to or made upon Pledgor by the Pledgee with respect thereto, shall operate as a waiver thereof, or limit or impair the Pledgee's right to take any action or to exercise any right, power or remedy hereunder, without notice or demand, or prejudice their rights against Pledgor in any respect. 6. Application of Proceeds. After a Default, all cash proceeds received by the Pledgee in respect of any sale of, liquidation of or other realization upon all or any part of the Pledged Collateral shall first be applied by the Pledgee to the payment of the costs and expenses of such sale, including reasonable fees and expenses of the Pledgee's agents and counsel, and all reasonable expenses, 5 liabilities and advances made or incurred by the Pledgee in connection therewith. All remaining cash proceeds received by the Pledgee up to the Recoverable Amount in respect of any sale of, liquidation of or other realization upon all or any part of the Pledged Collateral shall be applied by the Pledgee as follows: (a) First, to the payment of that portion of the Secured Obligations consisting of accrued and unpaid interest, if any, on $2,474,656.78 of the principal amount of the Note (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of the Note as of July 6, 2000); (b) Next, to the payment of up to the Recoverable Amount of the Secured Obligations consisting of principal; and (c) Next, to the payment of that remaining portion of the Secured Obligations consisting of principal. All cash proceeds received by the Pledgee in respect of any sale of, liquidation of or other realization upon all or any part of the Pledged Collateral and remaining after the application of the proceeds as set forth above, shall be paid to Pledgor, or to such person as the Pledgor may direct. 7. Release of Collateral. There shall be released from this pledge a portion of the Pledged Collateral hereunder upon payments of the principal of the Note (or a written promise to pay all or a portion of the principal of the Note with the after-tax net proceeds of a sale of such Pledged Collateral). The amount of the Pledged Collateral which shall be released shall be the amount of Pledged Collateral which bears the same proportion to the initial amount of Pledged Collateral pledged hereunder as the payment of principal bears to the initial full principal amount of the Note. 8. Term. This Agreement shall terminate (except as otherwise provided herein) on the earlier of (i) conversion of the Note pursuant to the terms of Paragraph 7(b) of the Note and (ii) the payment in cash of an aggregate of $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of the Note as of July 6, 2000) under the Note and upon the occurrence of such event, the Pledged Collateral shall be released from the liens and Encumbrances created hereby and Pledgor shall be entitled to the return of, and the Pledgee, upon such conversion or payment, shall return all of the Pledged Collateral at the time subject to this Agreement which may be in the Pledgee's custody hereunder and all instruments of assignment executed in connection therewith to Pledgor or such Person as the Pledgor may direct and all of Pledgor's liabilities hereunder shall at such time terminate. At the request and expense of Pledgor following any such termination, Pledgee shall execute and deliver to Pledgor such documents as Pledgor shall reasonably request to evidence such termination. 9. Insolvency. Upon the occurrence of an Event of Default described in Paragraphs 4(f) or (g) of the Note, the Note shall accelerate pursuant to the terms of the Note and Pledgee may proceed under this Agreement as provided in the case of Default. 6 10. Pledgee Liability. In the absence of bad faith, willful misconduct or negligence on the part of Pledgee, Pledgee shall not be liable to any party for any of his acts, or omissions to act, as Pledgee. Notwithstanding anything to the contrary in this Agreement, Pledgee's liability under this Agreement shall not exceed the lesser of (i) the sum of the Secured Obligations plus any reimbursements pursuant to Section 12 and (ii) the net proceeds received by the Pledgee upon any sale or other disposition of all or any part of the Pledged Collateral other than in the case of liabilities arising out of or related to bad faith, willful misconduct or negligence on the part of the Pledgee. 11. Use of Agents. The Pledgee may execute any of its rights hereunder through an agent or other designee and shall be entitled to advice of counsel concerning all matters pertaining to its duties hereunder. 12. Reimbursement. The Pledgor agrees to reimburse the Pledgee promptly for all reasonable expenses, including reasonable counsel fees, incurred by the Pledgee in connection with the enforcement of this Agreement upon an occurrence of a Default. Other than as set forth in the preceding sentence, neither the Pledgor nor any affiliate of Pledgor shall have any liability with respect to the expenses or fees of the Pledgee. This Section 12 shall survive any termination of this Agreement until such time as the amounts due under this Section 12 are paid in full in cash. 13. Notices. All notices, requests, demands or other communications required or permitted under this Agreement shall be sent by courier or by facsimile transmission, to the parties hereto at their respective addresses set forth below, and notice shall be deemed given as of the date the notice is received if sent by courier or when transmitted if sent by facsimile: (a) If to Pledgee: iVillage Inc. 212 Fifth Avenue New York, New York 10010 Attention: Steven A. Elkes Telecopy No.: (212) 689-9513 Telephone No.: (212) 206-3106 with a copy to: iVillage Inc. 212 Fifth Avenue New York, New York 10010 Attention: Michael A. Gilbert Telecopy No.: (212) 689-9834 Telephone No.: (212) 206-3167 7 (b) if to Pledgor: Babygear.com, Inc. 10 West 33rd Street, Suite 400 New York, New York 10001 Attention: Preston Bealle, President and CEO Telecopy No.: (212) 736-3578 Telephone No.: (212) 736-2600 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: John C. Kennedy, Esq. Telecopy No.: (212) 757-3990 Telephone No.: (212) 373-3000 Each of the above addressees may change its address for purposes of this Section 13 by giving to all other parties written notice of such new address in conformance with this paragraph. 14. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the enforceability or invalidity of any provision or provisions of this Agreement shall not render any other provision or provisions herein contained unenforceable or invalid. 15. Successors or Assigns. Pledgor and Pledgee agree that all of the terms of this Agreement shall be binding on their respective successors and assigns, and that the terms "Pledgor" and "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators. 16. Governing Law. This Agreement shall be interpreted and governed under the internal substantive laws, but not the choice of law rules, of New York. 17. Section Titles. The Section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreement between the parties hereto. 18. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same agreement. 8 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "PLEDGOR" Babygear.com, Inc., a Delaware corporation ------------------------------------- Signature ------------------------------------- Print Name ------------------------------------- Title "PLEDGEE" iBaby, Inc., a Delaware corporation ------------------------------------- Signature ------------------------------------- Print Name ------------------------------------- Title 9 EXHIBIT B Form of Promissory Note of Buyer BABYGEAR.COM, INC. CONVERTIBLE PROMISSORY NOTE New York, New York US$9,898,627.11 July 6, 2000 THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS THAT IS AVAILABLE IF AN OPINION OF COUNSEL TO SUCH EFFECT IS DELIVERED TO BABYGEAR.COM, INC. IN A FORM THAT IS REASONABLY SATISFACTORY TO BABYGEAR.COM, INC. THE SECURITIES REPRESENTED BY THIS NOTE ARE ALSO SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT (AS DEFINED HEREIN). 1. Principal; Interest; Due Date. BABYGEAR.COM, INC. (the "Company"), a Delaware corporation, for value received, hereby promises to pay to iBaby, Inc., a Delaware corporation ("iBaby"), in lawful money of the United States at the address of iBaby set forth below, the principal amount of NINE MILLION EIGHT HUNDRED NINETY-EIGHT THOUSAND SIX HUNDRED TWENTY-SEVEN DOLLARS and ELEVEN CENTS ($9,898,627.11) which shall be due and payable in full together with any accrued and unpaid interest thereon on January 6, 2003 (the "Maturity Date"). If the Maturity Date is not a business day in New York, New York, such payment shall be due and payable on the next succeeding business day in New York, New York. Interest on the outstanding principal amount of this Note at a rate of 6.0% per annum, shall accrue from October 1, 2000 until the Maturity Date. Interest on this Note shall be due and payable on the Maturity Date other than pursuant to Paragraph 7(b). Interest on this Note will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from October 1, 2000. The Company shall pay interest 1 (including post-petition interest in any proceeding under any bankruptcy law) on overdue principal from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any bankruptcy law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The outstanding principal amount and accrued and unpaid interest of this Note may be prepaid at any time by the Company. Terms used herein and not otherwise defined have the meanings assigned to them in the Asset Purchase Agreement, dated July 6, 2000, by and among the Company, iVillage Inc., a Delaware corporation, and iBaby (the "Purchase Agreement"). This Note is being issued by the Company pursuant to Section 4.3 of the Purchase Agreement as payment of the Purchase Price payable by the Company to iBaby for the Assets. If an adjustment to the purchase price for the Assets occurs as a result of the application of Section 2.3 of the Purchase Agreement, the outstanding principal amount of this Note shall be adjusted upward or downward in accordance with such Section 2.3 of the Purchase Agreement, effective as of July 6, 2000. This Note may not be transferred except in accordance with the terms of the Purchase Agreement. 2. Right of Set-Off. THE COMPANY SHALL HAVE THE RIGHT TO WITHHOLD AND SET-OFF AGAINST ANY AMOUNT DUE UNDER THIS NOTE THE AMOUNT OF ANY CLAIM FOR INDEMNIFICATION OR PAYMENT OF DAMAGES TO WHICH THE COMPANY MAY BE ENTITLED UNDER THE PURCHASE AGREEMENT, AS PROVIDED IN ARTICLE X THEREOF. 3. Security. The obligations of the Company under this Note are secured by a pledge of up to 100% of the inventory being transferred as part of the Assets on the Closing Date and as listed on Schedules I and II to Disclosure Schedule Section 2.1 of the Purchase Agreement and as may be adjusted by the Inventory Schedule prepared pursuant to Section 2.3 of the Purchase Agreement, pursuant to the terms and conditions of that certain Security Agreement of even date herewith between the Company and iBaby (the "Security Agreement"), and the terms of such Security Agreement are incorporated herein by reference. Notwithstanding the foregoing, the intellectual property assets shall not be subject to this Section 3. Pursuant to Section 4 of the Security Agreement, prepayments on the principal amount of this Note may be required and shall be noted on Schedule I to this Note. 4. Defaults and Remedies. An "Event of Default" shall mean the occurrence of one or more of the following described events: (a) the Company shall default in the payment when due of principal of or interest on this Note whether at maturity or otherwise; (b) material breach by the Company of its representations and warranties contained in the Purchase Agreement which is not cured within thirty (30) days after written notice from iBaby of such failure; (c) failure by the Company to comply with any of its other agreements in the Purchase Agreement or this Note for thirty (30) days after written notice from iBaby of such failure; (d) default by the Company under any agreement or instrument under which there may be issued or evidenced any financing with an aggregate outstanding principal amount of at least US$1.0 million, which default 2 continues for at least thirty (30) days, whether such financing now exists, or is created after the Closing Date, if that default: (1) is caused by a failure to repay such financing at its stated final maturity (after giving effect to any applicable grace period provided in such financing); or (2) results in the acceleration of such financing prior to its stated final maturity; (e) failure by the Company to pay final judgments aggregating in excess of US$1.0 million which judgments are not paid, discharged or stayed for a period of thirty (30) days after such judgment or judgments become final and non-appealable; (f) a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or for the winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed and in effect for a period of sixty (60) days; or (g) the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or for any substantial part of its property, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any action in furtherance of any of the foregoing. If any Event of Default occurs and is continuing, iBaby may declare all of this Note to be due and payable immediately by written notice to the Company. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency described in clauses (f) and (g) above, this Note will become due and payable immediately without further action or notice. iBaby may waive any existing Event of Default and its consequences under the Purchase Agreement and this Note or rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all other existing Events of Default have been cured or waived. 5. Attorneys' Fees. If the indebtedness represented by this Note or any part thereof is collected in bankruptcy, receivership or other judicial proceedings, or if this Note is placed in the hands of attorneys for collection after an Event of Default, the Company agrees to pay reasonable attorneys' fees and costs incurred by iBaby for the collection of payment under this Note. 6. Amendment, Supplement and Waiver. This Note may be amended or supplemented only with the written consent of both iBaby and the Company, and any existing Event of Default or compliance by the Company with any provision of this Note may be waived with the consent of iBaby. 7. Conversion. (a) In the event of the consummation of the Financing on or prior to September 30, 2000, the Company shall (i) prepay the Prepayment Amount (as defined below), which amount shall be delivered on the closing date of the Financing to iBaby by 3 wire transfer of immediately available funds to an account or accounts designated in writing by iBaby; and (ii) prepay $2,474,656.78 of the outstanding principal amount of this Note (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of this Note as of July 6, 2000) by delivering to iBaby a number of Equity Securities of the Company of the same type and class as and with the same rights, preferences and privileges as the Equity Securities issued in connection with the Financing (except that such Equity Securities shall be subject to set-off rights and transfer restrictions similar to those described in this Note and the Purchase Agreement and such other rights as are described in this Note) equal to $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of this Note as of July 6, 2000) divided by the purchase price per Equity Security paid by the investor(s) in the Financing provided that, if more than one financing constitutes the Financing, the $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of this Note as of July 6, 2000) shall be divided by the purchase price per Equity Security paid by the investor(s) in the most recently consummated financing generating at least $10.0 million that makes up the Financing, which shall be delivered to iBaby on the closing date of the most recent Financing in the form of stock certificates registered in the name of iBaby, Inc. In such event, this Paragraph 7 and Paragraphs 2, 8 and 10 shall cease to have any effect. The "Prepayment Amount" means the difference between (x) $2,474,656.78 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one quarter of the outstanding principal amount of this Note as of July 6, 2000) and (y) all prepayments of this Note prior to the consummation of the Financing other than any prepayments for an adjustment pursuant to Section 2.3 of the Purchase Agreement. (b) In the event that the Financing is not consummated on or prior to September 30, 2000, this Note shall be automatically converted on September 30, 2000 in accordance with the terms of this Paragraph 7, into a number of Equity Securities of the Company of the same type and class as and with the same rights, preferences and privileges as the Equity Securities issued in connection with the Prior Equity Financing (as defined below) equal to $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, the outstanding principal amount of this Note as of July 6, 2000), less any cash prepayments of this Note previously paid by the Company to iBaby, divided by the Purchase Price Per Share (as defined below), which shall be delivered to iBaby on the date of conversion of this Note in the form of stock certificates registered in the name of iBaby, Inc.; provided however that the Company also hereby grants to iBaby the right on the consummation date of any Financing of the Company occurring subsequent to September 30, 2000 and on or prior to March 31, 2001 (a "Subsequent Financing"), to convert, at iBaby's option, the number of such Equity Securities previously granted to iBaby pursuant to the provisions of this clause (b) equal to (A) $4,949,313.55 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one half of the outstanding principal amount of this Note as of July 6, 2000) plus (B) the Prepayment Amount divided by (C) the Purchase Price Per Share of the Equity Securities received by iBaby pursuant to this clause (b) into (i) cash equal to the Prepayment Amount, which amount shall be delivered to iBaby by wire transfer of immediately available funds to an account or accounts designated in writing by iBaby on 4 the date of the consummation of such Financing; and (ii) a note in the principal amount of $4,949,313.55 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, one half of the outstanding principal amount of this Note as of July 6, 2000), which shall be a full-recourse promissory note of the Company in the form of this Note excluding this Paragraph 7 and Paragraphs 2, 8 and 10 and delivered to iBaby on the consummation of such Financing. "Prior Equity Financing" means either (i) the issuance by the Company of Series B Convertible Preferred Stock of the Company in April 2000 or (ii) a subsequent equity financing of the Company in which the Company receives at least $10.0 million of gross proceeds and the purchase price per Equity Security paid by the investor(s) exceeds $10.91 (the purchase price paid per share of Series B Convertible Preferred Stock) if any such equity financing occurs on or prior to September 30, 2000. "Purchase Price Per Share" means (i) $10.91 with respect to the issuance of the Series B Convertible Preferred Stock and (ii) the purchase price per Equity Security paid by the investor(s) in any other Prior Equity Financing with respect to such Prior Equity Financing. If this Note is not converted on September 30, 2000 in accordance with the terms of this Paragraph 7(b), then this Note shall convert into a number of Equity Securities of the Company of the same type and class as and with the same rights, preferences and privileges as the Equity Securities issued in connection with the Prior Equity Financing equal to $9,898,627.11 (or, if an adjustment occurs pursuant to Section 2.3 of the Purchase Agreement, the outstanding principal amount of this Note as of July 6, 2000), plus any accrued and unpaid interest on the principal amount of this Note less any cash prepayments of this Note previously paid by the Company to iBaby, divided by the Purchase Price Per Share, in lieu of the number of Equity Securities this Note would have converted to on September 30, 2000 and shall otherwise have the other rights described in this Paragraph 7(b). (c) Whenever the Company proposes to consummate a Financing, the Company will give prompt written notice thereof to iBaby at least twenty (20) days before the proposed consummation date. (d) The Company shall, or shall direct its transfer agent to, issue certificates evidencing the shares of the Equity Securities issuable upon the conversion of this Note after it shall have received an executed stock subscription agreement prepared by the Company and reasonably satisfactory to iBaby from iBaby in customary form and any other necessary subscription documents prepared by the Company in a form reasonably satisfactory to iBaby either (i) upon delivery of this Note to the Company or its transfer agent for cancellation and conversion, or (ii) upon iBaby notifying the Company or its transfer agent that such Note has been lost, stolen or destroyed and executing an agreement to indemnify the Company from any loss incurred by it in connection with such Note. The person or persons entitled to receive securities issuable upon such conversion shall be treated for all purposes as the record holder or holders of such securities on such date. In addition, iBaby agrees to enter into the appropriate registration rights agreement in the form agreed to in the Financing or Prior Equity Financing, as appropriate, provided that iBaby will have the same rights and privileges as each other holder of the same class of Equity Securities held by iBaby, other than such additional rights that are granted to iBaby under the terms of this Note and certain 5 transfer restrictions as referred to in the Purchase Agreement and certain set-off rights as set forth in Section 10.2 of the Purchase Agreement. (e) No fractional shares or scrip representing fractional shares shall be issued upon the prepayment or conversion of this Note pursuant to this Paragraph 7. With respect to any fraction of a share, an amount equal to such fraction shall be multiplied by the price per share paid in the Financing or Prior Equity Financing, as appropriate, and shall be paid in cash by wire transfer of immediately available funds to iBaby. (f) The Equity Securities issued under this Paragraph 7 will be "restricted securities" under the Securities Act of 1933, as amended (the "Act"), and under any applicable regulations thereunder. The Equity Securities may not be resold, pledged or otherwise transferred without registration under the Act except pursuant to an exemption from registration. iBaby understands (i) that the Equity Securities will not be registered under the Act or any state securities or "blue-sky" laws by reason of their issuance in a transaction exempt from the registration requirements of the Act or any state securities or "blue-sky" laws, (ii) that the Equity Securities must be held indefinitely unless a subsequent disposition thereof is registered under the Act or any state securities or "blue-sky" laws or is exempt from such registration, (iii) that in the event that the Financing is consummated on or prior to September 30, 2000, iBaby shall have the same registration rights with respect to the Equity Securities as granted to an investor in that Financing, and that if the Financing is not consummated on or prior to September 30, 2000 and this Note is converted, the Equity Securities issued to iBaby shall have the registration rights granted to the Equity Securities in the Prior Equity Financing, and (iv) that the certificate(s) evidencing the shares of the Equity Securities will be imprinted with a legend that restricts their transfer substantially as set forth below unless they are registered or such registration is not required. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH STATE SECURITIES LAWS, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS THAT IS AVAILABLE IF AN OPINION OF COUNSEL TO SUCH EFFECT IS DELIVERED TO BABYGEAR.COM, INC. IN A FORM THAT IS REASONABLY SATISFACTORY TO BABYGEAR.COM, INC. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO 6 SUBJECT TO THE TRANSFER RESTRICTIONS SET FORTH IN THE PURCHASE AGREEMENT, DATED JULY 6, 2000, BY AND AMONG BABYGEAR.COM, INC., iBABY, INC. AND iVillage INC." 8. Adjustments. In the event that prior to the issuance by the Company of the Equity Securities to iBaby, there shall be any change in the outstanding capital stock of the Company by reason of subdivision or combination of the Company's outstanding capital stock, or by reason of a dividend or distribution of shares of capital stock of the Company, the Equity Securities issuable upon conversion of this Note and the purchase price therefor shall be appropriately adjusted (but without regard to fractions) by the Board of Directors of the Company to reflect such change. 9. Merger or Consolidation. (a) In case of any (i) consolidation of the Company with, or merger of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger which does not result in any reclassification or change in the outstanding capital stock of the Company), (ii) sale of all or substantially all of the assets of the Company or (iii) transaction similar to those described in clauses (i) or (ii) above, on or prior to September 30, 2000 and prior to the consummation of the Financing, the corporation formed by such consolidation or merger or purchasing such assets shall execute and deliver to iBaby a new convertible note in the form of this Note providing that iBaby shall have the right thereafter (until the payment in full of such new note) to receive, upon conversion of such new note, the kind and amount of shares and stock and other securities, cash and property a holder of this Note would have received upon conversion of this Note if such conversion occurred immediately prior to such consolidation, merger, sale or transfer. Such new note shall provide for adjustments which shall be identical to the adjustments provided in Paragraph 8 and shall otherwise be identical to this Note. (b) In case of (i) any consolidation of the Company with, or merger of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger which does not result in any reclassification or change in the outstanding capital stock of the Company), (ii) sale of all or substantially all of the assets of the Company or (iii) transaction similar to those described in clauses (i) or (ii) above, subsequent to any conversion of this Note as provided in Paragraph 7 and at a time when a note from the Company to iBaby remains outstanding, the corporation formed by such consolidation or merger or purchasing such assets shall execute and deliver to iBaby a new note in the form of this Note excluding Paragraphs 2, 7 and 8 and for the amount outstanding under this Note immediately prior to such merger, consolidation or sale of assets. (c) The above provisions of this Paragraph 9 shall similarly apply to successive consolidations or mergers. 10. Reservation of Stock. On the date hereof, the Company shall have obtained the consent of the holders of the outstanding Series A Convertible Preferred Stock and 7 Series B Convertible Preferred Stock to the transactions contemplated by the Purchase Agreement, the Security Agreement and this Note including the issuance of any Equity Securities upon a conversion or exchange of this Note, and there shall be no contractual restriction on the Company's ability to issue and deliver on conversion or exchange of this Note such shares of Equity Securities. On the date the Company issues any Equity Securities to iBaby, the Company will reserve and keep available, solely for the issuance and delivery upon the conversion of such Equity Securities, such shares of securities, as from time to time shall be issuable upon the conversion of the Equity Securities. The Company covenants that all Equity Securities which may be issued upon conversion of this Note in accordance with the terms of this Note will, upon issuance, be duly and validly issued, fully paid and nonassessable, and free from all taxes, liens, charges and security interests with respect to the issue thereof. 11. Notices. All notices, requests, demands or other communications required or permitted under this Note shall be sent by courier or by facsimile transmission, to the parties hereto at their respective addresses set forth below, and notice shall be deemed given as of the date the notice is received if sent by courier or when transmitted if sent by facsimile: (a) If to iBaby: iVillage Inc. 212 Fifth Avenue New York, New York 10010 Attention: Steven A. Elkes Telecopy No.: (212) 689-9513 Telephone No.: (212) 206-3106 with a copy to: iVillage Inc. 212 Fifth Avenue New York, New York 10010 Attention: Michael A. Gilbert Telecopy No.: (212) 689-9834 Telephone No.: (212) 206-3167 (b) if to the Company: Babygear.com, Inc. 10 West 33rd Street, Suite 400 New York, New York 10001 Attention: Preston Bealle, President and CEO Telecopy No.: (212) 736-3578 Telephone No.: (212) 736-2600 8 with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: John C. Kennedy, Esq. Telecopy No.: (212) 757-3990 Telephone No.: (212) 373-3000 Each of the above addressees may change its address for purposes of this Paragraph 11 by giving to all other parties written notice of such new address in conformance with this paragraph. 12. Waivers. To the fullest extent permitted by law, the Company hereby waives presentment, demand for performance, notice of non-performance, protest, notice of protest and notice of dishonor. No delay on the part of iBaby in exercising any right hereunder shall operate as a waiver of such right or any other right. 13. Governing Law; Consent to Jurisdiction. This Note shall be governed by, and construed in accordance with, the laws of the State of New York (without giving effect to its choice of law principles). Each of the parties hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, and (b) the United States District Court for the Southern District of New York, for the purposes of any Action arising out of this Note or any matter referred to in this Note. Each of the parties hereto agrees to commence any Action relating hereto either in the United States District Court for the Southern District of New York or in the Supreme Court of the State of New York. Each of the parties hereto further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth in Paragraph 11 shall be effective service of process for any Action in New York with respect to any matters to which it has submitted to jurisdiction in this Paragraph 13. Each of the parties hereto irrevocably and unconditionally waives any objection to the laying of venue of any Action arising out of this Agreement or any transaction contemplated hereby in (i) the Supreme Court of the State of New York, or (ii) the United States District Court for the Southern District of New York, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such Action brought in any such court has been brought in an inconvenient forum. 14. Parties in Interest. This Note shall bind the Company and its successors and assigns. Nothing in this Note, whether expressed or implied, is intended to confer any rights or remedies under or by reason of this Note on any Persons other than the parties to it and their respective successors, legal representatives and assigns, nor is anything in this Note intended to relieve or discharge the obligation or liability of any third Persons to any party to this Note, nor shall any provisions give any third Persons any rights of subrogation or action over or against any party to this Note. 9 15. Paragraph Headings, Construction. The headings of Paragraphs in this Note are provided for convenience only and will not affect its construction or interpretation. All references to "Paragraph" or "Paragraphs" refer to the corresponding Paragraph or Paragraphs of this Note unless otherwise specified. 16. Severability. If any provision in this Note is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Note will remain in full force and effect. Any provision of this Note held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. All words used in this Note will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the words "hereof" and "hereunder" and similar references refer to this Note in its entirety and not to any specific paragraph or subparagraph hereof. 10 IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the date first stated above. BABYGEAR.COM, INC. By: ---------------------------------- Name: Preston Bealle Title: President and Chief Executive Officer Accepted and Agreed to: iBaby, Inc. By: --------------------- Name: Steven A. Elkes Title: Chief Executive Officer 11 SCHEDULE I - -------------------------------------------------------------------------------- Amount of Amount Amount Running Running Increase of of Unpaid Unpaid of Amount of Principal Interest Principal Interest Notation Date Principal Prepayment Prepaid Prepaid Balance Balance Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 12 EXHIBIT C Form of Consent of Preferred Stock Holders BABYGEAR.COM, INC. Written Consent of the Series A Stockholders In Lieu of Meeting The undersigned, holding a majority of the shares of Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), of Babygear.com, Inc., a Delaware corporation (the "Corporation"}, hereby consent, pursuant to Section 228 of the General Corporation Law of the State of Delaware and pursuant to Article IV, Section B(5)(C) and any other section of the Corporation's Amended and Restated Certificate of Incorporation, to the purchase by the Corporation of certain assets of iBaby, Inc., a Delaware corporation ("iBaby"), pursuant to an Asset Purchase Agreement by and among the Corporation, iVillage Inc., a Delaware corporation ("iVillage"), and iBaby, substantially in the form attached hereto as Exhibit A (the "Asset Purchase Agreement"), the issuance of a convertible promissory note in favor of iBaby by the Corporation, substantially in the form attached hereto as Exhibit B (the "Note"), and the issuance in the future of equity securities of the Corporation to iBaby upon conversion of, or in exchange for, the Note, in accordance with the terms thereof and of the Asset Purchase Agreement. Without limiting the foregoing, the undersigned agree that they will enter into an amendment or consent to the Amended and Restated Registration Rights Agreement, dated as of March 3, 2000, among the Corporation, the undersigned and the other stockholders of the Corporation, as amended on April 7, 2000, in a form reasonably acceptable to the undersigned, to grant iBaby registration rights to the extent contemplated by the Note and the Asset Purchase Agreement in accordance with the issuance of any Equity Securities (as defined in the Asset Purchase Agreement). This consent may be executed in counterparts and all so executed shall constitute one consent, notwithstanding that the stockholders holding a majority of the shares of Series A Preferred Stock are not signatories to the original or the same counterpart. This consent shall be filed with the minutes of the Corporation. Dated: VANTAGEPOINT VENTURE PARTNERS III (Q), L.P. By: VantagePoint Venture Associates III, L.L.C., Its General Partner By: ----------------------------------------- Name: Title: VANTAGEPOINT VENTURE PARTNERS III, L.P. By: VantagePoint Venture Associates III, L.L.C., Its General Partner By: ----------------------------------------- Name: Title: BABYGEAR.COM, INC. Written Consent of the Series B Stockholders In Lieu of Meeting The undersigned, holding a majority of the shares of Series B Convertible Preferred Stock, par value $0.01 per share (the "Series B Preferred Stock"}, of Babygear.com, Inc., a Delaware corporation (the "Corporation"), hereby consent, pursuant to Section 228 of the General Corporation Law of the State of Delaware and pursuant to Section 7(c) and any other section of the Certificate of Designations of the Series B Preferred Stock, to the purchase by the Corporation of certain assets of iBaby, Inc., a Delaware corporation ("iBaby"), pursuant to an Asset Purchase Agreement by and among the Corporation, iVillage Inc., a Delaware corporation ("iVillage"), and iBaby, substantially in the form attached hereto as Exhibit A (the "Asset Purchase Agreement"), the issuance of a convertible promissory note in favor of iBaby by the Corporation, substantially in the form attached hereto as Exhibit B (the "Note"), and the issuance in the future of equity securities of the Corporation to iBaby upon conversion of, or in exchange for, the Note, in accordance with the terms thereof and of the Asset Purchase Agreement. Without limiting the foregoing, the undersigned agrees that it will enter into an amendment or consent to the Amended and Restated Registration Rights Agreement, dated as of March 3, 2000, among the Corporation, the undersigned and the other stockholders of the Corporation, as amended on April 7, 2000, in a form reasonably acceptable to the undersigned, to grant iBaby registration rights to the extent contemplated by the Note and the Asset Purchase Agreement in connection with the issuance of any Equity Securities (as defined in the Asset Purchase Agreement). This consent may be executed in counterparts and all so executed shall constitute one consent, notwithstanding that the stockholders holding a majority of the shares of Series B Preferred Stock are not signatories to the original or the same counterpart. This consent shall be filed with the minutes of the Corporation. Dated: GRUNER + JAHR PRINTING & PUBLISHING CO. By: ----------------------------------- Name: Title: GRUNER + JAHR PRINTING & PUBLISHING CO. Notwithstanding any provisions of the Stock Purchase Agreement, dated as of April 7, 2000, by and between Gruner+Jahr Printing & Publishing Co. (the "Company") and Babygear.com., Inc. ("Babygear") or any other agreements between the Company and Babygear, the undersigned hereby consents to the execution, delivery and performance of: i) Asset Purchase Agreement, dated as of July [6], 2000, by and among Babygear., iBaby, Inc. and iVillage Inc.; ii) Online Merchant Agreement, dated as of July [6], 2000, by and between Babygear and iVillage Inc.; iii) Sponsorship Agreement, dated as of July [6], 2000, by and between Babygear and iVillage Integrated Properties, Inc.; and vi) Lamaze Sponsorship Agreement, dated as of July |6| 2000, by and between Babygear and Lamaze Publishing Company. GRUNER + JAHR PRINTING & PUBLISHING CO. By: ----------------------------------- Name: Title: Dated: Disclosure Schedule Section 2.1 Assets 1. Trademarks and Service Marks: - -------------------------------------------------------------------------------- Registration Number Registration Date Trademark or Service Mark - -------------------------------------------------------------------------------- 2,209687 12/8/1998 IBABY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Application Number Application Date Trademark or Service Mark - -------------------------------------------------------------------------------- 75/738,052 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/738,055 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/738,054 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/738,050 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/738,583 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/738,053 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/738,051 6/28/1999 IBABY - -------------------------------------------------------------------------------- 75/462,652 4/6/1998 IBABY - -------------------------------------------------------------------------------- 75/462,548 4/6/1998 IBABY - -------------------------------------------------------------------------------- 75/462,547 4/6/1998 INTERNET BABY - -------------------------------------------------------------------------------- 75/462,531 4/6/1998 INTERNET BABY - -------------------------------------------------------------------------------- 75/264,837 3/27/1997 INTERNET BABY - -------------------------------------------------------------------------------- 2. Domain Names: iBaby.com and internetBaby.com 3. Inventory - See Schedules I and II attached hereto for a list of inventory being transferred pursuant to this Agreement. To the extent legally permissible, all of such Inventory is being transferred with all currently existing manufacturer's warranties and any other existing claims against manufacturers; Buyer shall have the right to enforce such warranties and/or claims in Seller's place from and after the Closing Date. If any manufacturer's warranty or other existing claim cannot be transferred, Seller agrees to enforce any such warranty and claim in accordance with the instructions of Buyer and at Buyer's expense, and to provide Buyer with all the benefits received in respect of such warranties or claims. 4. Hardware and Software - See Schedule III attached hereto for a list of hardware and software being transferred pursuant to this Agreement; provided however that to the extent Seller needs to have access to such hardware and software during the thirty-day transition period to fulfill its obligations under Section 7.3 of this Agreement such hardware and software shall be transferred at the end of such thirty-day period. To the extent legally permissible, all of such hardware and software is being transferred with all currently existing manufacturers warranties and any other existing claims against manufacturers; Buyer shall have the right to enforce such warranties and/or claims in Seller's place from and after the Closing Date. If any manufacturer's warranty or other existing claim cannot be transferred, Seller agrees to enforce any such warranty and claim in accordance with the instructions of Buyer and at Buyer's expense, and to provide Buyer with all the benefits received in respect of such warranties or claims. 5. Subject to Section 7.1 of this Agreement, All books, records, invoices and other documents relating to any of the foregoing Assets; provided however that to the extent Seller needs to have access to such books, records, invoices and other documents during the thirty-day transition period to fulfill its obligations under Section 7.3 of this Agreement such books, records, invoices and other documents shall be transferred at the end of such thirty-day period. Section 2.5(a) No Assignment in Certain Circumstances 1. Shopping Channel Promotional Agreement, dated as of June 16, 1999 between America Online, Inc. and iVillage Inc. 2. SNAP Promotion Agreement, dated as of November 6, 1998 between Snap! LLC and iVillage Inc. 3. Linkshare Network (Trademark) Membership Agreement for Merchants, dated April 1999 by and between Linkshare Corporation and iVillage Inc. 4. Internet Retail Establishment Agreement, dated October 15, 1999 by and between Citicorp Credit Services, Inc. and iVillage Inc. Section 5.2(b) Authorizations None. Section 5.3 Non-Contravention None. Section 5.5(a) Title to Assets None. 41 Section 5.8 Taxes Seller has not filed federal, state and local income tax returns for 1998 or 1999; provided however that Seller has filed and was granted an extension for the filing of federal, state and local income Tax returns for 1999. Seller is not required to file any property tax returns. Seller does not believe that any federal, state or local income Tax liability for 1998 and 1999 described above would have a Material Adverse Effect. Section 5.12 Employees and Employee Plans Cigna Healthcare Cigna Dental Vision Service Plan Cigna Short Term Disability Cigna Long-Term Disability Cigna Healthcare and Dependent Care Flexible Spending Accounts Fidelity Advisors 401(k) Savings Plan Section 5.22 Website Traffic Information See Schedule IV attached hereto for a copy of the information provided by Seller to Buyer with respect to traffic on Seller's website. Sections 6.2(a) and 6.2(b) Authorizations and Section 6.3 Non-Contravention Depending upon the form of the Equity Securities to be issued by the Buyer to Seller pursuant to the terms of the Note, (i) the Board of Directors of the Buyer may need to approve the issuance of any such Equity Securities to the Seller and an amendment to the Certificate of Incorporation of Buyer (or a certificate of designations) to create such Equity Securities, (ii) the Buyer may need to file an amendment to the Certificate of Incorporation (or a certificate of designations) with the Secretary of State of the State of Delaware and (iii) the Buyer may need to enter into an amendment or consent to the Registration Rights Agreement, dated as of February 1, 2000, by and among the Buyer and the Schedule A Investors, the Schedule B Investors and the Schedule C Investors listed therein, as amended and restated on March 3, 2000 and further amended on April 7, 2000 in order to provide registration rights to Seller in respect of the Equity Securities. 42 Schedule I to Disclosure Schedule Section 2.1
Schedule II to Disclosure Schedule Section 2.1
Schedule III to Disclosure Schedule Section 2.1 BG HW Inventory - ------------------------------------------------------------------------------- Type Quantity Brand Item - ------------------------------------------------------------------------------- - ----------------------- Servers/Network: 1 Cisco 2500 Router - ----------------------- 4 Cisco Catalyst 2924 Series XL Switch 4 3Com Superstack II 3300 Switch 1 CAT 5E Switch/Hub 1 Compaq Switchbox 1 Canon IX-4025 Scanner 3 Sun E250 2 Dell Power Edge 1300 Servers 3 Compaq 1850R 1 Ortronics Phone Switch 1 Ortronics Switchbox - ----------------------- Printers 1 HP Laser Jet 2100 - ----------------------- 1 HP Desk Jet 672c 1 HP OfficeJet 1 HP Laser Jet 6L 1 HP Laser Jet 5M/5 1 Zebra Printer 170 xi II 1 Zebra Printer Z4000 1 Canon Desktop Copier - ----------------------- Desktops - ----------------------- 1 Dell GX1 1 Dell GX1 1 Dell GXa 1 Dell Gxa 1 Dell Gxa 1 DELL WORKSTATION 1 OEM 1 266 Dell Gx1 1 266+L Dell Gx1 1 CEL-400 Compaq Deskpro 1 CEL-400 OEM 1 CEL-400 OEM 1 CEL-400 OEM 1 CEL-400 OEM 1 CEL-400 OEM 1 CEL-400 OEM 1 CEL-400 OEM 1 CEL-400 OEM-SDC 1 CEL-400 OEM-SDC 1 CEL-400 OEM-SDC 1 CEL-400 OEM-SDC 1 CEL-450 OEM 1 P-266 Dell Dimension XPS266 1 PII-200/66 Dell Dimension XPS200 1 PII-233 Compaq Deskpro 1 PII-233 Dell Gx1 1 PII-233 Dell Gx1 1 PII-233 Dell Gx1 1 PII-233 Dell Gxa 1 PII-233 Dell Gxa 1 PII-233 Dell Optiplex GX1 1 PII-233 Gx1 1 PII-233 GXa 1 PII-233L Dell Gxa 1 PII-233L Dell GXa 1 PII-233L Gxa 1 PII-266 Dell GX1 1 PII-266+L Dell GX1 1 PII-266+L Dell GX1 1 PII-266L Dell GX1 1 PII-333L+ Dell GX1 1 PII-333L+ Dell GX1 1 PII-333L+ Dell GX1 1 PII-350 Compaq DeskPro 1 PII-350 Compaq DeskPro 1 PII-350 Compaq Deskpro 1 PII-350 Compaq DeskPro 1 PII-350 Compaq Deskpro 1 PII-350 Compaq Deskpro 1 PII-350 Compaq DeskPro 1 PII-350 OEM 1 PII-400 CLONE - ----------------------- Monitors: - ----------------------- 8 15" Various 37 17" Various
Schedule IV to Disclosure Schedule Section 2.1 Month/Year Page - ---------- ----- Views ----- June 1999......... 2,962,297 July 1999......... 3,102,416 August 1999....... 3,012,971 September 1999.... 3,015,850 October 1999...... 3,228,143 November 1999..... 3,642,288 December 1999..... 3,945,024 January 2000...... 6,856,280 February 2000..... 5,541,741 March 2000........ 5,530,504 April 2000........ 3,600,769 May 2000.......... 3,861,685